N.Y.S. Rent Regulation Local 1359. Rent Regulation Services Employees.  
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December 4, 2006

Comments to the Proposed Amendments to the NYC Rent Stabilization Code and NYC Rent and Eviction Regulations

Ralph F. Carbone
President, Local 1359, DC 37
Vice-President, District Council 37
Member - DC 37 Housing Committee

My name is Ralph F. Carbone. I am President of Local 1359, District Council 37, AFSCME, AFL-CIO. I am also a Vice-President of District Council 37 and a member of the DC 37 Housing Committee. I have been in the field of rent regulation for almost 25 years as an attorney and, for the record, have been employed by the DHCR for the past 22 years.

I speak here, however, not as an agency employee but in my capacity as President of the Local which represents the approximately 400 members who administer the rent stabilization and control laws for the New York State Division of Housing & Community Renewal (DHCR) as well as in the interests of 122,000 members of DC 37, many of whom are in dire need of affordable housing, as one of their vice-presidents.

Let me just say, at the outset, that the proposed amendments to the rent laws appear to be a last gasp attempt by landlords to obtain favorable changes to the rent laws prior to the change of administrations in Albany on January 1, 2007. As anyone who is knowledgeable in this field is well aware, over the past 12 years DHCR has seemed to be nothing more than an arm of the real estate industry, issuing a continuous stream of code changes, orders, policies and directives antithetical to the interests of tenants in general and affordable housing in particular.

The new administration of Eliot Spitzer, taking office in just a few weeks, should be permitted to thoroughly examine the necessity and utility of each proposed change. Therefore, there is no reason why any of these changes need to be acted upon at this time. As a result, all of the proposed changes should be withdrawn and no action of any kind should be taken by the present lame-duck administration.

That being said, and having no confidence whatsoever that the agency will in fact withdraw the amendments, I will now go into detail in opposition to some of the more egregious of the proposed pro-owner changes.

Rather than extend to rent controlled tenancies [new proposed section 2202.6(b)] the current provision requiring stabilized tenants to charge no more than a "proportionate" share of an apartment's legal regulated rent, DHCR should have scrapped code section 2525.7(b) in its entirety and replaced it with a provision prohibiting a tenant from charging a roommate no more than the legal or maximum rent for the apartment. This had been the time-honored rule under rent stabilization and control for years and prevents "rent gouging" (the ostensible reason for the rule) while simultaneously preserving the private affairs of tenants and roommates. It is not the place of government (or for that matter, an owner) to interject itself into the interpersonal relationships or financial affairs of people who choose to live together. Moreover, unmarried couples or those in gay relationships are discriminated against by this provision. Such couples, due to their close, personal and financially interdependent lives are entitled to apartment succession rights. Yet, based on current law, such occupants are unable to have their names added to the leasehold. The result is that they are treated differently than married couples (who are exempt from the proportionate share rules) in ordering their financial lives subjecting them to possible eviction if they apportion their expenses incorrectly. Putting aside issues such as who uses more apartment space, who bought the furniture, who pays the telephone, gas and electric bills, to name just a few of the myriad number of ways people who live together order their lives, it's just poor public policy.

Proposed new subdivision (i) of section 2524.3 and amended subdivision (c) of section 2524.4 of the stabilization code, which would permit an owner to initiate a non-primary residency eviction proceeding at any time during the tenancy, is ultra-vires and therefore illegal as a matter of law. Section 26-511(c)(12)(c) of the Rent Stabilization Law provides that "an owner may terminate the tenancy of a tenant who sublets or assigns contrary to the terms of this paragraph but no action or proceeding based on non-primary residence of a tenant may be commenced prior to the expiration date of his or her lease." As a result, until the state legislature acts to change the law, these sections are being promulgated without appropriate legal authority and should therefore be stricken.

The collection of a security deposit of two months (rather than one month) for most new tenancies commencing after October 1, 2006 (proposed amendment to section 2525.4 of the code) was an issue which itself had been resolved at the very creation of the Rent Stabilization Law and Code. Building owners themselves agreed to limit the collection of a security deposit to one month's current rent because they understood it was adequate protection upon a tenant's vacancy (owners created the first code with the approval of the NYC Department of Housing, Preservation and Development [HPD]). Moreover, additional financial incentives are available to owners today, such as much more generous vacancy allowances along with the heightened possibility of luxury de-regulation - and therefore permanent exemption - of apartments when a tenant vacates. The agency's purported justification for the doubling of the security deposit is that it somehow "provides for continued viability of the housing stock for future tenancies," whatever that means. The reality is that it is just another way that DHCR has chosen to make regulated housing less affordable and subvert its own mandate to "protect tenants" [Section 26-511(c) (1)].

The proposed changes to subparagraph (i) of paragraph (2) of subdivision (s) of section 2520.11 of the code permitting the luxury decontrol of apartments subject to section 421-a of the Real Property Law as well as those subject to stabilization as a result of sections 11-243 and 11-244 (J-51 units) of the Administrative Code of the City of New York (as amended) appear to be contrary to current law or without any actual effect. Section 421-a only applies to new construction with most, if not all, buildings receiving a certificate of occupancy after January 1, 1974. Thus, units within these buildings would be subject to the rent laws solely as a result of receiving tax benefits and hence the proposed amendment would not apply in any way. Therefore, the agency's explanatory statement and justification as published in the October 18, 2006 NY State Register alluding to section 421-a units is misplaced. I assume they meant to cite J-51 units instead, as the proposed amendment also indicates, and will therefore direct my comments to that issue.

