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Arpit Gupta on Opposing Mamdani's Rent Freeze & Securing the Future of Rent-Stabilized Housing
01:05:04
Arpit Gupta, a member of the New York City Rent G…
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- [00:00]
A
Foreign. Hello and welcome to Max Politics. This is Ben Max coming to you from New York Law School and its center for New York City and State Law. Thanks for tuning in. Speaking here on Tuesday, June 30, 2026 one of Mayor Zoram Mamdani's central campaign promises last year was to freeze the rent New York City's roughly 1 million rent stabilized apartments whose rent increases are set by a board, the Rent Guidelines Board, whose nine members are appointed by the Mayor. But the RGB is tasked with setting those rental lease terms based on a variety of factors and cannot simply act based on the Mayor's campaign promises or a mayoral directive of some kind. RGB members must take public testimony and weigh factors including costs for landlords and tenants, building conditions, the broader housing market and more. The RGB's nine members include five members to be representative of the public, two landlord representatives and two tenant representatives. After its annual months long process this year, Last week, on June 25, 2026, the RGB delivered on Mamdani's campaign promise and in a seven to one vote approved a rent freeze on both one and two year leases, the latter an unprecedented move that tenants may sign in the coming months. While the RGB has nine seats, one was vacant for the vote as one landlord representative resigned from the board just ahead of the vote. My guest today is the lone dissenter in that vote and we have a very interesting conversation ahead. Arpit Gupta is with me today. He's a member of the New York City Rent Guidelines Board and in his day job an Associate professor of Finance at NYU Stern School of Business. He was originally appointed to the Rank guidelines board in 2022 and his term is set to expire at the end of this year. Mayor Mamdani celebrated the RGB vote, saying in a statement that it was a historic victory for New York City tenants. After reviewing the data and hearing from New Yorkers across the city, the independent RGB has delivered a freeze on one year leases and the first ever freeze on two year leases in our city's history. This is a relief that working people across our city deserve. He went on to say he is grateful for the board members thoughtful consideration of the data including tenants ability to pay cost of living and building operating costs. I'll continue working to deliver a more affordable city by building and preserving affordable housing, lowering building operating costs like insurance and ensuring tenants know their rights. Now in response, a landlord group Representative Kenny Burgos of the New York Apartment association, who has been a guest on this show before and is A former assembly colleague of the Mayor's said that this freeze will destroy the living conditions for hundreds of thousands of New Yorkers. This was supported with study after study including RGB data finding rent needed to increase just to run a building. Nycha, a shelter, a co op or a rent stabilized building cannot exist without funding. Yet here we are, left to watch housing stability and quality malaise with no plan to save it. I urge policymakers to act expeditiously before this bubble bursts. Arpit Gupta will join me momentarily to help sort all of this out, discuss his loan no vote on the Maidani rent freeze and talk about the broader rent stabilized system and where to go next. Very briefly, if you missed any recent episodes of the show, I just had a series of great post primary election conversations with guests to discuss the outcomes of the 2026 New York primary elections for state and federal seats, a series of elections that were dominated by Mamdani backed candidates and others supported by the New York City Democratic Socialists of America. I was joined for very interesting post primary conversations by New York City Public Advocate Jumani Williams, then the Chair of the New York State Democratic Party Jay Jacobs, and then now New York 10 Democratic nominee Brad Lander who defeated incumbent Congressman Dan Goldman in the Democratic primary to become Democratic, the nominee heading toward the fall general election. And then most recently on the show is joined by New York City DSA backed State Senator Julia Salazar of Brooklyn. A variety of interesting conversations with all four of those guests discussing the primaries in similar and different ways. So check any or all of those out if you haven't yet after you listen to this one. All right. I'm very pleased to welcome to Max Politics Arpit Gupta. He's a public member of New York City's Rent Guidelines Board and in his day job an Associate professor of Finance at NYU's Stern School of Business. Mr. Gupta was the lone dissenting vote as the Rent Guidelines Board approved a rent freeze for both one and two year leases on roughly 1 million rent stabilized apartments in New York City, home to about 2 million New Yorkers across roughly 44,000 buildings. Thanks for being here. How are you?
- [05:13]
B
I'm doing well. Thanks so much for having me on. I'm a huge fan of the podcast.
- [05:16]
A
Oh well, thanks for taking the time here before we get into your vote on this historic rent freeze. There's never been a freeze on two year leases before. Let's zoom out for a couple of minutes. How do you summarize for people what the Rent Guidelines Board is and does? It's a Nine member board, five public members, including yourself and the chair, to landlord representatives to tenant representatives. But say a little bit about just how you capture what it is and what it does.
