Freeze Rent and Eliminate MBR Increase

Assembly Member Richard N. Gottfried
Testimony before the New York State Home and Community Renewal
Maximum Base Rent Increase Public Hearing
New York State Assembly Hearing Room, 250 Broadway, New York, NY
My name is Assembly Member Richard N. Gottfried. I represent the 75th Assembly District in Manhattan, which includes the neighborhoods of Chelsea, Clinton, parts of the Upper West Side, Midtown, and Murray Hill. My district contains a large portion of the City’s Rent Controlled Apartments. I regret I am unable to be here in person to speak on the proposed increase to the Rent Control Maximum Base Rent (MBR). Under Rent Control, tenants are hit with a 7.5% increase in their Maximum Collectible Rent (MCR) each year until their rent hits the MBR level. Since the MBR is continually increased, it is seldom that a tenant reaches the point at which they will no longer be subject to the 7.5% increase. This year, DHCR is proposing a 7.4% increase in the MBR for 2018-19. Although this preliminary Standard Adjustment Factor (SAF) is lower than for the last four cycles, it comes on top of previous excessive increases. In 2010, the MBR was a high 12.9%, which occurred during a severe national recession. During the last 15 years, MBR increases averaged twice those for rent-stabilized tenants. In recent years, the New York City Rent Guidelines Board protected rent-stabilized tenants with rent freezes for two years. There is no rationale for the State to subject rent-controlled tenants to major rent increases year after year while the City protects rent-stabilized tenants. The system for determining rent control increases is seriously flawed. It is long overdue for the current MBR system to be ended and the State to provide fairness for rent-controlled tenants. A rent freeze is the only fair choice following years of unjustified increases. The MBR formula unfairly favors landlords. The formula is based on the premise that a landlord’s only income is from rent-controlled rents. Since most rental buildings have tenants who are rent stabilized, decontrolled market rate tenants, and in some cases co-ops and condos, the formula dictates rent increases that do not reflect a landlord’s actual building income. On top of the MBR increases, the State subjects rent-controlled tenants to fuel pass-along surcharges and Major Capital Improvement rent increases. Rent Controlled tenants are overwhelmingly older and generally poorer than average New York City tenants, and have lived in their homes for many years. They usually pay a higher percentage of their income for rent. One third of rent-controlled tenants spend more than half of their income on rent. This population stands at high risk of homelessness. According to a 2014 LiveOn report, more than 2,000 seniors per night reside in shelters. Changing the MBR formula or discarding it altogether would immediately contribute to preserving approximately 26,000 rent-protected housing units. Until the passage of state legislation eliminating the MBR formula to begin to even the playing field for rent-controlled tenants, the State should at least refrain from granting MBR increases on top of previous unfair increases. It is vital that the MBR increase be frozen in this cycle, and replaced with a new system.