I published a column with Nestor Davidson in Vital City, Can Mayor Mamdani Freeze the Rent? It’s Complicated. It reads,
Zohran Mamdani, the newly elected mayor who promised as a candidate to freeze the rent for rent-stabilized units each year in his four-year term, will soon seek to make good on his promise.
He can’t do it alone. He needs the cooperation of the NYC Rent Guidelines Board, an appointed body on which both of us have served as chair in recent years. The RGB was created pursuant to state law to set rent adjustments for apartments in the city that are subject to the Rent Stabilization Law. About one million of New York City’s over three-and-a-half million units of housing are rent-stabilized.
The incoming Board — on which Mamdani has made a majority of appointments — will begin its work this month. At the top of its agenda will almost surely be considering whether to keep the rents of rent-stabilized housing at current levels. As it does its work, the Board can best serve the city if all members are committed to carefully reviewing data collected and analyzed by RGB staff and other information brought to the board by experts and the public before reaching its decision.
Put differently, the RGB should not simply execute the mayor’s command. There are laws to follow and economic data to consider. The stakes are high for tenants facing increased housing burdens, for landlords facing increasing costs and for the fabric of our diverse city.
The Rent Guidelines Board’s mandate
The City’s rent stabilization system differs from rent regulation in other jurisdictions. While some jurisdictions allow landlords to increase rent when an apartment turns over to a new tenant, the Housing Stability & Tenant Protection Act of 2019 (HSTPA) eliminated vacancy rent hikes. Rent adjustments in New York are also set by a Board instead of being based on a formula that is tied to the inflation rate. The Board can therefore set rent increase rates higher or lower than inflation, based on the statutory criteria it applies.
The media rarely explains the RGB’s decision-making process clearly and sometimes echoes misunderstandings about how the Board works. Perhaps the biggest misunderstanding is that mayors decide whether and how much rents go up. But that is not how rent stabilization was designed to work. Even though one of us chaired the Board during the mayoralty of Bill de Blasio, who used the bully pulpit to advocate for a rent freeze, we know well it is the members of the Board who have the sole power to make this decision. Each of us had to work to get a majority of the Board to support what became the adopted guidelines each year. Board members take their roles seriously and typically engage in lengthy discussions about the data before deciding which proposals to support. Rather than seeing a rent freeze as a simple test of mayoral power, the public is best served by understanding the limited but important function of the Board and the constraints on its decisions.
Let’s step back a bit. The Rent Stabilization Law (RSL) charges the Board with one central task: adjusting rents of rent-stabilized units after reviewing “the economic condition of the residential real estate industry,” cost of living data and a catch-all, “such other data as may be made available to it.” Thus, there is no single, simple formula for the Board to apply.
To get into the weeds, the law requires that the Board review data regarding the operating and financing costs landlords are bearing, including (1) real estate taxes and sewer and water rates; (2) gross operating maintenance costs (such as insurance premiums, governmental fees and the cost of fuel and labor, among other things) and (3) costs and availability of mortgage financing. The Board is also charged with considering the supply of housing as well as vacancy rates. While tenants’ rent burden — the portion of their income they spend on rent — is not explicitly mentioned in the RSL, the Board has interpreted its mandate for decades to include an assessment of housing affordability.
While the mayor appoints all members of the Rent Guidelines Board (or a predecessor mayor, for holdovers), it is an independent body that is required by law to make its own determination about rent adjustments. The Board is composed of the chair, who serves at the pleasure of the mayor; two members who represent tenant interests; two members who represent landlord interests and four members who represent the general public. Other than the chair, members serve terms of two, three or four years.
Tenant members typically focus on affordability for today’s tenants. Landlord members often focus on the finances of rent-stabilized buildings, such as whether they are earning enough to cover maintenance and capital repairs as well as a profit for their owners. Those are appropriate agendas for those two sets of members. Chairs consider all of this, but also usually focus on the long-term, asking whether proposed rent adjustments will ensure that the rent-stabilized housing stock has sufficient revenue to be maintained for its residents for years to come.
Landlords have repeatedly challenged the Board’s annual rent guidelines, but courts have generally deferred to the Board’s expertise and upheld its balancing of the competing concerns of increasing costs for landlords and diminishing affordability for tenants.
The state of the housing stock
The Housing Stability and Tenant Protection Act, passed by the state Legislature and signed into law by then-Gov. Andrew Cuomo in 2019, dramatically altered the finances of the rent-stabilized housing stock. Proponents of the law wanted to limit ways that landlords could raise rents and, in particular, curb incentives to exit the program through high-rent/high-income deregulation. They succeeded in doing that, but rents flattened and buildings dropped in value as a result. Many buildings in the program are now showing financial distress as expenses have continued to increase each year.
