Rent control board should consider owners' rising costs - Brief Article

Everywhere you turn, costs for owning and managing residential properties are rising. Insurance premiums, real estate taxes, fuel costs, water and sewage taxes are just a few of the expenses that a property owner can expect to increase this year in the city of New York. In a robust economy the costs are exacerbated as prices rise across the board; in slow years price hikes hurt the bottom line even more. It seems there is a never-ending deluge of bills that just go up and up. Unfortunately, a rent-stabilized owner is in a particularly precarious position with no control over the increases and little recourse--essentially forced to absorb the costs. Owners are constantly dodging economic bullets.

Each year, the New York City Rent Guidelines Board (RGB) makes decisions on rent increases for rent-regulated apartments. The board takes into account various economic conditions that affect owners according to price indexes. However, the indexes do not necessarily correlate with individual owners' experiences, and don't necessarily cover all the issues. Aside from lobbying the RGB--already a highly political panel of representatives for tenants and landlords--there is little that can be done in response to the board's decision.

The Rent Regulation Reform Act of 1997 has made some significant inroads to provide equity for landlords, but there is still a quagmire of politics and landmines to navigate.

This year's situation is particularly difficult economically for a number of reasons. To begin, since Sept. 11, insurance premiums have jumped up sharply, in some cases doubling or tripling for many multi-unit structures that are dense with people. In some respects, the insurance companies have a plausible excuse to raise rates for real estate coverage. On the other hand, they are merely passing their losses to property owners. Costs could eventually trickle down to tenants, but the RGB needs to recognize this unusual spike.

Second, real estate taxes have been rising in New York for a number of consecutive boon years. Even though the market leveled off in the middle of 2001, assessments are going up while the overall economy is in a recession. As a result, rents need to accurately reflect current operating and management costs.

Another significant, pressing issue involves fuel costs which are spiking again in a major way. In the last month or two, prices have jumped nearly $0.20 cents per gallon. Demand is as high as ever while tension in the Middle East clouds the future supply.

Finally, water and sewer taxes have been rising at 6-12% per year. It's easy to project extensive increases in those costs over the next year as well.

None of this gets passed on effectively in a rent regulated building. The buck stops with the property owner. The economic bottom-line shows owners--especially rent stabilized property owners--bearing a larger and larger percentage of the financial burden each year.

Most owners are conscientious and recognize that the best way to run a building over the long term is to keep it well maintained, clean, and up-to-date. But, consumer media rarely covers owners in a positive light.

They are cast pejoratively as "landlords." Politicians refuse to align against the powerful tenant associations and the large numbers of votes that follow. So, where are the media reports about the majority of good owners and managers who provide nice, affordable living accommodations? Which politicians are going to protect owners who represent a small minority of the population, but bear the cost burdens of rent-stabilized apartments and feel the squeeze more and more each year?

There is no question that everyone deserves access to housing they can afford. Not everyone can pay $3,000 per month for a one-bedroom apartment. As such, rent-stabilization serves a valuable purpose. Being an owner of numerous rent-stabilized properties, I agree with this. Unfortunately, at times it seems as though, property owners are in a maze, surrounded on all sides by doors that are closed, locked into a fight to exist. The new mayoral administration has shown a strong business focus and will hopefully be able to mediate fairness for all involved.

COPYRIGHT 2002 Hagedorn Publication
COPYRIGHT 2002 Gale Group