- [05:46]
B
I think of us as a utility cost regulator, which is how Alex Armlow it also described it on your podcast earlier. Our mandate is at the same time broad and narrow. It's a narrow mandate in that our job is to try to assess a few considerations that are given to us in our mandate. These include building and housing conditions. They also include cost of living indices as well as other data. And the other data component is how the mandate has been conventionally read to mean a balance between owner and tenant interest to ensure the stability of the rent stabilized stock. And so it is also a broad mandate in that we have the ability to consider a wide range of criteria in trying to decide how to ensure that building conditions are appropriately maintained into the future.
- [06:35]
A
And what does it mean to be a public member versus a tenant or landlord member? How do you think about that role and how do you try to balance the different perspectives on the board and in the public testimony that you receive?
- [06:50]
B
So one thing that I've been frustrated at for a long time on the board is this dichotomy of owner versus tenant interests that is structurally there on the board because we have owner, tenant owner representatives and tenant representatives. But as a public member, I view my job as trying to think about the long term future of this housing stock. We have this tremendous resource here in New York City, these 1 million rent stabilized units which provide a huge source of affordable housing for New Yorkers. And our goal, I think as public members is to try to find ways of ensuring that this stock remains stable into the future and is able to provide essential housing services for New Yorkers.
- [07:32]
A
Yes, it's very interesting. We've had sort of conversation that landlords and tenants should not necessarily be at such opposition in many ways, perhaps especially when it comes to this housing stock. But of course that is still how a lot of the dichotomy plays out. You, you have been a holdover. Mayor Mamdani wound up getting to appoint six of the nine members. You were already on the board. Say a little bit about the change of the board's composition and how coming into this year's process, which just concluded the election of a new mayor who ran basically first and foremost on a pledge to freeze rent stabilized rents. Factored into how this all came to be, there were questions about how the political atmosphere influences the board's process and decision making, which again has you know, sort of always been the case. You can't totally separate any, you know, governmental activity from the political atmosphere. But there were questions around that impact. And then also this, this question of the new mayor getting to appoint a majority of board members. How did that transition go? What was your view on you how the mayor's election and then getting to appoint the board members impacted this process.
- [09:00]
B
So first of all, I have to really credit the hardworking staff of the rgb. We have an excellent group of people that are there to manage the transition and provide all the data and resources which we use as members on the board. So first of all, I have to congratulate them on their job. And I also have to credit the new administration for respecting the political independence of the board. I've not seen personally any attempt of interference by City hall onto the decision support members themselves. So in that sense it represents an independent decision making by board composition, which is different. We have of course, a chair who serves at the pleasure of the mayor, who has changed over. And we also have new board members that have been appointed by the administration.
- [09:45]
A
There's clearly the mayor started to be very careful once he got into office about changing some of his language around the campaign trail of we will freeze the rent, which everybody understood as a political promise to then becoming mayor and understanding that he needed to be very careful about dictating that because of the independence of the board. I'm sure you took very careful note of that. But is that sort of just like necessary? But it's obviously kind of like everybody acting apart?
- [10:19]
B
I think readers should check out the statement that the board chair made that describes a little bit of the thought process behind what went into the final decision making. I think it's responsive obviously to real pressures by tenants that are facing huge affordability issues. And what I've tried to do in a lot of my writing since the vote is try to highlight other ways that we can try to address these affordability challenges that don't just rely on the rgb. Because the challenge, and sure we'll get into this and talking about the rent freeze itself, is that it's not just a one year decision. It is a series of decisions that are made every single year. And so it's not about any one year's change to the rent, but about the forward looking guidance about what rents will be into the future. So I believe the board members acted independently and read the data and made an independent decision. But the concern, I think from any in the outside community is whether that will remain the case for all four years. If we have what is essentially a predetermined rent freeze for four years, regardless of building costs, that's going to put severe stress on building conditions. And so I hope that board members in the future continue to remain independent in their decision making.
- [11:31]
A
So you mentioned that as a member of the board, you generally see the board having to take obviously a variety of factors into decision making here, including building and apartment conditions, cost of living and balancing owner and tenant issues, among others. And how you take a view of this responsibility as really ensuring the long term sustainability and health of this very important affordable housing building stock. When you think about the, let's just say medium to long term health of this affordable housing building stock, that is rent stabilized apartments, what are the top things that are on your mind going into this process about that long term stability and how do one year leases, two year leases with, you know, maybe at most, you know, 4 or 5% increase? Obviously they're going to be frozen, but you know, that was sort of the range that anybody thought would be at the, at the high end coming into this process, factor in to sort of the medium and long term thinking about this building stock. Because there's so many other factors that you're considering other than just what the one year or two year lease terms might be.
