Stories

How does city set landlord rent hikes for tenants?

In New York City, the Rent Guidelines Board determines maximum rent hikes for about 1 million rent stabilized apartments. Tomorrow, the board will hold a preliminary vote on the next round of increases. We want to know: How does the Rent Guidelines Board calculate what landlords can charge their tenants? If you have information or…

In New York City, the Rent Guidelines Board determines maximum rent hikes for about 1 million rent stabilized apartments. Tomorrow, the board will hold a preliminary vote on the next round of increases.

We want to know: How does the Rent Guidelines Board calculate what landlords can charge their tenants?

If you have information or insight to share, write us, tweet @thenyworld or comment below.

What we found

The New York City Rent Guidelines Board has a staff that crunches data and produces four major reports throughout the year analyzing economic factors that influence rent – things like renters’ incomes, landlords’ profitability and operating expenses of a building.

That last number appears prominently in the Price Index of Operating Costs, also known as the PIOC and is arguably the most important number of the bunch. The PIOC is a projection of how much it will cost to run a building in upcoming years and looks at items like fuel, administrative costs and insurance.

Theoretically, once the board knows this number, they can take into account all of the reports and figure out how to share these costs so that renters aren’t paying too much and landlords aren’t paid too little.

Sounds easy, right?

But there’s no neat formula to come up with the magic number. It’s up to the nine members of the board – two representing owners, two for tenants, and five “public members” — to decide what happens. Formulas help determine a range of percentages for the rent hikes, but the decision is ultimately up to the board.

“The formula is just a point of reference,” said Andrew McLaughlin, executive director of the Rent Guidelines Board. “It’s not exclusively to set a guide.”

Since at least 2008, projections in the PIOC have outstripped the actual amount landlords later reported spending on their buildings. (Landlords are required to report operating and management costs to the city Department of Finance.) The problem seems to be an issue of timing. When the Rent Guidelines Board staff prepares its projections, the latest data available is already two years old. The current rent hike proposal was informed by costs landlords reported in 2010.

Timothy L. Collins, former director of the Rent Guidelines Board, told members at a hearing last Thursday this lag in information is one of the reasons for sharp rent increases in 2008 and 2009 , in the midst of a recession.

“You would think having learned that they would do lower rent increases for greatly overestimating in past years, but they didn’t,” said Sam Stein, the rent regulation campaign coordinator at Tenants and Neighbors, a tenant advocacy group.

We still have calls out to major landlord groups, the Rent Stabilization Association and Small Property Owners of New York and will add their comments as they come in.

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