Rent Board Approves 3%, 4.5% Hikes Amid Growing Calls For Rent Freeze

Scores of angry tenants and a decisive election result didn't stop New York City's Rent Guidelines Board from approving rent increases at stabilized buildings by 3% for one-year leases and 4.5% for two-year leases.

The vote divided the nine-member body 5-4, a sign of the political divisions at the heart of the issue of rent stabilization. Much of the 45-minute-long meeting was drowned out by jeers from the audience, some of whom yelled expletives, called the board “bloodsuckers” and shouted that landlords “belong in hell.”

The hikes are higher than what the RGB approved last year — when it implemented increases of up to 2.75% for one-year deals and 5.25% for two-year leases — but lower than the 6.3% increase in landlord operating costs.

“When the government continues to fail, the responsibility for long-term viability of the rent-stabilized housing stock falls on this Rent Guidelines Board,” landlord representative Christina Smyth said during the meeting. “If we continue to adjust rates below inflation, we are dooming buildings to failure.”

The decision impacts nearly 1 million apartments in the five boroughs and has become one of the biggest tension points between millions of New York renters and the real estate industry.

Following the 2019 passage of the Housing Stability and Tenant Protection Act, which reduced landlords' ability to remove apartments from regulation, property owners have become reliant on rent increases to stay in the black.

However, those increases haven't caught up with inflation, insurance costs and the renovations that buildings built before 1974 — which make up a majority of the stabilized stock — require. 

In a statement Monday night, New York Apartment Association CEO Kenny Burgos acknowledged that the RGB is put in a “horrible position” due to an inability to adjust other factors that increase the cost of housing, such as property taxes. 

“While we are disappointed that the RGB once again adjusted rents below inflation, we appreciate that they stood up to political pressure calling for rent freezes that would accelerate the financial and physical deterioration of thousands of older rent-stabilized buildings,” Burgos said.

State Assemblyman Zohran Mamdani has hitched his campaign for mayor to a rent freeze, attracting even more eyes to the RGB. The Democratic Socialist defeated former Gov. Andrew Cuomo in a stunning upset last week in the Democratic mayoral primary, generating angst among the city's real estate industry.

Mamdani had been vocal on the subject even before his run for mayor. He was arrested protesting outside last year’s board vote, according to Gothamist. The NYAA has called a “premeditated” rent freeze illegal.

Although Mamdani wasn't in attendance, his political ally, Comptroller Brad Lander, gave a speech in his place to tenants rallying before the meeting at El Museo del Barrio on the Upper East Side.

“Tenants are facing the highest rents in New York City history. Meanwhile, landlord profits are up 8% since last year,” Lander said before the vote. “If there was ever a moment for a rent freeze, it is right now.”

The 8% referenced by Lander is from an RGB analysis of the net operating income of rent-stabilized buildings between 2022 and 2023. The NYAA has countered that the data is skewed because it includes more than 120,000 free-market units that share buildings with rent-stabilized apartments.

The rent increase follows months of hearings during which property owner groups and tenant advocates sought to convince the RGB to take opposite paths. Nonpartisan think tanks, such as the NYU Furman Center and the Citizens Budget Commission, urged the board not to limit increases to appease tenants' demands.

“The city should act now to stop the physical and financial deterioration of the rent-regulated stock before these problems grow worse and enter the maintenance ‘death spiral’ observed in New York City Housing Authority buildings, where, as a result of deferred maintenance, the cost of repairs nearly exceed the cost of a new building,” CBC Director of Housing and Economic Development Studies Sean Campion said during his May 22 testimony.

Before the vote, a crowd of protesters gathered outside, donning hats that said “Freeze the Rent!” and reciting chants like “Hey-hey, ho-ho, Eric Adams has got to go.” They unveiled a banner with 20,000 signatures from residents advocating for no increase.

But the mayor put his own pressure on the board to limit rent increases this year. In the hours before the vote, Adams called for the RGB to “adopt the lowest increase possible,” citing the city’s historically tight 1.4% vacancy rate. 

Still, he didn't call for a rent freeze. The mayor appoints all nine members of the RGB, which include two representatives each from tenant and owner groups. All four of those members voted against the increase.

In a statement following the vote, Adams said that he was “disappointed” that the board increased rates higher than what he called for. However, he also toed the line, acknowledging property owners’ plight.

“Rent may be on the rise, but so are deteriorating housing conditions — including inadequate heat and heating breakdowns, mice and rat problems, mold, and leaks — especially for New Yorkers in rent-stabilized housing,” Adams said in the statement. “Demands to ‘freeze the rent’ would exacerbate these harmful health and safety issues inside the homes of more than 1 million New Yorkers by depriving owners of the resources needed to make repairs.”

Roughly 16% of securitized loans tied to New York City’s rent-regulated properties were delinquent in February, according to an analysis of CMBS data by Trepp. And although that dropped to 8% in June, the delinquency rate for nonregulated properties has been below 2%. Lenders have also become more cautious, with underwritten capitalization rates 50 to 100 basis points higher than those against nonregulated properties.

While tenant groups have pointed to data showing landlords' income improving, much of the top-line numbers are being skewed by record-high market rents. At properties where most or all of the units are subject to rent stabilization, NOI has been declining steadily in recent years, according to financial documents for more than 4,000 rent-stabilized apartments shared with Bisnow. 

Insurance costs alone for stabilized buildings built pre-1974 rose 145% over the past five years, according to a survey conducted by HR&A Advisors for REBNY. 

“[The RGB] didn't follow the math,” Ann Korchak, the board president of Small Property Owners of New York, said in a statement following the vote. “Now these rent adjustments will further plunge small rent-stabilized buildings into distress and foreclosure.”