City Landlords Say Rent Freeze Will Force Them to Cut Back Services

City Landlords Say Rent Freeze Will Force Them to Cut Back Services

City Landlords Say Rent Freeze Will Force Them to Cut Back Services
July 8, 2015

Mets vs. Yankees. Cuomo vs. de Blasio. Matt Stonie vs. Joey Chestnut. New York City has never been short on rivalries, but there is no more bitter—or more enduring—animosity than that between the city’s tenants and their landlords.

And the city Rent Guidelines Board has not helped ease tensions between them this year.

The board’s historic decision to freeze stabilized rents with a zero-percent increase on one-year leases late last month has tenants celebrating and landlords fuming.

Now, representatives for the city’s landlords say their constituents may forgo maintenance and building services on their properties due to the board’s decision.

“You can’t have costs that go up and rents that are frozen in place,” said Jack Freund of the Rent Stabilization Association, which represents the interests of the city’s landlords. “That’s not a practical way to run buildings.”

Landlords say the costs of maintaining buildings have outpaced the rent they receive from tenants in rent-stabilized units for over a decade. They cite data that show building expenses will increase 6 percent while rent-stabilized tenants will only pay a 1 percent increase in their rent over a two-year period.

“Ultimately, if this keeps up—and I believe these inordinately low increases will continue—then owners are going to have to cut back somewhere,” Freund said. Those cuts, he said, will likely come in the form of building services and repairs. Some of the largest expenses, like oil for heating and hot water, are fixed by city regulations mandating that landlords provide those basic services. This may leave other maintenance or service expenses on the chopping block.

“If you don’t have the money to put into the building, you know who’s going to suffer?” Freund asked. “The landlord will suffer, but the tenants will also suffer.”

For larger buildings and management companies that employ more workers, this could mean layoffs. One major owner of rent-regulated apartments told RSA they are planning to cut staff, Freund said.

For smaller building owners, property upkeep, cleanliness and maintenance will likely be postponed or neglected, landlords say.

“My phone is ringing off the hook every day, people are so disappointed and disgusted,” said Chris Athineos, head of the Small Building Owners of New York, who also rents stabilized units. “We talk about preserving and creating new affordable housing, but we have to preserve the affordable housing that we have now.”

Athineos says he is weighing what maintenance and repairs he will have to forgo on his own buildings as a direct result of the decision to freeze rents. A prewar building of his needs to be completely rebricked, but he says he can’t afford to do that. It is just one example of the kind of half-measures landlords are going to have to take, he says. “You have a leaking roof. It creates mold, mildew in top-floor apartments. Are you considering putting on a new roof? No, you’re just going to patch it. More patches, more patchwork.”

Without income that goes above and beyond the building’s operating costs, Athineos and others argue, landlords have to shift from a proactive, preventive maintenance approach to a reactive approach, because they say they simply don’t have the funds to take on major projects like replacing plumbing or reroofing an apartment.

“It’s frustrating. I want to do the right thing,” Athineos said, adding that he runs violation-free buildings and has good relationships with his tenants. “These are my customers. I want to provide them the best service I can. But it’s very hard to do when your income is so severely restricted.”

Small operators will be the most affected by these rent freezes, according to several landlord advocates.

“I just got off the phone myself with a small owner about an hour ago,” Athineos said. “And she said, ‘After this law passed in Albany and after what happened at the Rent Guidelines Board, I’m going to sell and just get out of the city. It’s not worth it anymore.’ ... You just get hit from all ends.”

Freund said that owner won’t be the only one. “We’ve been through this cycle of disinvestment before,” he said. “Hasn’t happened in a while, so maybe people are short on memory. Nobody on the board probably lived through that period of time when the Bronx was burning.”

Tenant groups, like the Metropolitan Council on Housing, dismissed such gloomy forecasts and rejected landlords’ claims that the Rent Guidelines Board’s decision was unfair.

“I think the landlord objections to a rent freeze are not only false, but laughably offensive to tenants,” said Ilana Maier at the Metropolitan Council on Housing. “The idea that they’re going to have to cut back on services is absurd. So if landlords stop giving services, it’s because they’re greedy, not because they’re having financial problems.”

Building owners in New York City, she contends, are still turning a profit every year.

The Rent Guidelines Board agreed. The board, which voted 7 to 2 to freeze rents, cited a consistent rise in landlords’ income after expenses over the last decade.

Nevertheless, building owners say the statistics and research carried out by the board was flawed. Moreover, they say, the board’s decision was based on politics—citing de Blasio appointees who dominate the board.

“They’re playing the wrong game here,” said Freund, who argued the board’s proper role is balancing affordability with building expenses, not trying to solve income inequality. “It’s a game that’s going to hurt the people they’re trying to protect.”

“You know,” Freund continued, “I just see an administration that doesn’t understand that it costs money to run buildings.” The low rent increases will likely continue in future years, but so will the unintended consequences of the board’s decisions, he said.

Maier says this argument both mischaracterizes the board and the facts it weighed in making its decision to freeze rents.

“I do not believe that a rent freeze, given the market, is actually hurting any of these buildings,” she said. “The only reason the Rent Guidelines Board voted for a rent freeze was that landlords made record profits for so many years in a row that it was justified this year. Landlords will still be able to pay their bills while making a profit.”

“I think it’s offensive that they have the gall to say a rent freeze is going to hurt tenants,” she said. Before the vote, she said, tenants called her saying that if the board voted for a new increase on rent-stabilized apartments, they would be forced to move out of the city.

The irony in this landlord-tenant spat is that both sides decry the same problem: They don’t have the money to keep up with rising costs. Tenants say they cannot afford the cost of rent and landlords say they cannot afford the cost of operating a building in New York City—and in the long run, both groups say they will have to pick up and leave if things don’t go their way.

While tenant advocates may not believe that building owners won’t have enough money to take care of their buildings, they do believe landlords when they threaten to not make repairs.

“Now they have an excuse to do it,” Maier said. “But they’ve been doing it for so long that it’s just going to be another day in a stabilized unit.”

Frank Runyeon
Frank G. Runyeon
is City & State’s senior reporter. He covers state politics and investigations.