- [12:54]
B
Absolutely. So the first place I start to think about that is with the physical conditions of the buildings themselves, which have to which require a good amount of maintenance and other capital expenditures to ensure proper maintenance. So the challenge that we observe is that about 10% of buildings right now are negative in NOI, meaning that they don't earn enough revenue on their buildings in order to meet expenses. An additional number of buildings are likely deficient in their ability to fully pay for these necessary expares and maintenance. We see this in the fact that when we look at this housing stock and as your listeners are well aware, we really have these two parts of the housing stock, right? We have the post1974 rent stabilized stock which is primarily consisting of buildings that were rent stabilized as a result of property tax abatements and regulatory agreements in comparison with this pre1974 stock, which is our legacy rent stabilized stock. And a large fraction of this is 90% plus rent stabilized, meaning that the rental adjustments by the Rent Guidelines Board are really the main way that they have additional rental revenue to pay for necessary expenses. So especially if we think about that part of the stock, the rent increases allowed by the RGB are really the main way to ensure appropriate, proper maintenance of these buildings. So we need to make sure that these buildings one way or the other have sufficient cash flow to make these necessary expenses. And data the board saw this year from the Independent Budget Office show that when you look at that part of the stock and you increase the number of rent stabilized units as a fraction of the stock, you have increasing number of violations, which is a sign that there might be challenges with respect to building maintenance already at baseline. So the challenge in trying to address this with just allowing rental increases is there's no necessary guarantee that the rental adjustments are actually going to translate into those improved building conditions which we want to see. So that's one of the reforms that I proposed, is to tie the rental adjustment process more directly to building conditions themselves. This would take the form of a proviso which would say that buildings that are not doing sufficient maintenance would not receive the rental adjustment voted on by the rgb. So it would be a, if you like, a rent freeze for some lords. And only those buildings that are making necessary maintenance investments as proxied by things like violations or involvement in the city's alternate enforcement program, only those buildings would receive rental adjustments. So that's a proposal I put out there to try to think creatively ways of trying to better execute on mandate and try to ensure appropriate building conditions for the medium long term.
- [15:33]
A
So that's the first part, but I'll let you. I'll let you continue, but I want to come back to that idea in a minute.
- [15:37]
B
Go ahead. The second part that I think of as being important for appropriate building conditions is the supply environment. So how many of these rent stabilized units are actually available for people to rent? And take the number that we've seen the this year, which concerns me a little bit, is we now have 57,000 vacant rent stabilized units. This is up about 9,000 from the previous year. This number represents a point in time estimate and it is likely the case that some of these units will be leased up into the future. This represents therefore transitional vacancy for our number of these units. But the concern is that the economics of rent stabilized buildings might be deteriorating in ways that actually limit access into these buildings for more tenants. This would be the case if, for example, the vacancies that do happen require expensive and complicated process of rehabilitation from which the owner cannot really recoup much value and in fact might be facing the prospect of frozen rents out in the future. That will mean that these units will then not be available to New Yorkers that need access to this Essential affordable housing stock. So that supply environment I think is critical and it also plays into a number of new unit constructions that are happening right now through programs such as 45x465m mandatory inclusionary housing. There are whole, you know, acronym and slew of programs that the city is providing tax benefits for which all essentially create some fraction of affordable housing units in the form of rent stabilized units. As these programs get underwritten, the decision on whether or not to freeze their rents also impacts new supply because it impairs the ability of investors to receive cash flow from those rent stabilized units in the future. And so it may affect the supply environment as well.
- [17:29]
A
Now, generally speaking though, that segment, we don't see much evidence that those, those types of mixed income buildings that have some required units going into rent stabilization, that those requirements and the potential of a rent freeze or even very small rent increases. Do we have any evidence that we think that would impact the larger supply picture that you're getting out there? I mean, is that sort of just theory at this point, or, you know, how, how worried are you that a rent freeze on that segment of the rent stabilized market would actually impact the larger supply considerations?
