Albany Dems trumpet a depressing rent compromise, while tenants and landlords gear up for the real battle to come
10:50 am Jul. 11, 2011
Andrew Cuomo's office called it “The Greatest Strengthening of Rent Regulations in Decades.” Assembly Speaker Sheldon Silver and Assembly housing committee chairman Vito Lopez called the state's new rent-regulations enhancement, which will go into effect this year, a “Hard-Fought Victory for New York City Tenants and Working Families.”
The propertied class, meanwhile, claimed persecution. The Rent Stabilization Association, a landlord group, called the new rent laws “an indication of the increasingly hostile environment for residential property owners in the City of New York.”
Mostly, everyone was just going through the motions.
The hyperbolic dueling press releases obscured the fact the changes wrought by this most recent extension of rent regulations are actually minor ones. The new regulations, agreed upon last month as part of a much bigger budget compromise between legislative leaders and the governor, will do little to halt the erosion of middle-income housing in New York City, and are more dangerous to landlords in principle than in practice.
The respective lobbies are positioning themselves accordingly.
“There is a need to understand that the Democratic conference as presently constituted is so far in the tenants' pockets, that to try to have a debate in terms of reasonableness doesn’t [work]," said Joseph Strasburg, president of the RSA. “Practically speaking, we need to focus on the Senate in terms of keeping the Republicans in the majority and working with the moderate Democrats.”
IT IS A REMARKABLE THING TO SEE SO MANY IMPORTANT MEN REPRESENTING aggressively vocal, mutually hostile constituencies converge on Albany, only to emerge disconsolate, agreeing over nothing but the pointlessness of it all.
“The so-called enhancements to the bill are so minor,” said Michael McKee, treasurer of Tenants PAC and the leader of the rent stabilized tenants movement. “You know, I’m really not happy about this law. These vaunted, much-hyped enhancements are greatly exaggerated and left a whole bunch of loopholes in effect.”
Brooklyn Councilman Brad Lander, a former affordable-housing activist, described the legislation as “extremely modest.”
“Sadly, it will not make much of an impact in the ongoing loss of affordable housing,” Lander said.
Lander’s ideological opposite, Strasburg, described it similarly: “It’s a little cosmetics here and there.”
No one is happy, because no one, aside from perhaps Andrew Cuomo, who can now claim he’s marginally more tenant-friendly than his predecessors, got precisely what they wanted.
Steven Spinola, president of The Real Estate Board of New York, which has a membership list containing nearly every industry multibillionaire, billionaire and millionaire from the Dursts and and Rudins to Related Companies and Tishman Speyer, approached lawmakers with a sheaf of demands, and he had good reason to think they’d be met. His organization has lavished money on both Senate Republicans and Governor Cuomo, and the pro-Cuomo Committee to Save New York is bankrolled in large part by the real estate industry.
But Cuomo, who has shown himself in this past session to be a masterful political tactician, appears to have had the industry’s number. In particular, in facing down their demands, he seems to have taken of a advantage of a split in the industry between major developers and bread-and-butter residential landlords.
This played out during budget negotiations when the Rent Stabilization Association, which represents the bread-and-butter apartment building owners, and REBNY, which is more closely associated with mega developers and the commercial real estate industry, failed to agree on a common agenda to push for.
Spinola, at the urging of a small group of big landlords, including the Litwins and Related Companies Chairman and CEO Stephen Ross, sought a controversial 20 percent tax cap for rental apartment projects built in recent decades that took advantage of tax incentives for 20-percent affordable-housing set-asides and 421-a tax incentives. He also sought an extension of the 421-a incentives themselves.
The 421-a extension happened, but the more ambitious proposal for the tax cap ended up going nowhere.
It was a disappointing result for the landlords, and apparently part of the reason it came about is that Cuomo and the Democratic Assembly leadership knew that Strasburg, normally the point man on residential matters, was more interested in other concessions.
“We each had different priorities,” Strasburg said. “For them what was most important was 421-a. We were focused on rent regulation. So I think my position was, you know, you do much better when you speak with one voice and you’re united.”
Spinola, when asked if there was any dispute between the two organizations, replied, “None.”
“I don’t know what RSA thought,” Spinola said. “REBNY has been involved with this issue for as long as I’ve been here. I was up in Albany when we adopted vacancy decontrol 14 years ago. I was there six years ago. REBNY continues to have a constituency that continues to care a great deal about housing, and we will continue to be involved in housing issues.”
Other things the landlords wanted, but didn’t get, were a longer time-frame for the rent-regulations extension (a full eight years, versus the four they got), and legislation that would address the 2009 Court of Appeals decision on Roberts v. Tishman Speyer, which ruled that apartments could not be deregulated if they received J-51 incentives for property improvements. (The J-51 program was originally designed to encourage improvements to run-down or foreclosed properties.)
Further, landlords strenuously opposed the tenant-friendly increase of decontrol thresholds—the amount of monthly rent above which apartments can go market rate, from $2,000 a month to $2,500, and the raising of the tenant-income limit from $175,000 to $200,000. The landlords also sought to expand income limits to all apartments, so that a billionaire could not rent a $1,900-a-month rent-stabilized apartment. That, too, was rejected.
And landlords will now only be able to increase rent for individual apartment improvements one sixtieth, versus one fourtieth, the cost of the improvement, though only in buildings with 36 or more units, something landlords claim will worsen housing conditions for tenants.
All the Senate Republicans and their real estate patrons got was a preservation of most of the deregulation provisions, what opponents call "loopholes," created in the 1990s, as well as a three-year extension of 421-a benefits, and no legislatively required increase in governmental oversight of apartment deregulation, which was another thing the tenants had been hoping for.
“There is a big remaining question over whether the state Division of Housing and Community Renewal will actually step up and require documentation and enforce rules that people are doing this necessary work and it really gets done,” said Lander. “The legislation that got passed just restates what’s already true, that the agency has the power to do it.”
The officials who worked to pass this rent-regulations legislation take firm issue with the idea that the changes are insignificant. They point to the practical impact, but also to the fact that these changes are the first pro-tenant improvements achieved at the state level since the '90s.
"At three prior expirations of rent protections, there was an erosion of benefits," said Lopez. "It's the first time there was no erosion, and the first time there was an expansion of benefits. Did we get everything we wanted? No. But it was definitely something many people were excited about."
But the fact is that political achievement was overshadowed by what tenant advocates did not get in the final deal: an abolition of vacancy decontrol, or a repeal of the Urstadt Law, which would have returned control of New York City rent stabilization policy to the city.
This means that as long as the balance of partisan power in Albany remains static, time is on the side of the real estate industry. As the clock ticks, more and more units continue to leave rent stabilization and go market rate, and the strength of the tenants movement weakens accordingly.
“Raising the threshold from $2,000 to $2,500 guarantees the eventual deregulation of Manhattan and every other prime neighborhood, because the big landlords, the owners of valuable real estate, will expend the money to reach the $2,500 threshhold, will do it the legal way, and there will be no way to stop it,” said McKee. “They would be stupid not to.”
Ultimately, though, these are just details. The real game, starting now, will be taking place in Senate districts around New York State.
“We will concentrate on the election next year, and try to help the Democrats recapture the Senate,” said McKee. “Not only that, we will continue to replace pro- landlord Democrats with pro-tenant Democrats as we did last year with Espada, and then we will back in January 2013, saying OK, now let’s get some stuff done.”
Homepage image by Bonnie Natko, via flickr.