New York’s Republican legislators learned a lesson in June: Hell hath no fury like a New York City tenant scorned. Just when it seemed that rent regulations, which have protected New Yorkers from rent gouging and other landlord abuses since WWII, were going the way of the Brooklyn Dodgers, a tenant movement struck enough fear in the hearts of elected state leaders to force them to pass new regulations. The new law was far from a victory, however, with tenant protections eviscerated, and rent ceilings raised to as yet undetermined heights.
Senate Majority Leader Joseph Bruno fired the opening salvo in this round of the so-called “Rent Wars” back in December 1996, when he declared that he would seek to phase out all rent regulations, which cover about a million apartments, within two years. Proclaiming that “An atom bomb would have created less of a problem literally in New York City to the real estate market than rent control has,” and calling such regulations a form of “social engineering,” Bruno promised to stonewall any efforts to soften his stance and said he would allow the existing laws to expire on June 15 if Democrats refused to accept his proposal. Assembly Speaker Sheldon Silver responded by refusing to negotiate unless Bruno backed off on some key issues.
What followed was one of the bitterest battles in New York politics in recent memory, causing intra-party fighting as well as the traditional partisan bickering, and bringing about a massive tenant mobilization to keep the pressure on elected officials.
“I’m a Tenant and I Vote”
The fight over rent control, like much of politics, boils down to a struggle between organized money and organized people. While the landlord lobby typically trots out small property owners as the public face of the anti-rent control campaign, “Mom and Pop” landlords beleaguered by a bureaucracy that protects affluent tenants, the real estate forces are dominated by fat cats. But New York City’s tenant activists waged war against these forces, sharpening their attacks on politically vulnerable politicians who oppose rent regulation.
The New York State Tenants and Neighbors Coalition (NYSTNC), an umbrella of 148 local tenant and community organizations, led the pro-rent control campaign. On May 20, NYSTNC, along with the Metropolitan Council on Housing (MetCouncil) and other organizers, bused more than 5,000 tenants to Albany for a rally at the State capitol, brandishing signs, buttons, and caps proclaiming, “I’m a Tenant and I Vote” and “No Protection, No Election.” Speaker Sheldon Silver, a Manhattan Democrat who lead the pro-rent control forces in the legislature, told the crowd that Pataki “cares more about a few of his campaign contributors than he does about millions of you. What kind of governor allows hard-working, taxpaying citizens to be threatened with the loss of their homes?”
The organizing went far beyond just holding rallies. In April, realizing they were three votes shy of a pro-rent control majority in the State Senate, the coalition began targeting six key districts (two in New York City and four in the suburbs) represented by Republican legislators. Through telephone and door-to-door canvassing, the coalition contacted every tenant registered to vote in these districts at least once, and organized constituent meetings with senators.
The coalition enlisted some important allies. Two days after NYSTNC leaders met with him, New York’s John Cardinal O’Connor, in a May 11 sermon at St. Patrick’s Cathedral, urged state lawmakers to maintain the current system. The major unions made preserving rent control a priority, not only because many of their members live in regulated apartments, but because they see it as a weapon against anti-union Republicans. Republican New York City Mayor Rudolph Giuliani supported the status quo, though reluctantly.
In many ways, the battle over rent control served as a surrogate for broader ideological issues. Tenant activists and their allies argue that rent regulations are needed to restore balance between renters and landlords, who control a scarce but fundamental necessity. Landlords argue that rent control is unwarranted interference with their private property rights. They turned New York’s rent control wars into a battle of images and ideas, assisted by hired academics and think tank policy wonks who turn out reports, testify at hearings, and talk to reporters.
But in the end, the Republicans blinked first. Though Bruno was risking little – the constituents who elect him are from an upstate district with no rent-controlled units in sight – Governor George Pataki and other Republican leaders recognized the threat to their political careers if they allowed the regulations to expire and offered a last-minute compromise. A midnight deal, struck as the old laws expired, extended rent regulations for another six years.
That’s not to say that New York’s tenants can claim total victory. While protections will remain for the vast majority of the residents of the 1.1 million units covered under rent regulations, changes to the laws [see sidebar] limit those protections and increase the amount by which rents may increase as apartments become vacant. Ambiguities in the wording of the new law, in fact, are prolonging the struggle, as state officials have interpreted them to allow increases even greater than had been initially indicated.
“The changes are bad because they weaken the laws,” said Jenny Laurie, Executive Director of MetCouncil. “But we were facing total vacancy decontrol, which would have been much worse.”
