Setting the stage for a long court battle over the city’s rent-control system, the City Council has voted overwhelmingly to throw out a new method for calculating rents that would mean steeper annual increases for thousands of tenants, many of them elderly.
Landlord groups that successfully sued the state last year to put the new method in place immediately insisted the city has no authority over the issue and vowed to return to court if tenants refuse to pay increases.
The dispute concerns the 71,000 apartments in New York City’s rent-control system, the older and more restrictive of the city’s two forms of rent regulation. It does not affect the many more apartments that are governed by rent stabilization laws that were the subject of a protracted battle in Albany this spring.
But it has resurrected many of the issues that marked that battle, which ended in June with a law leaving most rent protections in place but allowing landlords to raise rents more quickly.
Now tenants under rent control have accused Gov. George E. Pataki of abandoning them.
The Pataki administration countered that the unanimous decision by the Appellate Division of the State Supreme Court left no chance for a successful appeal.
Under the new formula opposed by the City Council, rent increases could affect about half of the apartments under rent control. The increases could be more than $100 a month for some .
The rent-control system uses a two-part formula to determine what a tenant pays.
First, the “maximum base rent,” or the rent to which a landlord is theoretically entitled, is determined using a complex formula that reflects taxes, water and sewer charges, operating and maintenance expenses and the return on a building’s capital value. The maximum base rent, also known as a ceiling, is raised every two years.
A second formula, for the “maximum collectible rent,” keeps some tenants’ rent below the ceiling. This applies for many tenants who had long paid low rents and were unable to absorb the large increase when the ceiling formula was imposed in 1972.
As a consequence, their rents were allowed to rise by 7.5 percent a year until they reached the ceiling. Because the ceiling also rises, some rents still have not reached it. And those tenants, estimated to be about half of all the tenants under rent control, would continue to pay 7.5 percent more a year no matter what the outcome of the battle.
The other half, with rents at the ceiling, paid 3 percent more in 1996 and 1997, the amount by which the ceiling was raised for those years under the old formula.
But the new formula, which changes the way a building is assessed for tax purposes, would raise the ceiling more than 30 percent for those two years, and those tenants would have to pay retroactive increases up to the 7.5 percent allowed under the maximum collectible rent formula.
For example, a tenant whose rent was $800 a month in 1995 and already at the ceiling paid 3 percent more, or $824 a month in 1996, and so far this year.
Under the new system, the rent for 1996 should have been increased by 7.5 percent to $860 and 7.5 percent again this year to $924.50.
Under the court ruling won by the landlords, the tenant would be required to pay the retroactive increase–$1336.50–over a period of 21 months. Added to the 7.5 percent increase for this year, the tenant’s new rent beginning in October would be $988.14, or almost a 20 percent increase over the previous year’s rent.
Even tenant advocates say that such a large increase is probably an extreme case. Also, some tenants with low incomes receive rental assistance that would pay for the increase. But City Council members insisted that the average increases would impose a hardship on many elderly tenants.
Joseph Strasburg, president of the Rent Stabilization Association, one of the landlord groups that sued to change the rent formula, said notices of increases have already been mailed to tenants. Landlords will most likely challenge the City Council’s action if tenants refuse to pay the increases or take landlords to court, Strasburg said.
