Thank you for this opportunity to comment on the vital importance of rent control and rent stabilization laws for New York City’s tenants. My name is Oksana Mironova and I am a Housing Policy Analyst at The Community Service Society (CSS), an independent nonprofit organization that addresses some of the most urgent problems facing low-income New Yorkers and their communities, including the effects of the city’s chronic housing shortage.
Rent control and rent stabilization are fundamentally a response to this chronic shortage, which creates a severe power imbalance between tenants and landlords. The primary purpose of the laws is to prevent landlords from exploiting this imbalance to impose large rent increases and arbitrary evictions. This is a matter of simple justice, even before we consider the effects of rent regulation on affordability. This alone should be a sufficient reason for this committee, the City Council, and the mayor to extend the laws as they are authorized to do under state law
Unfortunately, the affordability the rent laws provide falls short of what the city needs, partially as a result of specific loopholes within the law: vacancy deregulation, the vacancy bonus, and preferential rents. Beyond extending the laws, I hope that you will join tenants and advocates who will be seeking to strengthen the rent laws on the state level this year.
Rent Regulation within the Context of a Growing Economy
The rent laws are also an important complement to the city’s economic development activities. When public resources are used to promote economic development, all New Yorkers should benefit. But too often, economic development leads to rent increases, and only those who can pay the increased rent can share in the benefits. Those who cannot pay are either displaced or subject to severe rent burdens. Rent control and rent stabilization are important tools for alleviating the negative side effects of economic development policy. They ease displacement pressures. This is also an important reason for the city to extend the rent laws.
Data included in the Selected Initial Findings of the 2017 New York City Housing and Vacancy Survey (presented by the New York City Department of Housing Preservation and Development to the City Council in February 2018) points to rapidly increasing market rents, likely spurred by both the broader economic recovery and public economic development efforts. The median asking rent increased from $1,443 (April 2017 dollars) in 2014 to $1,875 in 2017, 29.9 percent above inflation. For comparison, asking rents between 2011 and 2014 went up by 2.1 percent above inflation, from $1,371 to $1,400 (See: http://www.cssny.org/news/entry/demystifying-housing-data). Given a rising rental market, rent protections afforded by rent stabilization and rent control are paramount.
The rental market in New York City is rising within the context of a growing economy, as measured by multiple indicators, including declining unemployment. However, low-income New Yorkers, defined as those with incomes below 200 percent of the federal poverty line, have not reaped the same post-recession benefits as higher income households (incomes above 400 percent of the federal poverty line). According to analysis of American Community Survey data conducted by CSS Policy Analyst Irene Lew, “the real median income of employed, working-age (18-64) households in New York City increased by 8 percent since the end of the Recession, from $71,544 in 2010 to $77,000 in 2016... However, the growing ranks of higher-income households are driving up overall median incomes—the number of working higher-income households rose by 12 percent since the end of the Recession. Meanwhile, despite higher employment, increases in the minimum wage and other new worker protections, the number of working poor and near-poor households have barely budged.”
Rent Regulation and Low-Income Tenants
With increasing market pressure and stagnating wages, New York City’s rent control and rent stabilization laws protect about one million households, including over 400,000 low-income households. It is important to note that the rent laws are not a housing affordability program like public housing or Section 8 vouchers. Many rent regulated tenants are rent burdened, paying more than 30 percent of household income. This is confirmed in the Selected Initial Findings of the 2017 New York City Housing and Vacancy Survey, which shows a median rent burden of 33.3 percent for rent-stabilized tenants and 40.2 percent for rent-controlled tenants.
Despite this, rent regulated housing is an essential resource for low-income households. According to the Selected Initial Findings of the 2017 New York City Housing and Vacancy Survey, median contract rents in rent stabilized apartments in 2017 were $1,269; in non-regulated units they were $1,700, a 29 percent difference. Accordingly, the rent stabilized vacancy rate was also much lower, 2.06 percent, as compared to 6.07 percent in the non-regulated units. While the rent laws are not an affordable housing program, they do help stabilize rental costs, which makes them more accessible to low-income people. The median household income in rent stabilized apartments was $44,650, as compared to $67,000 in unregulated units, a 40 percent difference.
As we wrote in Making the Rent: Tenant Conditions in New York City’s Changing Neighborhoods (See: http://www.cssny.org/publications/entry/making-the-rent-2016), in 2014 the median rent burden for low-income rent regulated tenants was 48 percent, compared to 50 percent for unregulated tenants (2017 HVS data for low income households is not yet available). While seemingly small, the significance of 2 percent of income should not be underestimated. For a family earning $20,000 a year, it is the difference between after-rent income of $10,000 in an unregulated apartment and $10,400 in a regulated one. For a family on a tight budget, that $400 can make a real difference.
Importantly, the rent laws create a mechanism to mitigate the immense pressure of the rental market on tenants. They allow the Rent Guidelines Board to take the economic situation into account when setting rent adjustments. With the skyrocketing rental market in 2015 and 2016, the Rent Guidelines Board enacted two rent freezes. This had an impact: the median rent for rent stabilized apartments rose from $1,237 in 2014 (April 2017 dollars) to $1,269 in 2017, an increase in 2.6 percent above inflation. In comparison, median rents in unregulated apartments rose from $1,546 (April 2017 dollars) to $1,700, or 10 percent above inflation.
The two rent freezes have had a measurable impact on low-income New Yorkers. 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 rent regulated renters reporting a very serious or somewhat serious problem with affordability decreased by 13 percent from 2015 to 2017 to 37 percent. In comparison, the share of unregulated renters reporting a very to somewhat serious problem declined by only two percent, to 48 percent (within the survey’s margin of error).
Beyond affordability, the rent laws provide a foundation for a number of other programs that extend support to vulnerable New Yorkers, including the Senior Citizen Rent Increase Exemption (SCRIE), Disability Rent Increase Exemption (DRIE), and the city’s groundbreaking Right to Counsel program, which will provide all low-income tenants with access to an attorney when facing an eviction in Housing Court.
The Need for Stronger Rent Laws
Rent regulation is an important piece of the city’s housing affordability landscape. However, as illustrated by the relatively high median rent burdens among low-income rent regulated tenants, the affordability it provides still falls short of what the city needs. This is only partly because rent regulation is a system of rent and eviction protections, conceptually distinct from a true affordability program. The problem is also caused by specific weaknesses in the laws, which often stem from pro-landlord amendments that have been made to the laws as they have been renewed over the years.
Vacancy deregulation, the vacancy bonus, and preferential rents undermine the affordability of rent regulated apartments. For example, as described in Community Service Society’s Making the Rent, the largest contributor to rent increases in rent stabilized apartments is the vacancy bonus, which allows an automatic increase of about 20 percent when an apartment becomes vacant and turns over to a new tenant. This mechanism explains 49 percent of the citywide total increase in stabilized rents above inflation between 2011 and 2014.
Unfortunately, as you know, state law precludes the city from making changes to address these defects. But I hope that many of you will join the tenants, neighborhood activists, and advocates who will be seeking solutions to these problems at the state level this year. We must not allow rent regulation to erode until it becomes a socially stigmatized residual program for a handful of people. As a broad-based program focusing on fairness rather than subsidy, rent regulation has an important place in our city’s housing policy system. I urge you to pass introduction and resolution in front of you today.