ANOTHER WAY TO HIKE THE RENT
Rockman, Jane
Another way to hike the rent How HUD helps the landlord beat inflation Jane Rockman It is the perennial tug-of-war. On one side are tenants trying to block rising rents, and on the other side are...
...landlords claim that preemption is the only way to free themselves from overly restrictive controls...
...Los Angeles, where a new rent stabilization ordinance enacted last May has led a HUD spokesman in Washington to foresee a major political battle, depending on what effect the controls have...
...In one grass-roots effort to eliminate the need for political clout and wheeling and dealing in signing an apartment lease, tenants from New York, New Jersey, Massachusetts, and Washington, D.C., formed the Coalition Against Federal Preemption of Local Rent Controls, and sent busloads of concerned tenants to meet with HUD officials...
...The city's old rent control law still covers a number of buildings, but is gradually being phased out...
...In 1976, applications were filed to convert some 500 units...
...The Assistant Secretary for Housing Management said to hold off," reports a representative of HUD's New York Area office...
...Department of Housing and Urban Development...
...While local ordinances to limit rent increases have helped tenants in some areas, the same controls have sent landlords to the Federal Government for a counterforce weapon that has come to be known as "preemption...
...In many cases, a landlord would have to raise rents something like 58 per cent 'o catch up to his expenses, and even without controls, he could never get away with that," O'Neill explains...
...With support from most of the city's mayoral candidates, the district's Congressional representative, Theodore Weiss, and other political leaders, the preemption order was stopped and no further preemptions have taken place in New York since...
...personal savvy to be the most useful tools for dealing with it...
...But in 1976, Papson's rent jumped 22 per cent to $680 after the building was preempted — temporarily removed from local rent controls — by the U.S...
...In Washington, D.C., no privately financed multi-unit housing has been built since 1976, and condominium conversions have reached epidemic proportions...
...The reforms are intended to soften the impact of preemption, but they do not really solve the problem for tenants...
...Now 130 municipalities have separate rent laws, and efforts are under way to devise a coordinated, statewide system...
...The prognosis is gloomy — more inflation, more controls, more preemptions, but no solutions...
...The cost-push squeeze on landlords is universal," O'Neill says...
...to provide assistance for housing...
...He feels that the only hope for the future is for tenants and landlords to work together in their buildings instead of looking to either rent controls or HUD...
...As large numbers of people move back into cities," explains Sheldon Friedman, "tenants are having to compete with families who would like to buy their units as co-ops or condominiums...
...What you will find in the Federal Register is HUD claiming preemptive power as "an expression of Congressional intent for the Department...
...Preemption is not a law but an administrative regulation set up by the Department in 1976, and HUD attorney David Cooper admits that you will not find any clear-cut statement such as, "HUD is hereby entitled to preempt local rent control laws...
...In at least one New York City building, a preemption notice coupled with rumors that all rents would be increased by 20 per cent sent tenants flocking to the landlord to make individual deals...
...When Costa Papson moved into his Bronx apartment in 1974, the rent was $560 a month — a limit set by New York City's Rent Stabilization Code, which covers multi-family, unsub-sidized housing built after World War II...
...Some of the major rent control areas include: f New York City, which recently extended its ten-year-old Rent Stabilization Code for three more years, covering almost one million apartments...
...And in a number of preempted buildings — or buildings threatened with preemption — tenants have accused landlords of trying to force them to let their buildings turn co-op...
...These are meant to enlarge the rights of tenants by providing advance warning of a preemption order and access to the landlord's books...
...Friedman would like to see an end to the "adversary relationship" between tenants and landlords...
...New York City, with some 680 unsubsidized FHA-insured apartment developments, experienced twenty preemptions between 1975 and the summer of 1977, when a freeze was put on further actions...
...A recent study by Washington's Rental Accommodations Office discovered that conversion activity was heaviest in those parts of the city where sales of single-family homes were heaviest, meaning that middle-income and upper-income families precluded from buying houses — either because of price or lack of availability — were ready instead to buy apartments and share some of the tax benefits of ownership...
...Preemption is such an amorphous policy, so sketchily conceived, that tenants have found political pressure and Jane Rockman is a free-lance writer in New York City...
...But most tenants do not know anything about preemption until they are faced with it, so that a preemption notice catches them unprepared...
...In fact, a growing interest in cooperatives and condominiums — not only in cities with rent controls — may be the major threat to rental housing in the future...
...HUD further explains that local rent control has been "a significant factor in causing owners of FHA projects, especially subsidized projects, to default on their mortgages," so that HUD has "an overriding interest to preempt state and local actions which contribute to such claims...
...Weiss and Representative Benjamin Rosenthal, whose Queens district has also been plagued with preemptions, have co-sponsored legislation which would make the HUD policy illegal...
...Since most rent ordinances now have special exemptions for subsidized buildings, what is really at issue is preemption's effect on the future of middle-income unsubsidized housing...
...When a landlord claims that his rent revenues do not cover operating costs and that he might have to default on his mortgage, he first applies to the local rent control board for a hardship increase...
...This means that a Sidney Harris developer or landlord has a very real choice: If the rental building is a losing enterprise, you can get out from under by converting it...
...Tenants claim that preemption is driving them from their homes by setting exorbitant rents...
...The year before last was a mayoral election year in New York, and one of the housing developments being threatened with preemption was a vast middle-income complex of 10,000 residents on Manhattan's West Side, called Lincoln Towers...
...Besides building conversions in the Northeast, more are happening in Chicago, Denver, and Salt Lake City, and O'Neill sees this trend spreading soon to Atlanta and cities in Texas...
...in 1978, there were 10,500 applications (although just under 2,000 were actually converted...
...John O'Neill, lobbyist for the Apartment and Office Building Association in Washington, predicts that "in fifteen years, there won't be much rental option left in most cities" — a situation he calls "the ignored crisis in America...
...Unfortunately, no other solutions have been offered to this growing problem...
...It is a no-win situation...
...These findings are supported by HUD...
...So far, preemptions have been scattered, occurring mainly in New York and New Jersey...
...New Jersey, where rent controls began in 1970 in the bedroom community of Fort Lee, a city of expensive apartment complexes overlooking the Hudson River and Manhattan...
...Any building with a FHA-insured mortgage is a potential candidate for preemption if it comes under the umbrella of a local rent control ordinance...
...If preemption is here to stay," says David Baslow, president of the New Jersey Tenant Organization, "we have to try to make it livable...
...On one side are tenants trying to block rising rents, and on the other side are landlords trying to cover rising costs...
...But preemptions are expected to resume shortly when HUD's new regulations take effect...
...More than displeasure with the District's rent controls, the real spur to conversion seems to be the existence of a seller's market...
...If this is denied, he turns to HUD, which can supersede the local board, determine what the landlord's yearly rent revenues should be, and draw up an implementation schedule to bring in those revenues...
...When word of the impending preemption was received, tenant association attorney Errol Brett recalls, "we went the political route...
...Boston, where the current rent control law expires in December, leading one local representative to predict that rent control will be a major issue in that city's upcoming mayoral election...
...Washington, D.C., where the rent control law is six years old...
Vol. 43 • August 1979 • No. 8