A recent Furman Center report shows that there is reason to worry that the current regulatory environment has set up a dynamic where around two-thirds of the rent-regulated housing stock is on a trajectory of financial distress — potentially including mortgage default and bankruptcy — that will result in deteriorating quality in housing for tenants. This would mean more heat and hot water outages, more pest infestations and more lead paint hazards, among other health and safety concerns.
That picture of the current stock brings us back to how the Board makes its decisions. As we noted, many people think that the mayor simply tells the Board how to vote. That has not been our experience. Nor has it been our sense of the experience of other chairs we have spoken with.
It is true that mayors often appoint members who are broadly sympathetic to either tenants or owners. Now, even with some members whose terms straddle previous administrations, Mayor Mamdani has tapped a majority of the incoming Board.
The mayor does not — and should not — “control” them. With a process designed to provide broad technical and public input, chairs and other Board members formulate proposed rent guidelines that reflect the data that the RGB’s research staff provides them. The Board staff and members take their work seriously. They must consider the data before them, and the Rent Stabilization Law requires the Board to make challenging calls to balance increasing costs for building owners with affordability concerns for tenants. If the record does not support a finding that the Board’s decision was based upon their statutory mandate, it is open to challenge.
Some have asked why a rent increase or freeze needs to be boiled down to a single number when so many buildings and building owners face different pressures and conditions. It’s a fair question, but right now, the law doesn’t allow for fine-grained distinctions. Each year’s rent guidelines are a blunt instrument that applies to every building with rent-stabilized units. This means that the same figure applies to a building in the Bronx composed entirely of 99 rent-stabilized units and to the one remaining rent-stabilized unit in a 99-unit luxury building in midtown Manhattan where the owner has no limitation on how much it can charge for those ”market rate” units.
The Mamdani administration will need to grapple with this blunt instrument, just as every previous administration has had to. Ultimately, the Board must pay close attention to the data to determine how rents should be adjusted — understanding that a freeze will likely harm buildings in deep financial distress even as it would aim to help tenants in buildings whose landlords are doing just fine.
The Board does not act alone
Whatever the Board decides, many stabilized buildings will continue to face financial distress. But the fate of the rent-stabilized housing stock does not solely rest with the Board. The governor, the Legislature, the mayor and the City Council can all act to ensure that the rent-stabilized housing stock has sufficient funding for maintenance and needed capital repairs. While the City and State have many tools at their disposal to address financial gaps, the three main avenues for helping distressed buildings are bigger rent increases, new subsidies or reduced costs for buildings in financial distress.
After the passage of the 2019 HSTPA, rent increases for rent-stabilized units can only be authorized by the Board (or, subject to stricter limits under the HSTPA and subsequent amendments, through temporary Major Capital Improvement (MCI) increases and permanent Individual Apartment Improvement (IAI) increases). And because previous amendments to the RSL have limited the Board’s discretion to target certain subsets of the housing stock, rent increases cannot be targeted to the buildings that need them most (not to mention the fact that tenants in the most distressed buildings tend to have lower incomes and are less likely to be able to afford those targeted increases). RGB rent increases will not be enough on their own to resolve the financial distress of many of these buildings.
Direct subsidies to preserve this stock will be very expensive, easily measured in the hundreds of millions of dollars, and soon into the billions of dollars each year — at a time when the City is already struggling to close significant budget gaps. Nonetheless, the City and state may need to subsidize a large portion of rent-stabilized housing to keep it from failing, and that will redirect resources from other priorities.
Broader changes to the regulatory and property tax regime that govern revenues and expenses for this housing stock might help, but none of those changes will be easy, and indirect subsidies come with measurable costs as well, even if they are not showing up in State and City budgets. It will be difficult otherwise to reduce costs, such as insurance and interest on mortgages, as these are set by third parties over whom government actors have relatively little control.
There are no easy answers to this growing problem. But as the politics heat up, it is important that the public understand the basic nature, power and obligations of the Rent Guidelines Board. All New Yorkers should be concerned about the long-term viability of the rent-regulated housing stock, and we are all on notice that it is at risk. This part of the housing stock is a precious resource for a city rightly committed to socio-economic diversity, and we should all look for a path forward to preserve it.
We assume that the mayor will work hard to make good on his promise to freeze the rent. If he doesn’t, many of those who voted for him will see it as a betrayal. If the Board, following its mandate, agrees, preserving the stabilized stock will require partnering with the governor, the Legislature and the City Council to address the impending financial crisis facing a large swath of this vital source of housing.