- [18:18]
B
So first of all, I do really like the design of these programs that mix market rate units and affordable housing units together. So that was another series of proposals I laid out in a vital city piece to try to think about how to make these buildings more sustainable in the wake of rent freezes. And I think one of the ideas is to make more rent stabilized buildings look like these new construction units that have this mix of market rate and affordable housing units together. That would take the form, for example, of a lawnmower building on existing rent stabilized apartments and having the incremental units be market rate, which provides a cross subsidy and helps to sustain the viability of the existing rent stabilized units without impacting existing tenants. So in general, I'm a big fan of these programs. On your question about how much on the margin is a rent freeze going to impact the supply environment for these units? I think one place to look is the 99 unit threshold that we have for 485x buildings, right? So as many of our listeners are probably aware, we have a tax abatement program which funds new construction. And if you go up to 99 units, you take advantage of the Friday benefits. If you go up to 100 units, you now face incremental additional labor requirements. And what we see is very few buildings have been built at the 100 unit threshold or above. We see instead A lot of units at 99 instead. So that's just one sign that the economics and cost of how we incentivize new construction makes a difference on the margin for how builders actually design their projects. And so if we're going to take the 20, 25% of new units being constructed through a variety of programs and subject them to a different regime, that does impair on the margin, I think, the economics of how these get financing constructed.
- [20:02]
A
Let me come back to the other thing you said, which is this idea of potentially tying rent increases to building conditions. And you put it, you know, potential rent freeze for the tenants of slum lords. Doesn't that. I mean, it creates a new potential incentive for landlords to ensure that they are, you know, fixing up their buildings and the apartments they're in. But doesn't it also potentially create even more of, you know, sort of like potential doom loop in these, in the finances of these buildings?
- [20:37]
B
I think that's a totally fair concern. And so that would be the third layer of concern that I have about the medium and future term for housing policy is what's going to happen to the finances of buildings more generally if their revenues are capped, but their costs are growing without limit. And this really speaks to what I've always felt is the fundamental tension of being on the rgb, which is that we are tasked, as we've been discussing, in assessing the cost environment and try to think through how many of these costs should flow through to tenants. The challenging part of this job is that many of the costs that we are considering are in fact set by government. The biggest component of these costs is property tax, which takes up as much as a third of the building costs overall. And the Furman center has done a great job of outlining all the inequities with this property tax system. Of course you also have other costs like water, so that's set by the government in a separate water board. We have costs like insurance which depend critically on the regulations that we have, particularly around liability. So we have a system in which the government is involved with many of the costs associated with running these buildings, but they then appoint a separate board which consists of people like us, and we are then tasked with taking these government set costs and passing some of these on to the tenants. So your point is that, well, if we are sending freezes on either a subset of the stock or the entire stock, that's going to create an environment in which the revenues are going to be limited. And again, for these 90% plus rent stabilized units, that this is really their main source of rent. Rental income increases. At the same time, the costs are potentially going to continue and that's going to place a lot of these buildings in a very difficult position into the future. There'll be situations in which many owners are unable to either pay the maintenance, as we've discussed, or find it unaffordable to pay for their mortgages, pay for property taxes, at which point the building then reverts in ownership either to the bank or to the city government to hold or sell in a tax lien sale. This process of distress impairs tremendously the lives of tenants that go through this process and can create real costs as buildings go under maintained and fall into distress as a result of these worsening financial conditions.
- [22:55]
A
All right, I want to talk more about solutions and other things, but let's get to this specific vote. So you are on the board. You take all of the research and the data in front of you from the staff, from your own analysis, from the testimony in front of you, you wind up being the lone dissenting vote in a 7 to 1 vote. Now, there was one landlord representative member of the RGB who resigned from the board right before the vote, so probably would have been a no vote alongside you on this. But you did have. So. So I want you to explain your rationale for voting against the the rent freeze. But to the point you just made about all of these sort of government set costs that landlords and owners are dealing with, the landlord rep on the board actually pointed to all those in voting for the freeze, which was an interesting dynamic. So maybe as you conclude some of your rationale on your vote against these rent freezes, you know, you can address that a little bit because it was interesting to hear a landlord representative appointed by Mayor Mamdani, but still cite those costs as what people should really focus on and noting that in the most distressed buildings, you often have the most distressed tenants who therefore might struggle to pay rent, especially if it's increased and therefore having a negative impact on the revenue anyway of the buildings. But we can get back to that in a minute. Why don't you start with some of your reasoning behind being this loan dissenting vote.
