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.”