RGB Releases 2023 Income & Expense, Affordability 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.
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 2023 Income and Affordability Study as well as its Income and Expense Study.
Income & Affordability Highlights
This study highlights year-to-year changes in many of the major economic factors affecting NYC’s tenant population and takes into consideration a broad range of market forces and public policies affecting housing affordability, such as unemployment rates; wages; housing court and eviction data; and rent and poverty levels. Here are the highlights of this year’s report:
Data from the 2021 NYC Housing and Vacancy Survey shows that rent-stabilized tenants had a median gross rent-to-income ratio of 32.2 percent. For all rent-stabilized tenants, the median household income was $47,000, median contract rent was $1,400, and median gross rent was $1,547. The vacancy rate for all rental units was 4.54 percent.
- The Consumer Price Index, which measures inflation, increased 6.1 percent in the NYC metropolitan area during 2022.
- Due to high inflation, average inflation-adjusted wages were down 2.1 percent in the most recent time period studied.
- New York City gained an average of 297,592 jobs in 2022, a 7.0 percent increase from 2021, and the unemployment rate fell to an average of 5.7 percent, down from 10.0 percent in 2021.
- More persons were in NYC Department of Homeless Services shelters each night of 2022, up 8.0 percent from 2021.
- Concurrent with the end of pandemic eviction moratoriums, non-payment filings in Housing Court increased 167.8 percent in 2022, while non-payment cases actually heard increased 228.6 percent. The number of residential evictions rose from 136 to 4,109.
- Cash assistance caseloads rose 14.2 percent in 2022, while the number of SNAP (food stamp) recipients rose 1.3 percent, and Medicaid enrollees fell 4.9 percent.
- As of March 29, 2023, the NYS Emergency Rental Assistance Program has made 175,301 payments on behalf of tenants for rent assistance within NYC. The average payment amount is $13,410.
Income & Expense Study Highlights
As part of the process of establishing rent adjustments for stabilized apartments, the RGB since 1969 has analyzed the cost of operating and maintaining rental housing in New York City. Until 1990 the board measured changes in prices and costs solely using the Price Index of Operating Costs (PIOC), a survey of prices and costs for various goods and services required to operate and maintain rent-stabilized apartment buildings, which include buildings that contain at least one rent stabilized unit.
However, 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 study reflects the appreciable impact of the COVID-19 pandemic on the NYC economy.
And in a methodological change, this study now stratifies buildings based on whether they were constructed prior to 1974, or on or after Jan. 1, 1974. Here are the highlights from the study:
- In 2021, citywide average monthly rent was $1,495, average income was $1,667, average operating cost was $1,091, and average Net Operating Income was $576 per unit per month.
- The adjusted Cost-to-Income ratio in 2021 was 62.2 percent. In Core Manhattan, the ratio was 66.4 percent, 5.3 percentage points higher than the 61.1 percent in the rest of the city.
- Between 2020 and 2021, the proportion of gross income spent on adjusted expenses (the O&M Cost-to-Income ratio) increased, rising by 3.2 percentage points.
- Rental income decreased an average of 1.2 percent, total income declined an average of 0.2 percent, and operating costs rose an average of 5.2 percent between 2020 and 2021.
- Between 2020 and 2021, Net Operating Income (revenue remaining after operating costs are paid) fell 9.1 percent for buildings containing rent-stabilized units.
- The decline in NOI was most significant in Core Manhattan, where it fell 21.0 percent from 2020 to 2021. By contrast, NOI in the remainder of the city fell 5.1 percent over the same period.
Preliminary Vote Meeting
The RGB will hold a series of public hearings to gain insight from tenants and property owners before the board’s final vote in June. However, on May 2, the RGB will hold a public meeting at the Great Hall at Cooper Union to have a preliminary vote on proposed lease adjustments for rent-stabilized apartments, lofts, and hotels.
In 2022, the RGB’s preliminary vote called for a 2 to 4 percent increase on one-year leases, and a 4 to 6 percent increase on two-year leases. Ultimately, the RGB voted for a 3.25 percent increase on one-year leases and a 5 percent increase on two-year leases.
Mayor Adams' Recent Appointments 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. Two members are appointed to represent tenant interests. One of these serves a two-year term, and the other a three-year term. Two members are appointed to represent owner interests. Like the tenant members, one serves a two-year term, and the other a three-year term. Five members (including the chairperson) are appointed to represent the general public. One of these serves a two-year term, another a three-year term, and two serve four-year terms. The chairperson serves at the pleasure of the mayor.
Mayor Adams recently appointed Genesis Aquino as a tenant member and Doug Apple as a public member to the NYC Rent Guidelines Board. Genesis Aquino is the executive director of Tenants & Neighbors, a grassroots membership organization that works collaboratively with tenants to preserve and protect affordable housing in New York State. And Doug Apple is the president and CEO of 1811Consulting, representing clients with real estate, health care, and project management services. He works on a range of supportive and transitional housing development projects as well as commercial real estate sales, leases, and acquisitions.
These appointments follow the appointment of Nestor Davidson as the chair of the RGB in March. Davidson is a professor of housing and land use at Fordham University School of Law. He previously served as special counsel and principal deputy general counsel at the U.S. Department of Housing and Urban Development. He also served as a clerk for former Supreme Court Justice David H. Souter. And he was a NYS Housing Finance Agency board member for six years.
RGB Formulas Recommend Increases
Between 5.3% and 16% for Rent-Stabilized Units
On April 20, in a presentation to the nine-member Rent Guidelines Board (RGB), staff of the RGB suggested rent increases between 5.3 percent and 8.5 percent for one-year leases and 11 percent and 16 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 doesn’t include taxes and mortgage payments.
The “Net Revenue” formula found a commensurate rent adjustment using a no-vacancy factor is 6 percent on a one-year lease and 11.5 percent on a two-year lease. The same formula with a vacancy factor included offered a 5.75 percent increase on one-year leases and a 11 percent increase on two-year leases. The board’s “CPI-Adjusted NOI” formula, which reflects general inflation, yielded a 8.5 percent hike for one-year leases and a 16 percent hike for two-year leases (no-vacancy factor) and a 8.25 percent hike for one-year leases and a 15.75 percent for two-year leases (vacancy factor included). Using the “traditional” formula, a method used since the creation of the RGB, the board recommends a rent adjustment of 5.3 percent for a one-year lease and 16 percent for a two-year lease.