Rent Guidelines Board Supports Rent Increases for Millions of NYC Renters
With rents for market-rate apartments breaking new records every month in New York City, those who live in regulated units have been largely shielded from the affordability crisis – until now.
On May 5, the city’s Rent Guidelines Board voted to support the most significant increases for rent-stabilized homes across the city since 2013. Expected to be formally approved in June, the move affects more than 1 million rent-stabilized homes and more than 2 million New Yorkers.
The move came after numerous meetings and discussions between the board, which includes five representatives from the public, two landlords and two tenants. Ultimately, the decision fell short of what landlords sought and exceeded what tenants were hoping for.
The board approved a proposal to increase rents on one-year leases by 2% to 4% and rents on two-year leases by 4% to 6%. Initially, the proposal called for an increase of up to 4.5% for one-year leases and up to 9% for two-year leases, but those figures were adjusted following negotiations.
Tenants of rent-stabilized units in NYC haven’t faced such a steep increase in nearly a decade. In 2013, the board approved a 4% increase for one-year leases and a 7.75% increase for two-year leases. Throughout most of Mayor Bill de Blasio’s tenure, however, the board kept rent increases reasonably low. In fact, for four of the last eight years, it voted to approve rent freezes.
The mayor basically controls NYC’s Rent Guidelines Board. With a new mayor, Mayor Eric Adams, in office, it appears the board now includes several people who are amenable to larger rent increases. During the virtual meeting on May 5, the board voted 5 to 4 to approve the proposal.
Both sides of the issue have strong arguments and are passionate about them. Landlords and affiliated groups, for instance, point to the skyrocketing cost of fuel, labor, materials and other necessities as the primary reason for needing to increase rents. Landlords who own these properties are paying more to maintain them in 2022. They were hoping to get a larger increase approved to pass along some of these increased costs to tenants.
At meetings regarding the issue, landlords warned the panel that they might struggle to maintain buildings effectively without a significant increase. Instead of repairing something properly, for instance, they may use stop-gap measures to avoid sticker shock. In turn, buildings won’t be maintained as well, and more expensive repairs will be needed before long.
Landlords also cite the sweeping tenant protection laws that were passed in 2019 as an additional factor affecting their ability to run profitable businesses. Those laws significantly restricted landlords’ ability to increase rents when properties become vacant or are renovated. Shortly after, the pandemic arrived, causing many tenants to fall behind on rent payments. Many are still in the hole from the debacle.
On the other hand, tenants who showed up at the meeting cited those same price increases as the primary reason they shouldn’t have to deal with significant rent increases. Most of those living in rent-stabilized apartments – more than 2 million people – earn well below the city’s median household income of $67,000. The median household income for rent-stabilized tenants in NYC is around $44,000 – roughly 33% lower than the citywide average. Tenants and their affiliates argue that low-income people are inordinately hit with surging costs thanks to these increases.
New York’s rent stabilization program, which went into effect in 1969, was designed to encourage housing affordability for people across various income levels. Today, the median rent for rent-stabilized units stands at around $1,270 while the median rent for market-rate units is around $1,700. If the proposed increases go into effect, the median rate for rent-stabilized apartments in the city will increase to as much as $1,320 for one-year leases and $1,345 for two-year leases.
Many people who live in rent-stabilized apartments are on fixed incomes, so the proposed rent increase could pose serious problems for such individuals. However, market conditions currently favor landlords, and market-rate apartments across the city can be rented for as much as people are willing to pay.
In recent weeks, evictions have gone up across NYC. However, they’re still well below pre-pandemic levels. If current market conditions continue, however, this trend could intensify. Once the approved increases for rent-stabilized units go into effect, evictions could start skyrocketing.
Although many aren’t happy about the proposed rent increases, those increases are still far lower than the sticker shock being experienced by tenants of market-rate apartments. In May 20222, the median rent for an apartment in New York stood at $4,000 – a new record. Rent prices increased by nearly 2% from April to May for market-rate units. From May 2021 to May 2022, they increased by more than 25%. Compared with the increases proposed for regulated apartments – 2% to 6% -- those increases are astronomical.
Typically, the Rent Guidelines Board looks to current inflation rates to determine its decisions. During the de Blasio years, inflation rates stayed low and steady, so major increases weren’t warranted. When the pandemic arrived in the early spring of 2020, rent prices tumbled as people fled the city and buildings emptied out.
Today, the rebound effect from the pandemic is profound. More people are descending upon NYC than ever, including many newcomers. However, rental vacancy rates have stood below 2% for several months, and they are expected to remain tight for most of the year. With construction costs skyrocketing, new construction isn’t keeping up with demand. Rising mortgage rates are affecting the situation too, prompting many would-be homebuyers to rent for now instead – increasing demand even more.
Is there an end in sight for rent increases in New York City? For 2022, market conditions are likely to remain largely unchanged. Rents for market-rate apartments could continue going up for the foreseeable future. If that happens, the Rent Guidelines Board could approve additional increases on rent-stabilized units. Stay tuned to BCP Real Estate Group for additional updates regarding this situation.