Rpld §2 sub 2 ¶ (n), amd §§2-a & 2, Emerg Hous Rent Cont L; amd §§26-403.1, 26-504.1, 26-504.3 & 26-504, rpld
§26-403 sub e ¶ 2 sub¶ (k), rpld §26-504.2, NYC Ad Cd; rpld §5 sub a ¶ 13, amd §§5-a & 5, Emerg Ten Prot Act
of 1974; amd §1, Chap 21 of 1962
Eliminates rent regulation protections for certain high income tenants; lowers the annual income for certain protections to $125,000; repeals certain provisions relating to de-regulation of rent-stabilized housing accommodations upon vacancy.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6770
SPONSOR: Kolb (MS) TITLE OF BILL:
An act to amend the emergency housing rent control law, the administra-
tive code of the city of New York and the emergency tenant protection
act of nineteen seventy-four, in relation to eliminating rent regulation
protections for certain high income tenants; to amend the emergency
housing rent control law, the local emergency housing rent control act,
the emergency tenant protection act of nineteen seventy-four and the
administrative code of the city of New York, in relation to the deregu-
lation of rent-stabilized housing accommodations upon vacancy; and to
repeal certain provisions of the emergency housing rent control law, the
administrative code of the city of New York and the emergency tenant
protection act of nineteen seventy-four relating to eliminating rent
regulation protections for certain high income tenants
PURPOSE OR GENERAL IDEA OF BILL:
To eliminate rent regulation protection for apartments that become
vacant after June 16, 2017 and, then, to gradually return the current
regulated system of rental housing to a free market economy and to elim-
inate rent regulation protections for certain high income individuals.
SUMMARY OF SPECIFIC PROVISIONS:
This bill amends Section 2 and 2-a of the Emergency Housing Rent Control
Law, Sections 26-403 and 26-403.1 of the Administrative Code of the City
of New York (NYC Rent Control), Sections 26-504, 26-504.1, 26-504.2 and
26-504.3 of the Administrative Code of the City of New York (NYC Rent
Stabilization), and Sections 5 and 5-a of the Emergency Tenant
Protection Act to eliminate rent regulation protections for those
tenants residing in rent stabilized or rent controlled apartments who
have a total federal adjusted gross income in excess of $125,000 per
year (rather than $200,000) per year) in each of the two preceding
calendar years. It also eliminates the decontrol upon vacancy of apart-
ments that have a legal regulated rent of $2,700 or more. Instead, the
bill decontrols all rent regulated apartments that became vacant on or
after June 16, 2017. The exemption from rent regulation would not apply,
though, to any apartment that the Commissioner of the Division of Hous-
ing and Community Renewal determines becomes vacant because the land-
lord, with intent to cause the tenant to vacate, engaged in any cause of
conduct that, interfered or disturbed the comfort, repose, peace, quiet
of the tenant in his or her use or occupancy of the apartment.
EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
This bill amends Sections 2 and 2-a of the Emergency Housing Rent
Control Law, Section 26-403 of the Administrative Code of the City of
New York (NYC Rent Control Section 1 C3) of the Local Emergency Housing
Rent Control Law, Sections 26504, 26-504.1 and 26-504,2 of the Adminis-
trative Code of the City of New York (NYC Rent Stabilization), and
Sections 5 and 5-1 of the Emergency Tenant Protection Act.
JUSTIFICATION:
In some form or another, rent regulation has existed in the City of New
York since 1943 when it was imposed by the federal government as an
emergency wartime measure. In 1946, the State of New York maintained
rent control on the basis that an emergency in rental housing continued
to exist as evidenced by a vacancy rate that remained at less than 5%.
New York City represents the only municipality in the nation that has
maintained and Subsequently expanded rent regulations since their
wartime imposition. While the regulation of rents has certainly allowed
many tenants to remain in apartments and neighborhoods to which they
have become accustomed, its effects upon the supply and the maintenance
of housing have been devastating. Stated Anthony Downs, Senior Fellow,
the Brookings institute in his initial study, Residential Rent.
Controls, An Evaluation (The Urban Land Institute).
Rent controls inhibit the development of the additional new rental units
needed to remedy the problem that led to the adoption of controls. This
self-defeating aspect of stringent rent controls is their most serious
long-term drawback. The rapid increases in rents that usually stimulate
adoption of any rent controls are invariably caused by an excess of
demand in relation to the existing supply. The only long-run cure for
that imbalance, other than cutting back on demand itself, is expanding
the supply of available rental units. Expansion of the supply requires
building new housing units (or converting other properties to use as
rental housing). But stringent rent controls weaken or even destroy the
incentives for developers to build new units by limiting the potential
profitability of undertaking development. Id. at p.17; See also Downs, a
Reevaluation of Residential Rent Controls, The Urban Land Institute,
p.45.