Section 489.7(a)(2) of the Real Property Tax Law states in pertinent part:

Any dwelling unit subject to rent regulation on or before the effective date of this subparagraph (June 18, 1985) as a result of receiving a tax exemption or abatement pursuant to this section shall be subject to such regulation until the occurrence of the first vacancy of such unit after such benefits are no longer being received…; unless such unit would have been subject to regulation under the rent stabilization law…or emergency tenant protection act of nineteen seventy-four.

The clear language of the tax law establishes that an owner is not entitled to deregulate an apartment subject to or currently receiving a J-51 tax exemption pursuant to the luxury decontrol provisions of the code even in instances where the units are otherwise subject to rent regulation (because, for example, the building was constructed prior to January 1, 1974). Thus the agency's indicated purpose behind the amendment to "ensure that the luxury decontrol provisions of the Rent Stabilization Law and RSC are equally applicable to apartments which would otherwise qualify for luxury decontrol, but for no other reason than the receipt of tax benefits pursuant to section 421-a of the Real Property Tax Law, they do not qualify" is contrary to law. Therefore the proposed code amendment as well as the agency's justification to permit such deregulation, as (however mistakenly) explained in the NY State Register is ultra-vires. Moreover, there does not appear to be a methodology to permit the apportionment of J-51 benefits as the program did not envision that an owner would be entitled to remove individual apartments from the jurisdiction of the program. DHCR has not indicated in its explanatory statement that the piecemeal removal of units from the J-51 program is in compliance with state or city tax law; that it has obtained an agreement with HPD (which is required to perform the tax increase calculation) with respect to this method of removal; or, whether this type of removal is even legally possible under the law. Finally, if an owner chooses to participate in the J-51 program, which is entirely voluntary, he has in effect contractually and legally agreed to forego certain other benefits, such as the ability to utilize the luxury decontrol provisions of the rent laws, for the life of the program in order to receive the significant tax benefits it provides. For all of the reasons stated this amendment should be scrapped.

The revisions to paragraph (1) of subdivision (a) of section 2522.4 and subparagraph (iii) of paragraph (2) of subdivision (a) of section 2522.4 of the code permitting an owner to obtain either an individual apartment improvement (IAI) rent increase (1/40th of the cost) where said apartment is vacant or receive a Major Capital Improvement (MCI) rent increase where the cost is apportioned over every tenancy in the entire building if said apartment remains occupied as a result of lead paint abatement work is impermissible as a matter of law. Such work does not qualify under the legal definitions for IAI's or MCI's. In fact, the code modification granting an Individual Apartment Improvement rent increase for lead paint abatement violates Section 26-511(c)(13) of the Rent Stabilization Law which states in pertinent part that the code can only provide for such increase "where there has been a substantial modification or increase of dwelling space or an increase in the services, or installation of new equipment or improvements or new furniture or furnishings provided in or to a tenant's housing accommodation…." The abatement of lead paint, an expense and/or repair item, does not come under this definition with respect to any of the specified grounds for an individual apartment rent increase under the law. The code promulgation is therefore ultra-vires and must be stricken.

With respect to permitting a building-wide rent increase for lead paint abatement pursuant to modified code section 2522.4(a)(2)(iii), it is illegal under section 26-511(c)(6)(b) of the Rent Stabilization Law which requires any MCI to be depreciable under the Internal Revenue Code. The abatement of lead paint is similar to asbestos abatement, which the IRS has ruled is not depreciable because it is not considered an improvement but an expense item. DHCR Policy Statement 89-8 similarly excludes asbestos removal as an MCI. It is of no matter that the code places the lead paint removal rent increase in subsection iii rather than in subsection i (the MCI rent increase section) as the Stabilization Law supersedes any code provision to the contrary. Moreover, code section iii is perfectly in conformance with the law if the work otherwise completed pursuant to that section constitutes an improvement which is depreciable under the IRS code. As a result, this proposed code change is ultra-vires and therefore must also be stricken.

The allowance of those who are in receipt of a Disability Rent Increase Exemption (DRIE) to be exempted from the "electrical inclusion/exclusion" code provisions [subparagraph (iii) of paragraph 3 of subdivision (d) of section 2522.4) is actually the only true tenant friendly change presented. While welcome, it in no way counter-balances the overwhelmingly pro-owner amendments proposed.

The code modifications concerning various administrative notice provisions are non-objectionable but can nonetheless wait for official action under the new administration.

It is truly unfortunate that DHCR has chosen over the past 12 years to proceed against its legislative mandate to protect tenants, its consumers, from the exaction of unjust, unreasonable and oppressive rents…prevent (tenant) uncertainty, hardship and dislocation…(and) protect the public health, safety and general welfare…(Section 8602, Local Housing Rent Control). Consistently weakening its enforcement and inspectorial arm, which is two-thirds smaller today than it was under the previous democratic administration; refusing to independently investigate tenant heat and hot water complaints; creating numerous administrative hurdles for tenants who wish to file service and rent complaints causing many to simply give-up (perhaps the agency's intent); and, otherwise in so many ways so tilting the balance against a very vulnerable tenant population, DHCR must be held accountable for its role in destroying the rent regulated affordable housing stock which is so desperately needed by so many poor, working and middle class families. Hopefully that accounting will begin in earnest on January 1, 2007.

Thank you for the opportunity to testify here today.




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