Invited Testimony: New York City Rent Guidelines Board
Oksana Mironova
Download the full testimony with charts [PDF].
Thank you for the opportunity to present our concerns about the potential impact of rent guidelines on low-income New Yorkers.
The decisions of the Rent Guidelines Board (RGB) are among the most important factors influencing the well-being of the hundreds of thousands of low-income households who live in rent-regulated apartments. As illustrated in Chart 1, more low-income New Yorkers live in rent regulated apartments than in any other type of housing in New York City (low-income households are those whose incomes are at 200 percent of the federal poverty level, or about $39,000 for a family of three).
Further, with the launch of Where We Live NYC, the city’s comprehensive fair housing planning process, it is important to consider the rent regulated stock from a fair housing perspective. As stated in a recent report published by Council Member Brad Lander’s office: “Rent regulations are an underappreciated, but perhaps most important, policy for a diverse city. Strong rent regulations enable low- and moderate-income tenants to stay in their neighborhoods as rents rise—a critical policy to preserving integrated neighborhoods, especially as gentrification continues to roll across New York City.”[1] As of 2014, approximately 65 percent of the rent regulated housing stock was occupied by people of color.
The city’s growing economy and wage stagnation
The RGB’s 2018 Income & Affordability study registers many positive economic indicators, including a declining unemployment rate and rising employment levels. However, the study also reports the stagnation of inflation-adjusted wages over the past two years.
The recent trend of both rising employment and stagnating wages may be partially explained by the fact that the city’s long-term economic growth has been concentrated in low-wage sectors. A recent report by the Comptroller’s office[2] has found that while the city’s economy has grown and diversified since 2000, the growth has largely occurred in low-paying jobs. As shown in Chart 2 , the number of low paying jobs grew by 39 percent between 2000 and 2016, outpacing middle and high paying job growth.
Further, analysis of the 2016 American Community Survey shows that many low-income workers are in industries that have minimal opportunities for long-term career development: 44 percent of low-income employed residents hold jobs in service and retail industries with median annual earnings of just $15,000.[3] The Comptroller’s report concludes that despite employment level growth, the City’s economy continues to be volatile for many workers, and that wages for low- and middle-income New Yorkers will likely continue to stagnate into the future.
Given this context, it is unsurprising that the number of low-income households in New York City is staying at about the same level, even as the city’s population continues to grow. As shown in Table 1, between 2000 and 2016, New York City has experienced rapid growth in both population and the number of households. Both trends are likely to continue through the next decade. Over the same time period, the number of low-income households has remained at about the same level, while the number of homeless families nearly tripled.
According to homeless advocacy groups like Picture the Homeless and Coalition for the Homeless, as well as the city’s own research,[4] the city’s homelessness crisis is directly tied to the growing housing affordability gap, driven in no small part by increasing rents. Rent regulated tenants have more protections than unregulated tenants. However, the Independent Budget Office’s analysis showed that 43 percent of households entering the shelter system between 2002 and 2012 (latest data available) were coming from a rent regulated apartment.[5]
Changes to rents and incomes between 2014 and 2017
The rent regulated housing stock offers an increasingly important reprieve to the city’s low-income tenants, as housing costs continue to rise. Data included in the 2017 New York City Housing and Vacancy Survey[6] points to rapidly increasing market-rate rents, likely spurred by both the broader economic recovery and public economic development efforts. As illustrated in Chart 3, median asking rents increased by 29.9 percent above inflation between 2014 and 2017. For comparison, asking rents between 2011 and 2014 went up by just 2.1 percent above inflation.
Between 2014 and 2017, the median income for rent stabilized tenants rose quicker than the rate of inflation, by 7 percent. However, it is possible that this increase is indicative of an influx of higher income tenants. Despite rising incomes, the median rent to income ratio has not budged for the third HVS in a row, and is at 31.3 percent, meaning that half of rent stabilized tenants are still rent burdened.
HVS findings illustrate the impact of recent RGB decisions
RGB’s consideration of the tenants’ economic situation is measurable by the latest HVS figures: the median rent for stabilized apartments rose by 2.6 percent above inflation between 2014 and 2017. In comparison, median rents in unregulated apartments rose by 10 percent above inflation.
This has have had an impact on low-income New Yorkers living in regulated apartments. In 2017, as part of Community Service Society’s annual Unheard Third survey, we asked low-income renters to rank how much of a problem affording the rent was for their household. The share of regulated renters reporting a problem with affordability decreased by 13 percent from 2015. In comparison, the share of unregulated renters reporting a problem did not show a significant change (see chart).
Conclusion
RGB’s decisions have a real impact on the well-being of low-income tenants. Over the past few years, the board has taken this into account. Ultimately, this board must find a way to institutionalize the practice of setting guidelines that reflect changes in both landlords’ costs and tenants’ incomes.
Between 2015 and 2016, the citywide net operating income (NOI) for rent stabilized buildings increased for the twelfth year in a row, by 4.4 percent. Many neighborhoods with high concentration of both low-income tenants and rent stabilized buildings saw much higher increases in the NOI. For example, the NOI in Inwood/Washington Heights increased by 14.9 percent. It increased by 17.6 percent in Morrisania/Melrose/Claremont, and by 10.7 percent in Oceanhill/Brownsville.
At the same time, as part of CSS’s Unheard Third survey, we asked renters if they would be able to afford to stay in their apartment if their rent increased by just $25 per month (or, two percent of the median cost of a rent stabilized apartment in 2017). Half of low-income regulated tenants said that they would not.
With stagnating wages, diminishing low-rent housing stock that leaves tenants with minimal choices if they are priced out of their rent regulated apartments, and evidence that RGB decisions have a measurable impact on the well-being of low-income New Yorkers, we recommend a rent freeze for this coming year.
_____________________________________________
[1] City Council Member Brad Lander, Desegregating NYC: 12 Steps Toward a More Inclusive City, April 10, 2018.
[2] New York City Comptroller Scott M. Stringer, New York City’s Economy Has Become More Diversified: So What? December 20, 2017.
[3] Unpublished data analysis of 2016 ACS data by CSS policy analyst Irene Lew.
[4] The City of New York, Turning the Tide on Homelessness in New York City, February 2017.
[5] New York Independent Budget Office, The Rising Number of Homeless Families in NYC, 2002–2012: A Look at Why Families Were Granted Shelter, the Housing They Had Lived in & Where They Came From, November 2014.
[6] Elyzabeth Gaumer, Selected Initial Findings of the 2017 New York City Housing and Vacancy Survey (HVS), New York City Department of Housing Preservation and Development, February 2017.