Rent regulation also has other adverse impacts beyond inhibiting new
housing investment. It also affects investment in existing rental units.
If rents are constrained, they may not keep pace with an owner's operat-
ing expenses. When the owner cannot realize a normal rate of profit on
his investment, he may respond by reducing spending on maintenance and
services in order to make the net cash flow more nearly reflect the
level of investment in the property. If owners of rent regulated units
permit their buildings to deteriorate, the quality of the existing
rental stock declines and eventually results in a decrease in the quan-
tity of such housing. In this regard Dr. Downs states:
"Because stringent rent control ordinances often reduce the profitabil-
ity of owning and operating existing rental units, they encourage owners
to convert their units to condominium, cooperative, or other ownership
forms and sell them. Low profitability also provides incentives for some
owners to withdraw their units from the housing market altogether
through demolition, abandonment, or conversion to nonresidential uses.
As a result, rental housing inventories in cities that adopt stringent
rent controls tend to shrink over time. This aggravates the shortage of
housing supply that leads to the adoption of rent controls in the first
place." Id at p.48.
Rent regulation also skews the distribution of benefits to tenants.
Theoretically, it should protect the most economically depressed house-
holds; however, several studies indicate that rent controls hurt those
persons they are meant to help and instead benefit wealthier individ-
uals, See Salins, Peter and Mildner, Gerald, Security by Design: the
Legacy of New York City's Housing Policies, Harvard University Press,
P,12. Salins and Mildner conclude that even though nationally the rich
spend a smaller percentage of their income on rent than do the poor,
"the important point, however, is not that under rent regulation New
York's poor do somewhat worse than the rest of the country, but that
they were supposed to do much better. If the result of rent regulation
is to make the rental market somewhat harder on the less fortunate, and
easier for the rich, why have rent control at all? Id.
In addition, the Citizens Budget Commission study entitled "Rent Regu-
lation: Beyond the Rhetoric" (June 2010) discovered that households in
Manhattan benefit the most from the rent discounts that rent regulation
provides averaging 510,000 annually or 40%, while residents of the Bronx
receive discounts averaging 19% or less than 52,400 annually. Id at 11.
They also state that for a significant share of households regulation
provides no economic benefits: for 19% of households there is no effec-
tive discount since the unregulated rent is higher than the regulated
rent while for another 11% the discount is less than 10% of the
predicted unregulated rent. Id. Once again, for residents of the Bronx,
regulation provides little or no discount to 42% of regulated households
while in Manhattan only 17% of the regulated households receive little
or no discount while 40% receive a discount of at least 50%. Id. They
also conclude that households with annual incomes between $125,000 and
$175,000 receive a disproportionately large share of the benefits from
rent regulation. Id. at 13.
It is clear that the current rent regulation system is full of inequi-
ties and inefficiencies. It also exacerbates the very problem it was
designed to solve: a housing shortage. The system also benefits too many
wealthy people who are lucky enough to be living in rent regulated
apartments, causes a greater deterioration of rental property than would
exist without controls, helps reduce the current inventory of rental
housing, and inhibits the creation of new rental units. This bill will
help restore logic to the rent regulation system by removing unjustified
subsidies for wealthier individuals and by returning it to a free market
economy over time by decontrolling June 16, 2017. By decontrolling will
continue to receive the apartments that become vacant after only vacant
apartments, current tenants protections afforded them by rent regu-
lation.
PRIOR LEGISLATIVE HISTORY:
A.3889 (2015-16), Held in Housing;
A.2322 (2013-14), Held in Housing;
A.4815 (2011-12), Held in Housing;
A.8212 (2009-10), Held in Housing;
A.5689 (2007-08), Held in Housing;
A.4868 (2005), Referred to Housing;
A.2798 (2003-04), Held in Housing;
A.2822 (2001-02), Held in Housing;
A.4425 (1999-00), Held in Housing;
A.9267 (1998), Held in Housing.
FISCAL IMPLICATIONS:
As the number of rent regulated apartments decrease over time, the
administrative burden of DHCR's Office of Rent Administration should
decrease; thus, the State should realize an eventual savings. Munici-
palities with rent regulated apartment buildings would also realize an
increase in real property assessments for such buildings as they become
decontrolled.
EFFECTIVE DATE:
Immediately.
