RGB Releases 2022 Operating Cost, Income and Expense, Mortgage Reports

The Rent Guidelines Board (RGB) is mandated by law to establish yearly rent adjustments for rent-stabilized apartments in New York City. The board holds an annual series of public meetings and hearings to consider research from staff and testimony from owners, tenants, advocacy groups, and industry experts.

The Rent Guidelines Board (RGB) is mandated by law to establish yearly rent adjustments for rent-stabilized apartments in New York City. The board holds an annual series of public meetings and hearings to consider research from staff and testimony from owners, tenants, advocacy groups, and industry experts.

Throughout the year, the RGB staff is responsible for providing administrative support to the board and year-round research efforts regarding the economic condition of the stabilized residential real estate industry. Section 26-510(b) of the Rent Stabilization Law requires the RGB to consider “relevant data from the current and projected cost of living indices” and permits consideration of other measures of housing affordability in its deliberations.

The RGB annually publishes six research studies that it uses to determine the rent guidelines: Price Index of Operating Costs; Income and Expense Study; Housing Supply Report; Income and Affordability Study; Mortgage Survey Report; and Changes to the Rent Stabilized Housing Stock.

Recently, the RGB released its 2022 Price Index of Operating Costs, Mortgage Survey Report, and its Income and Expense Study.

Price Index of Operating Costs Highlights

The Price Index of Operating Costs (PIOC) measures the price change in a market basket of goods and services used in the operation and maintenance of rent-stabilized apartment buildings in New York City. The goods and services that make up the market basket were originally selected on the basis of the findings of a study of 1969 expenditure patterns by owners of rent-stabilized apartment buildings.

Changes to the market basket have been made over time. The relative importance of the various goods and services in the market basket was updated in 1983 by means of a study of expenditure patterns of owners of rent-stabilized apartment buildings. And additional updates to these expenditure patterns have been done throughout the years in order to present a current and relevant analysis of changes in owner expense. Here are the highlights of this year’s report:

  • The PIOC for rent-stabilized apartment buildings increased 4.2 percent this year.
  • All costs in natural gas-heated buildings increased 4.1 percent, and all costs in fuel oil-heated buildings increased 4.3 percent.
  • The “Core” PIOC, which excludes the changes in fuel oil prices, natural gas, and steam costs, is useful for analyzing inflationary trends. The Core PIOC rose by 3.0 percent this year.
  • Fuel costs and Insurance costs rose by the greatest proportions, 19.6 percent and 10.9 percent, respectively.
  • Real estate taxes fell by 3.7 percent, the only decrease of any PIOC component, primarily due to a decline in assessments for Class Two properties.
  • The Maintenance component increased by 9.2 percent.
  • The Utilities component increased by 5.8 percent.
  • The PIOC for rent-stabilized apartment buildings is projected to increase 4.7 percent next year.

Mortgage Survey Report Highlights

Each winter the RGB research staff surveys lending institutions that underwrite mortgages for multifamily rent-stabilized properties in New York City. The survey provides details about New York City’s multifamily lending market during the 2021 calendar year as well as the first few months of 2022.

The survey is organized into three sections: (1) financing availability and terms for rent-stabilized buildings; (2) underwriting criteria; and (3) additional mortgage questions, including vacancy and collection losses, operating and maintenance expenses, and portfolio performance information. In addition to the survey analysis, rent-stabilized building sales data, obtained from the NYC Department of Finance, is also examined. Here are the report’s highlights:

  • Average interest rates for new multifamily mortgages increased 15 basis points, to 3.91 percent this year, the first increase in four years.
  • Average maximum loan-to-value (LTV) ratios decreased from 74.1 percent last year to 73.8 percent this year. The LTV ratio is the amount institutions are willing to lend as a proportion of a building’s value; the lower the LTV, the lower the risk to the lender.
  • Vacancy and collection losses increased from 2.83 percent last year to 4.05 percent this year, the highest level since 2013.
  • A total of 777 buildings containing rent-stabilized units were sold citywide in 2021, a 65 percent increase from the prior year.

Income and Expense Study Highlights

In 1990, the RGB acquired a new data source that enabled researchers to compare PIOC-measured prices and costs with those reported by owners: Real Property Income and Expense (RPIE) statements from rent-stabilized buildings collected by the NYC Department of Finance. These Income and Expense (I&E) statements, filed annually by property owners, provide detailed information on the revenues and costs of income-producing properties. The addition of I&E statements has greatly expanded the information base used in the rent-setting process. I&E statements not only describe conditions in rent-stabilized housing in a given year, but also depict changes in conditions over a two-year period.

Most important, I&E data encompasses both revenue and expenses, allowing the RGB to gauge the overall economic condition of New York City’s rent-stabilized housing stock. This year’s findings reflect the impact of the first year of the COVID-19 pandemic on the NYC economy.