That’s of little comfort to tenants, though, said Jay Small, Executive Director of the Association for Neighborhood and Housing Development, who calls the new law “a complete disaster.” The rent setting procedures codified by rent protections do little to ensure affordable housing to low- and moderate-income residents anyway, he said. Bruno may not have gotten what he wanted immediately, said Small, but the new law set in motion the process by which New York’s 50-year history of rent regulation will eventually be completely dismantled.
Only about 70,000 units in New York City are still under the old rent-control system, which covers apartments built before 1947 in which the same tenants have lived since 1971. The units tend to have the lowest rents (averaging $428 a month) and poorest tenants (average income: $13,428). About 1 million apartments fall under the city’s rent stabilization system, which covers apartments built before 1947 in which tenants vacated rent-controlled units, those built between 1947 and 1969, and a few recent buildings with special tax breaks. (There are another 60,000 rent-stabilized apartments in the Nassau, Westchester, and Rockland County suburbs.) Rents in stabilized apartments average $600, about $80 below rents in unregulated units, although the size of the “discount” varies widely. The systems follow different formulas, but generally allow landlords to raise rents based on their annual costs.
New York once tried vacancy decontrol, which eliminates rent regulation on apartments when tenants move. About 400,000 apartments were removed from regulations between 1971 and 1974. Rent in regulated units went up an average of 52 percent. Not surprisingly, landlord harassment and evictions escalated, because under vacancy decontrol owners gain when tenants leave. Decontrol was such a disaster that after three years the state legislature (with both houses controlled by Republicans) and Republican Governor Malcolm Wilson repealed it.
It is a sign of the real estate lobby’s political and ideological power that vacancy decontrol is now often identified as the middle ground position. Vacancy decontrol is like calling for the elimination of seat belts in all new cars while keeping belts in the cars that people already own. Sooner or later, as people replace old cars, there will be no seat belts at all. Bruno, who has received lots of the landlord lobby’s money, positioned himself as the “extremist” so Pataki, whose pockets also jingle with real estate cash, could appear moderate.
Over the past five years, the real estate lobby dramatically increased campaign contributions to the state G.O.P. and its candidates, making the industry one of the biggest donors in state politics. Last year the Neighborhood Preservation Political Action Fund and the Real Estate Board PAC, both major industry groups, were the fourth- and sixth-largest contributors to state legislative races, according to a report by the New York Public Interest Research Group. The landlord-sponsored Rent Stabilization Association (RSA) PAC, which was formed in 1992 and has given about $750,000 to state candidates and party committees, was not far behind. Since 1993, The New York Times reported, a small group of major developers and landlords – which includes Donald Trump among its ranks – gave more than $1.1 million to state candidates and party committees, mostly Republicans. “Getting rid of the rent laws is a very big deal to us,” as one landlord said.
Since the early 80s, the real estate industry has beefed up its political arsenal nationally and has been using rent control as a symbol of “big government.” Unable to roll back rent control at the local level, the industry, led by the National Multi Housing Council, looked to the federal and state governments for help. In 1981 and 1982, Senator D’Amato introduced legislation backed by the Reagan Administration to punish cities with rent control by denying them federal housing subsidies. After a bruising battle that included intense lobbying by tenant groups and help from then-Speaker Tip O’Neill – whose hometown of Cambridge, MA, had a strong tenant movement and rent control program – the D’Amato bill went down to defeat.
By 1995, 30 states, none of which had rent control laws, had passed legislation preventing local governments from enacting them. In the past two years the real estate lobby has used its political muscle (with both Democrats and Republicans) to abolish rent control in Massachusetts and severely weaken it in California, both once hotbeds of tenant activism.
Despite these gains by landlords, and New York City tenant activists’ feeling that the new legislation was damaging to tenants, the real estate lobby’s apparent lack of a strong, cohesive attack on the laws this time around was a surprise to some activists. “I never understood why the landlords didn’t fight harder,” said Jenny Laurie, Executive Director of the Metropolitan Council on Housing.
In the end, tenant organizing proved more vigorous. Some landlord groups even felt Bruno’s rhetoric went too far, according to the New York Times. Such disagreement within the ranks allowed tenant positions to take center stage in the media and to win more public support.
Nevertheless, landlord groups are touting the new law as a victory. “The new law provides the most sweeping benefits and relief measures for property owners in the history of rent law negotiations,” trumpets the July/August issue of the RSA Reporter. “Never before has the housing industry gained so much without giving up anything in return . . . we conceded nothing to the tenant organizers.”
