Rent Guidelines Board (RGB) members can be freely dismissed or brought on based on the mayor’s liking. This power dynamic offers fertile grounds for bias to exist, perhaps automatically. Let’s work through this by analogy. The Federal Reserve Chairperson of the U.S is appointed by the president. When the presidential administration changes, the chair does not right away get dismissed. Instead, he or she rides out the remainder of his or her term in office and sometimes even gets re-appointed by thew new administration. Even with this mechanism in-place there are sometimes accusations that the Fed is not independent, but beholden to the wishes of the appointing person. Imagine if large swaths of the Federal Reserve board of governors could be dismissed on a whim when President Biden or former President Trump gets elected? That probably wouldn’t go over so well. That’s exactly what happens in NY’s rent regulations governing body. In 2014, former Mayor DeBlasio replaced 5 out of 9 members of the rent guidelines board in one day, shortly after getting elected. The mayor holds great power in creating appointments. As a result, the board tends to vote in ways that directly reflect the views and wishes of the mayoral administration. Back in his time in office Rudy Giuliani, explicit stated what he wanted to see the RGB put out.
The mayor’s ability to influence the yearly rent increases for all rent stabilized buildings is unchecked. Not only do appointments come from the mayor, there is no other governing body required to proofread and okay his work. There is no confirmation by the City Council for the board members that the mayor nominates. In NY, approximately 950,000 rent stabilized apartments house nearly 30% of NYC residents. If the goal is to move away from partisanship, it seems like an easy fix to involve more parties to weigh in on or make decisions about how profitable or costly housing is. This isn’t an outlandish idea btw. Westchester county also has an RGB, and its appointees go through two levels of screening: appointment by Westchester’s version of City Council and then confirmed and appointed by the Department of Housing and Community Renewal (DHCR). Reforming NYC’s RGB clearly isn’t impossible to do.
The Rent Guidelines Board is not the answer. Pitting renter advocates against housing provider supporters to decide how much the rent increases are each year is a sub-optimal solution. It worsens tenant-owner relations at large. Equally important, it misses an opportunity to incentivize owners to better manage properties in exchange for higher profits. Taking the viewpoint for a second that housing providers are in the business of providing housing means that buildings owners will respond positively to incentives that put more money in their pocket.
Board member Mr. Gonzalez Riviera alluded to this incentives system when discussing taxes. According to Riviera, tax expenses encompass ~36% of gross income on multifamily buildings and they make up 40% of the city’s revenue derived from the city of NY (no outside grants). Riviera floated the idea of reducing property tax bills by a fixed amount for each repair performed during the year. This would encourage housing providers to be A+ owners, because doing so would make them more profitable. It would also directly benefit tenants who would have more ready access to repairs and maintenance. This could look a bit like new models of health insurance payments, whereby health care providers are paid a flat fee for patient treatments. If they spend less money and time to do the procedures than the standard reimbursement hurdle, or if the patient doesn’t need follow up care, it grows profit margins for the health providers. The key requirement in a model like this one is that the official cost for each repair needs to be reasonable, such that both nimble investment firms and mom & pop owners can perform the repair at a cost lower than the deductions to their tax bills. This isn’t a bullet proof approach either – tax class 2A and 2B buildings which historically have lower tax basis might need some other form of relief. But this idea is big and bold enough to get the conversation started on reform.
Sources: Curbed, Gotham Gazette, RGB June 21st, 2022 vote
Originally published on July 3rd, 2022