From 2019 to 2020, Net Operating Income (revenue remaining after operating costs are paid) fell 7.8 percent for buildings containing rent-stabilized units, the fourth decrease in the past 30 years.

  • On average, in stabilized buildings, from 2019–2020:
  • Rental income decreased an average of 3.8 percent;
  • Total income declined an average of 4.6 percent;
  • Operating costs fell an average of 2.8 percent.


RGB Formulas Recommend Guidelines Increases

Between 2.7% and 9%

On April 14, in a presentation to the nine-member Rent Guidelines Board (RGB), staff of the RGB suggested rent increases between 2.7 percent and 4.5 percent for one-year leases and 4.3 percent and 9 percent for two-year leases. These preliminary figures are based on formulas applied to PIOC data.

Throughout the board's history, the RGB has used formulas known as commensurate rent adjustments to help determine annual rent guidelines for rent-stabilized apartments. The formulas combine various data concerning operating costs, revenues, and inflation into a single measure to determine how much rent would have to change for net operating income (NOI) to remain constant for rent-stabilized apartments. NOI measures earnings left over after operating and maintenance bills are paid, but does not include taxes and mortgage payments. The board previously reported that NOI for landlords of rent-regulated apartments dropped 7.8 percent between 2019 and 2020, the latest data available.

The “Net Revenue” formula found a commensurate rent adjustment using a no vacancy factor is 3 percent on a one-year lease and 6 percent on a two-year lease. The board’s “CPI-Adjusted NOI” formula which reflect general inflation yielded a 4.5 percent hike for one-year leases and a 9 percent for two-year leases. Using the “traditional” formula, a method used since the creation of the Rent Guidelines Board, the board recommends a rent adjustment of 2.7 percent for a one-year lease and 4.3 percent for a two-year lease.

Andrew McLaughlin, executive director at the RGB, told the board that “each of these formulas may be best thought of as a starting point for deliberations." The data presented in other rent guidelines annual research reports beside the PIOC and Mortgage Survey Report, such as the income and affordability study and the income expense study, along with public testimony can be used with these formula outcomes to determine rent adjustments.

Mayor Adams Appoints New Members to Rent Guidelines Board

The nine-member rent guidelines board (RGB) is responsible for adjusting rents for the one million New York City apartments subject to the city’s rent stabilization law. The mayor appoints all of the members, with two representing tenants, two representing owners, and the remaining representing the general public. Mayor Adams' latest appointments to the RGB indicate a shift from the de Blasio era, during which there were several rent freezes and only slight increases over eight years.

Last summer, the RGB adopted a proposal that froze rent at NYC rent-stabilized apartments for six months then increased rent by 1.5 percent for the following six months. The unusual guidelines were meant to serve as a compromise between tenants who called for rent freezes and landlords who called for increases, both feeling the financial effects of the pandemic. In 2020, the board froze rent for one-year leases and increased rent for the second year of two-year leases by 1 percent. Before 2020, the board last issued rent freezes in 2015 and 2016.

Mayor Adams has moved away from public support of tenants and rent freezes. In a statement he made as he announced two of the appointees, he said, “My administration is committed to making decisions based on data, and I know these two appointees share that commitment and will serve New Yorkers well in their respective roles.”

On March 31, Mayor Adams announced Arpit Gupta as a public member and Christina Smyth as an owner member of the Rent Guidelines Board (RGB). And on April 14, Mayor Adams announced Adan Soltren as a tenant member for the RGB.

Public member. Arpit Gupta is assistant professor of Finance at New York University Stern School of Business, where his research focuses on using large datasets to understand default dynamics in household finance, real estate, and corporate finance. His interests in policy research include real estate, housing, and land-use regulation, as well as transit, infrastructure, public finance, pedestrianization, and the management of urban street space.

Owner member. Christina Smyth, Esq. is the founder and owner of Smyth Law PC, a real estate law practice that represents multifamily residential building owners, operators, and management companies throughout Manhattan, Queens, Brooklyn, and the Bronx. She is also an adjunct instructor at the New York University Real Estate Institute. Smyth has been a member of the Real Estate Services Alliance since 2011 and is a committee member of the New York State Bar Association’s Lawyers Assistance Program.

Tenant member. Adán Soltren, Esq. is a staff attorney with the Housing Justice Unit—Group Advocacy project of the Legal Aid Society’s civil practice. He is a member of Legal Aid’s Harlem Community Law Office and works closely with tenant associations and groups of low-income tenants throughout Manhattan on a wide array of legal matters pertaining to New York housing law. Throughout his seven-year tenure at the Legal Aid Society, Soltren has also held many roles within the United Auto Workers Association of Legal Aid Attorneys Local 2325, including union delegate, Attorneys of Color at Legal Aid caucus co-representative, and trustee.