An “Exemplary” Effort
Tenant advocates would be quick to agree: landlords conceded nothing; they were forced to back down, however slightly, by the tenant movement. The biggest success of this battle, Laurie feels, was the tenant mobilization itself. “New York tenants did a fantastic job beating an incredibly powerful real estate campaign back,” she said.
This is especially significant given that tenants are notoriously difficult to organize. For one thing, they generally move a lot. In most parts of the country, middle-class renters aspire to homeownership and have little reason to become activists. But in New York City, where apartments represent two-thirds of New York City’s 3 million housing units, renting is a way of life for many middle class New Yorkers, as well as the poor. Another exception has been in New Jersey, where the New Jersey Tenants Organization has built a strong base in working class and middle-income suburbs. Today, more than half of the roughly 150 localities in the nation with some kind of rent regulation are in New Jersey.
In New York, which has a long history of effective tenant organization, groups and individuals that had not traditionally been involved joined in letter writing, phone banks, and public demonstrations. The tenant campaign cost close to half a million dollars, according to The New York Times, garnered from tenant and union contributions, along with funds from the Democratic Assembly Campaign Committee, which is controlled by Silver.
But some say Silver’s professed support for tenants was little more than thinly veiled political maneuvering, as evidenced by the compromise agreement. “Silver sold us out,” said Small, adding that tenant advocates remain in the dark as to just what political dealings led him to soften his stance on some provisions at the last minute. Perhaps such sacrifices were necessary to ensure that vacancy decontrol would be removed from the bill, Small suggests, or perhaps Silver’s concessions were linked to other issues, and earned him political points for later debates on the budget or welfare.
Small agrees, however, that the tenant organizing around this issue was “exemplary.” The involvement of tenants of color and from low-income communities was particularly positive for the tenant movement, he said. “Tenants are still energized,” he said, “The task at this point is to build on the gains and continue to develop the movement.”
These efforts are proving necessary immediately, in fact, in light of recent interpretations of the new law. While the law was initially thought to impose a 20 percent ceiling on rent increases for vacant regulated apartments, ambiguities in the wording of the law have been interpreted to allow local rent guideline boards to levy additional increases. This has already happened in Westchester and Nassau counties, creating an uproar among tenant advocacy groups, who claim such steps are tantamount to vacancy decontrol.
Thanks in no small part to pressure from these groups, Speaker Silver threatened to hold up a state budget agreement until Pataki agreed to rectify the matter. Silver capitulated when Pataki offered an administrative, rather than legislative fix, however, and the matter remains unresolved. Mike McKee, NYSTNC’s policy director, points out that Pataki is between a rock and a hard place, with tenant activists challenging him on one side, and on the other landlords who have been handed juicy rent increases and are likely to sue if he backs down.
Tenants and advocacy groups are also considering using the courts as a tool in fighting potentially unconstitutional provisions of the new laws, such as requiring rent deposits for tenants in disputes with their landlords and disallowing judges to stay court-ordered evictions of tenants who show cause for nonpayment of rent. While no such legal challenges have been launched yet, organizers have suggested that particular clauses of the law are vulnerable.
Meanwhile, in an effort to keep up momentum, various tenant groups have held public meetings to discuss the new laws’ effects, and to strategize for future battles. After all, New York City’s own rent laws come up for renewal again in three years, followed closely by those just passed by the state.
New York’s new rent regs include:
Limited Vacancy Decontrol. Bruno and Pataki had originally argued for vacancy decontrol of regulated apartments: as tenants moved out, landlords would be allowed to charge market rate rents. The compromise position allows landlords to hike rents by 20 percent as tenants vacate regulated units, plus additional hikes for units with rents less than $500, or those which have been occupied by long-term tenants. Apartments renting for $2,000 or more will be deregulated immediately upon vacancy. Due to some ambiguity in the wording of the new law, the Department of Housing and Community Renewal has informed rent guideline boards that they may impose additional vacancy increases, above the 20 percent, for their jurisdictions.
Luxury Decontrol. The only tenants currently living in rent regulated apartments who will be affected by the changes immediately are those who have a household income of $175,000 or more for two consecutive years and pay $2,000 or more in monthly rent.
Succession Rights. Succession rights previously had allowed tenants to pass along rent regulated apartments to family members when they moved out. While these regulations are retained in the new laws, they are limited to one generation, and only applicable to immediate family, not aunts, uncles, nieces or nephews.
