The Rents Are Too Damn High!

And Socialist Policies Have Made Things Worse!

By Dominick Romeo

Despite popular belief, rent control and stabilization are not socialist policies, they are consumer protection programs.  They were created to solve a particular financial problem at the time and had clear end dates. 

New York’s current rent control/rent stabilization program began in 1943 and is the longest-running program in the United States. This version was signed into law by President Franklin D. Roosevelt, part of his Emergency Price Control Act during WWII, but can be traced even further back to WWI, after a coal and housing shortage raised rents uncontrollably in 1920. 

I’m not against rent control or rent stabilization but let’s look at what happens. When a tenant pays $600 a month for a one-bedroom and their neighbor is paying $3,000 for that same one-bedroom, that $2,400 difference needs to be made back somehow because the rent controlled units are not covering the owner’s operating expenses. And how do owners make up this difference?  By increasing the rents of others who live in or rent storefronts in the building. This is the only way that the owner can pay their bills and it’s not fair for a renter or an owner.   

Being a building superintendent gives me a unique perspective regarding housing as well as other policies affecting our neighborhood.

Fairness in Apartment Rental Expenses
In June of this year, the Fairness in Apartment Rental Expenses [FARE Act] was passed, written by members of the Democratic Socialists of America in City Council.  This law mandates owners to pay for broker fees instead of tenants who are moving into their new homes. Broker fees tend to be equivalent to one month’s rent.  So, if the asking price for a one-bedroom apartment is $4,500 per month (standard for a one bedroom in Manhattan) that would be roughly what a broker would get in fees.

Small property owners, brokers and realty companies all warned City Council that if the FARE Act passed it would result in increased rents – and indeed it has.  I watched the rents in my building go from $4,500 to $5,000 overnight.  Ultimately, even though this policy forced owners to pay the broker fees, those fees were passed down to new tenants for the duration of their lease.  And the response by City Council when they were warned of this? They brushed them off saying that the rents will go back down.

SPOILER ALERT! The rents have not gone back down!

Housing Stability and Tenant Protection Act
HSTPA was signed into law by former Governor Andrew Cuomo after caving under pressure due to the blue-wave of 2018 when progressives (aka Socialists) took the Senate in Albany.  Cuomo later admitted that he regretted certain aspects of HSTPA, particularly MCI and IAI repairs according to an article published in Politico in March of this year.

HSTPA severely limits the amount spent on Major Capital Improvements [MCI], like a new boiler or a new roof, to only a 2% increase in rent, leaving owners to either make up the difference or not replace their aging roofs and boilers.  No one can keep up with all the new regulations – the “local laws” we see flying out of City Council chambers. For example, Local Law 11 that went into effect in August requires building owners to inspect and repair their façades every 12 years—along with testing for and removing lead paint. This all costs money!

Lead paint removal alone could cost over $30,000 for a studio apartment, and the building owner is only allowed to charge a tenant back 2% a year – that’s roughly $83 per unit each month – just to put HSPTA into perspective.

Costs keep going up and there are few ways for owners to stay afloat.  Individual Apartment Improvements [IAI] are also capped at 2% or $83 per month for $15,000 worth of improvements. This means owners can’t afford to renovate the bathroom or replace kitchen cabinets or complete the paint job that’s required every three years, instead of what was once every seven years, because City Council created a new local law for that as well.  All while owners pay outrageous property taxes, and high electric, water, and gas bills.

Andrew Cuomo’s campaign spokesperson Rich Azzopardi was quoted saying, “While well-intended, the 2019 bill had unintended consequences — specifically changes involving MCI and IAI repairs.”  But there were groups of people telling them exactly what those consequences were going to be!

As a result of HSTPA, there are close to 60,000 units that can no longer be rented out in NYC.  Owners of these buildings simply cannot afford the repairs anymore, which caused rents to go up even further due to supply and demand.

REFORM HSTPA AND THE FARE ACT
Both HSTPA and the FARE Act need to be reformed. This would bring much-needed relief to owners, while bringing empty apartments back online, and stop banks from seizing then reselling their properties to the highest bidder.

 Once their property is taken away from them, due to tax issues and the number of fines they have received but could not pay –  the developer will claim their building fell into disrepair – that it needs to be demolished, and the original tenants will be evicted, so they can erect another luxury building in its place, then charge fair market value for rent.

There is a new housing bubble that’s about to burst and the cause of this is not corporate greed this time – it’s socialist policies.

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Dominick Romeo is a candidate for District 3 NY City Council.