Skip to content

Rent Guidelines Board’s Compelling Data For A Rent Increase

Blog Post

It’s the rent-debate time of year again.

On June 27, the Rent Guidelines Board (“RGB”) will vote on the size of annual renewal rent-bumps for rent-stabilized apartments.  Until then, the RGB calendar will be filled with public hearings and preliminary votes.  Among other things, the RGB will publicly review a few of the research reports that they released this month.  The data in those reports present a strong case for rent increases.

At the start of every calendar year, the RGB measures year-to-year changes in aggregate operating costs and in aggregate rental income for the more than 1-million regulated apartments in New York City.  It slices and dices the data in ways that should inform a vote on the size of rent increases for one- and two-year rent stabilized lease renewals.

One of the recent RGB reports (released on April 13) shows that owners’ operating costs have increased substantially in the most recently measured year (2016).  The RGB’s expense metric is the Price Index of Operating Costs.  The PIOC is a composite of landlord expenses, and it rose in 2016 by 6.2% year-over-year.

apt-costs

One of the recent RGB reports (released on April 13) shows that owners’ operating costs have increased substantially in the most recently measured year (2016).  The RGB’s expense metric is the Price Index of Operating Costs.  The PIOC is a composite of landlord expenses, and it rose in 2016 by 6.2% year-over-year.

On nearly every 2016 line item (taxes, insurance, labor, fuel) owners experienced material increases.  Only one line item, utilities, saw a slight decline.

This significant increase fuels landlord concerns about over-regulation when their increased operating costs fail to be offset by increased rent collections.  Given the past two years, where the RGB has frozen rents on lease renewals, owners are justifiably looking for a decision that compensates them for their increased financial burdens.

However, rent regulation is public policy, so of course it is not only about the owners’ profitability.  RGB is also charged with the task of keeping housing affordable, so they measure affordability.   It is mandated to consider the cost of living increases that tenants encounter, not just the cost-of-management increases that landlords encounter.

One of the most frequently used measures of affordability is the gross-rent-to-income ratio.  The ratio describes what portion of a tenant’s household income is spent on apartment rents.  In its most recent reading (2015), tenants in New York, on the whole, experienced a moment of relief.  The rent-to-income ratio decreased 70 basis points from 32.7% to 32.0%.

rent-to-income

Income has been going up and rents—for many—have been frozen.  It’s the first year since 2012 that tenant’s have experienced a decline in this affordability metric, so it should be heartening for the RGB policy makers who want to see tenants pay a lighter load relative to their income.

The RGB has a duel mandate:  to be fair to tenants and to be fair to owners.  Given the increased costs owners have experienced in the past year and the increases in tenant affordability, owners should be justifiably optimistic about RGB handing down long-awaited rent increases in June.

Back