Landlord-Tenant Disputes. Tenants will now be required to deposit monthly rent into escrow accounts during court disputes with landlords. In addition, judges are no longer permitted to grant stays of evictions when tenants return to court to show cause for nonpayment of rent. While in the past, tenants have been able to persuade judges to show leniency if they could prove a rent check was on its way, judges are now are unable to prevent landlords from evicting tenants five days after a court ruling against them.
Demolition. The older laws made it difficult for landlords to remove holdout tenants from buildings slated for demolition to make way for new development. In a last-minute addition, language allowing landlords to relocate tenants from buildings with very few occupants was inserted.
The portions of the legislation dealing with tenant protection in landlord-tenant disputes were most severely compromised and weakened. With 150,000 orders to show cause a year, Michael McKee of NYSTNC said, the new law will likely result in “wholesale evictions.”
The law is particularly damaging to low-income tenants, Jennie Laurie of MetCouncil said, pointing to the additional increases permitted for exceptionally low-rent units, and the new succession rules. “Low rent apartments will disappear quickly,” she said, adding that the hike in vacancy allowances encourages landlords to find “creative ways” to remove tenants.
The Case Against the Case Against Rent Regulation
Along with examples of small property owners hurt by rent regulations, several other arguments have become the refrain of anti-rent control forces.
Landlords typically argue that rent control does not even do what its proponents want – protect the poor. The lobby uses examples of wealthy, high-profile New Yorkers who live in regulated apartments with rent far below what they can afford. It’s true that some New Yorkers in rent-controlled apartments own summer homes and drive BMWs. However, in 1993, the last time the rent laws were renewed, Bruno successfully pushed to eliminate regulations for people with incomes over $250,000 and rents above $2,000. Lowering this luxury decontrol floor to $175,000 affects only 13,000 households – about 1.4 percent of rent stabilized apartments. Only about 5 percent of rent stabilized households (and fewer than 1 percent of rent-controlled households) have incomes over $100,000, while about one-quarter of the approximately 1.1 million households in rent stabilized apartments are poor, according to the 1996 NYC Housing and Vacancy Survey.
The landlord lobby also claims that if rent control is abolished, banks and developers will start a rental housing construction boom. But studies that compare cities with rent control to similar cities without it reveal comparable new rental housing construction rates. Why? For one thing, rent control laws, including New York’s, permanently exempt new buildings from rent regulation. The city’s biggest post-war housing boom occurred from 1947 to 1966, when strict controls covered most existing apartments. In contrast, the last time New York lifted rent controls – in the early seventies – no boom followed. Given the current costs of financing, construction and land, a developer of a new apartment building in New York City needs to get monthly rents of at least $1,600 ($19,200 a year) and even more in much of Manhattan, just to break even. There simply aren’t enough households in New York City that can afford that kind of rent to jump-start a new construction boom.
Deregulation could trigger a small spurt of new high-end rentals, in the $2,000-to-$5,000-a-month-range. This, developers allege, will increase the inventory of new apartments and start the “filtering down” process, whereby wealthy renters move up to newer and fancier buildings, leaving the other apartments for the middle class and the poor. More likely, deregulation will lead to “filtering up,” as landlords respond to the intense competition for scarce apartments by raising rents. Even in older, rent-controlled buildings with lower operating costs, in the city’s poorest neighborhoods, break-even rents are often higher than most poor people can afford.
That explains why the landlord lobby’s third claim – that rent control leads landlords to abandon their buildings because they can’t make a decent profit – is bogus. A recent study by the Rent Guidelines Board found that landlords’ profits have grown steadily since 1992. In New York’s middle-class or high-income areas, stabilized rents, though often significantly below the market, allow landlords to maintain their buildings and make a profit. Abandonment, not surprisingly, is concentrated in poor neighborhoods – as it is in St. Louis, Cleveland, Detroit and other cities that never had rent control. The problem is growing poverty, low-wage jobs, and increasingly inadequate welfare payments or housing subsidies.
Rent control has its flaws, but it does more good than harm. It protects working-class people from the worst excesses of the marketplace, and it assures that some middle-class people can still afford to live in the city. It guarantees that New York won’t become a two-tiered society, affordable only to the very rich and, for those lucky enough to live in government-subsidized housing, the very poor. And from the perspective of the broader business community, it guarantees that New Yorkers will have enough income after paying their rent to shop for food and clothing and even take in the occasional movie. No one has yet figured out a better way – short of massive federal subsidies to tenants or nonprofit community developers – to enable average New Yorkers to stay in the city.
Portions of this article appeared in The Nation as “The Landlords Stage A Rent Strike,” June 23, 1997, and can be download from the New York City Rent Guidelines Board web site.