State’s “eviction bonus” the largest contributor; mechanism accounts for increases to stabilized rents totaling $40 million per month over the last three years
New York’s rent regulated apartments are the largest source of housing for more than one million low-income households with incomes below twice the federal poverty threshold. Yet this vital bulwark against the worst effects of the city’s chronic affordable housing shortage is being steadily weakened through deregulation and excessive rent increases allowed when apartments turn over
In a new report, the Community Service Society (CSS) dissects the mechanisms that are allowing rents and rent burdens to reach increasingly unaffordable levels in all parts of the city. “Making the Rent 2016: Tenant Conditions in New York City’s Changing Neighborhoods,” documents the widening gaps between rents and incomes for tenants and related surges in overcrowding, which is often a precursor to homelessness.
Most notably, the report argues that New York’s statutory vacancy allowance, or “eviction bonus,” is responsible for nearly 50 percent of the citywide total increase in stabilized rents above inflation.
“Loopholes in our rent controls laws are contributing to the city’s affordable housing crisis by allowing unscrupulous landlords and real estate speculators to pressure tenants into moving out of their apartments and then jack up rents during the vacancy,” said David R. Jones, President and CEO of the Community Service Society. “We’ve heard a lot of talk about the importance of preserving affordable housing. Now we need action. It’s time to strengthen protections to the rent stabilization system and put a halt to the harmful displacement of families from their homes.”
"I am sad and happy about this report. Happy because it is what tenants and affordable housing preservation advocates have been shouting from the rooftops all along and why a bill to end the eviction bonus is on our legislative platform -- it is a primary tool used by landlords to escalate rents and bring rent-regulated apartments to the deregulation threshold,” said Delsenia Glover of the Alliance for Tenant Power. “I am sad because it states plainly the dire situation we are in with regard to rent regulated housing and why the small tweaks made during the 2015 renewal of the rent laws yielded nothing of any significance for tenants, and in no way stops the speeding train from reaching the 100 percent deregulated station in another 20 years. The gaping loophole encourages landlord harassment targeted to tenants in regulated homes.”
Echoing concerns raised in the CSS report, a group of state lawmakers will hold a press conference in Albany today to call for the elimination of the vacancy allowance and stronger protections to New York’s rent laws.
Summary of the report’s key findings:
- Rents have risen far faster than incomes since 2002. For the bottom 20 percent of the city’s population, rents have risen 30 percent faster than income. As a result, the residual income for low-income tenants in the private unassisted market was eight percent lower in 2014 than it was in 2005, after adjusting for inflation.
- The largest contributor to rent increases in rent stabilized apartments is the statutory vacancy allowance that allows an automatic increase of about 20 percent when an apartment becomes vacant and turns over to a new tenant. The vacancy allowance accounted for 48 percent of the citywide total increase in stabilized rents above inflation.
- The vacancy allowance is also contributing to the spread of “preferential rent” leases which specify a preferential rent to be paid during the term of the lease along with a higher registered rent which can become the basis for the rent charged upon lease renewal. This undermines the protection of rent stabilization by allowing large increases from the preferential rent to the registered rent (plus any further increase allowed under the Rent Guidelines Board) at the conclusion of the lease term.
- Low-income tenant households in the unassisted market have become significantly more overcrowded since 2008, probably due to doubling up or taking on additional household members in response to unaffordable rents. This crowding imposes hardships and could signal increased risks of homelessness.
- Rents continue to rise the fastest in neighborhoods in Upper Manhattan, brownstone Brooklyn and Western Queens driven by changes in the city’s economy and high demand for centrally-located housing. But rents and rent burdens are also rising fast in less centrally-located neighborhoods where far more of the city’s low-income people live. In addition to concerns about gentrification and the market effects of local redevelopment, advocates of affordable housing are also concerned about the city as a whole losing its ability to accommodate the housing needs of low-income people.
- After the vacancy allowance, the second largest contributor to rent increases on rent-stabilized apartments is the increases allowed on renewal of rent‐stabilized leases by the Rent Guidelines Board. It accounts for 27 percent of the citywide total increase, and 37 percent in low‐income areas.
Findings from the Making the Rent 2016 report, co-authored by CSS housing experts Tom Waters and Victor Bach, are based on an analysis of new and historic data from the New York City Housing and Vacancy Survey, which is conducted every three years by the U.S. Census Bureau.
In response to these trends, and to prevent the city’s regulated housing stock from sliding into even greater degrees of unaffordability, CSS recommends the following:
- The New York State Legislature and governor should act to eliminate the “eviction bonus,” which is the preeminent driver of unaffordable rents in the city’s regulated housing stock;
- The New York State Legislature and governor should act to eliminate the “preferential rent” loophole by requiring that landlords offer rent-stabilized tenants renewal leases at rents based on the rent actually paid by the tenant under the previous lease, not a higher registered rent;
- The New York Rent Guidelines Board should continue to take the economic situation of tenants into account in setting limits on rent increases on lease renewals of rent-stabilized apartments.