Costs up for owners of rent stabilized buildings, RGB says

nov20-mike-mckee

Mike McKee of TenantsPAC

By Maria Rocha-Buschel

Prices have increased 6.2 percent for owners of rent stabilized buildings in the last year, a study released by the Rent Guidelines Board last Thursday found.

RGB executive director Andrew McLaughlin said that one of the main factors for this increase was a 24.6 percent increase in fuel costs due to the year’s winter weather, which was reportedly colder than average.

However, RGB tenant member Harvey Epstein expressed concern and confusion about the reported increase in fuel costs, noting that 2016 was one of the hottest years on record. McLaughlin explained that the winter was 18 percent colder than the previous year, based on comparing each month to those in the previous year, and there were more days in which the average temperature was lower than 65 degrees.

The increase in fuel costs from 2016 to 2017 contrasted sharply with prices from the previous year, when fuel cost decreased 41.2 percent and by 21 percent the year before that. The decrease in last year’s fuel costs contributed to the negative price index in 2016, at -1.2.

The RGB released a study at the end of last month that examined actual income and expenses for owners, but instead of looking at figures from the last year, the most recent data available is from the year before that.

“The Real Property Income and Expense (RPIE) study asks what owners are actually spending and the Price Index of Operating Costs (PIOC) is a prediction based on current estimates, so we’ll see in the RPIE in a couple of years if we’re right,” McLaughlin said. “But this is what the price index does. It looks at the prices.”

This year, a group representing landlords, the Rent Stabilization Association, plans to call for a four percent increase on one-year leases and an eight percent increase on two-year leases at a Rent Guidelines Board meeting to be held on Thursday. The final vote on this year’s increases (or freeze) for the city’s one million stabilized households, will take place on June 27.

Meanwhile. TenantsPAC treasurer Mike McKee has advocated for eliminating the price index study because it does only look at prices.

“It’s one-sided because it only looks at costs and ignores income,” he said. “It can’t give you a picture of profitability in the real estate industry.”

McKee noted that the income and expense study provides more useful information, but the setback there is that the data is older. However, he said that even without the most current numbers, the trends of the last few years show that net operating income has increased every year.

“Overall landlords have been overcompensated for a number of years and tenants are still paying for that and still suffering for that imbalance,” he said. “(The rent freezes are) correcting the mistakes of the Bloomberg administration.”

McKee also noted that landlords are inclined to trust the price index more when higher costs are reported, but he said that it’s difficult to say how the finding will impact the board’s final vote.

“(The owner members) tend to rely on the price index when it’s high, and they’ll say income and expense data is old and it’s not valid,” he said. “Everyone else on the board is usually more balanced.”

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2 thoughts on “Costs up for owners of rent stabilized buildings, RGB says

  1. Even if just looking at temps and costs, the landlords have no case; Here is the data. Avg temps by month in this order: 2014-15/ 2015-16/ 2016-17. Note that 2015-16 was an unusually warm winter; 2014 looks more like past years.. Data from weather.gov.

    Oct: 59.6/ 58.0/ 58.8…temps very close
    Nov: 45.3/ 52.8/ 49.8…2016-17 was colder than last year but 4 just degrees warmer than usual
    Dec: 40,5/ 50.8/ 38.8…2016-17 was colder than prior years
    Jan: 29.9/ 34.5/ 38.0…2016-17 was actually warmer than prior years
    Feb: 23.9/ 37.7/ 41.6…2016-17 was actually warmer than prior years
    Mar: 38.1/ 48.9/ 39.2…2016-17 was colder than last year but warmer than prior years

    So 2 months this past year were warmer than past years; one month there was no difference, 1 month was colder than prior years, and 2 months were just colder than last year.

    So the landlord’s case rests on 3 months primarily comparing this past year to the unusually warm last year.

    But when comparing 2016-17 to 2014-15 except for Dec, 2016-17 was actually warmer than 2014-15. In short, this past winter 2016-17 was a comparatively warm.

    Now let’s take a look average heating oil prices for NYC. Data from NYC.gov

    2013-14: 4.158.gal.
    2014-15 3.379/gal.
    2015-16 2.544/gal.
    2016-17 2.672/gal.

    Comparing 2015-16 prices to all those of recent years, what’s clear again is that 2015-16 was an unusually warm winter. An anomaly. So for the landlords to base comparisons just on 2015-16 is strictly self-serving and not realistic. Compared to more normal winters, the price of heating oil has substantially dropped.

    In short, the data show that the landlords are probably lying about their costs. The winter of 2016-17 was warmer than normal and heating oils costs were lower than normal.

    Based on the data alone, there is no reason for the RGB to grant landlords any increases this year.

  2. If, as the RSA says, rents should go up because one winter is colder than the last, shouldn’t rents go down when one winter is warmer than the last? or is the answer to that too obvious to anyone but the greedy landlords?

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