- [24:30]
B
Right. So first of all, I'm not against all rent freezes. I recently discussed in a newsletter the economic context in which we've had prior rent freezes in the past. So I don't think this is commonly appreciated. But in the period in which we had rent freezes under the de Blasio administration, we had estimates of building costs in some years that were actually negative. So the freeze is actually a positive number with respect to the board's assessment of building costs, which are actually going down in some of those years. We additionally had some rent freezes over the COVID period, which presented enormous stress, obviously for tenants and many different dimensions. So the board always has this balancing act of how to think about building costs and conditions and weigh them against various other considerations, including cost of living and tenant affordability. While there is positive momentum, I agree on addressing some of these costs, the data the board was given this year showed that building costs continued to rise quite rapidly. We are seeing in our estimate of pioc, which is the board's estimate of building costs, that those are growing over 5%. Of course, we're living in an overall inflationary environment, which is 3, 4%, still quite inflationary. And the board's estimate of renter income was growing by about 5.7%. So we recognize that that income growth doesn't benefit everybody. There are many people who are still struggling and face high rental burdens. But when I look at that balance of evidence, when I look at cost conditions for buildings that are still growing quite rapidly in a context of tenant affordability, which is still impaired but shows promising signs of growth, this seems like a condition to allow for some positive rent increases while we wait for broader progress on the affordability front in other dimensions. The RGB is not here to address every single problem in the world. We are here to try to make sure that this housing stock that we're regulating is able to stand tall one decade from now, two decades from now, and three decades from now.
- [26:33]
A
Now. We'll get to this in a minute, but part of the problem here is putting one set of conditions on these leases to a set of buildings and apartments that has incredible diversity within it and a set of tenants that has an incredible set of diversity within it. As you're pointing at, you know, with looking at the total, you know, renter income and noting that that of course includes, you know, a diversity of income situations. The rationale for the freezes pointed at something similar that you just pointed out. Just on the flip side, that overall landlord income, net operating income was up. How do you respond to that as a rationale for landlords being able, again, in sum, to withstand a rent freeze in this situation?
- [27:29]
B
So I think the logic of these one size fits all measures of building conditions really changed after 2019. So when we look at estimates like building profitability is going out by a certain percentage point, that's sort of like taking a room full of people where Bill Gates is one of the people and saying, well, the average income in this group is, you know, in the billions of dollars. Because we really have, with the rent stabilized stock is really two completely different components. As we've been discussing the part of the rent stabilized stock that consists of this balance between market rate and rent stabilized units. So that of course relates to these post1974 buildings we've been talking about. It also relates to pre1974 buildings that were partially deregulated and as a result have a mixture of market rate and rent stabilized units. This segment of the stock, I agree, is fine. They're doing quite well because they have the balance of the market rate units which are available to cross subsidize the rent stabilized units. And you also have the possibility that freezing the rents on the rent stabilized tenants might actually increase market rate rents. That's another concern or consideration I have. But for these buildings that it means that they're kind of well hedged against future rent freezes. We have, on the other hand, this legacy stock, which makes up between 450 500,000 units, which consists of predominantly this pre1974, predominantly 90% plus rent stabilized units. For this segment of the stock, the profits are getting worse. So they've been steadily losing more and more money in the last several years. And so their building conditions I think are at the greatest risk. So when we look at one number, it's really hard to know what to do with that because it represents this average across these drastically different building stocks. And so I've taken a lot from folks at the Furman center like Mark Willis, who have argued that the aftermath of The HSTPA in 2019 means that structurally the Rent Guidelines Board needs to weigh this heavily stabilized segment of the stock quite heavily in our decision making process because these are the buildings that have essentially no other recourse now for rental increases.
- [29:30]
A
Because just to back up for those not familiar, because in 2019 at the state level there was this change in law that basically removed a variety of ways that landlords and building owners were able to either recoup investments into their buildings by raising rents or remove units from the rent stabilized system once they got to a certain rent threshold and vacancy. Is that fair to sum up exactly.
- [29:58]
B
It also took away a few of the routes for building improvements that then provided additional revenue increases or for the landlord. So the combination of all these factors means that this segment of that rent stabilized stock now has essentially only the RGB as their source of incremental revenues.
- [30:18]
A
Go ahead.
- [30:19]
B
So this means that when we look at the proper conditions for landlords, it's true that if we were putting all of these landlords into one bucket, if there was one consolidated landlord that owned all these units, then you could say, well, the cross subsidy from the market units is totally sufficient to cover some of these stabilized units. But we have to also consider the fact that we have this very large component of the stock that is facing real and growing distress. And it is with respect to these units that I think we have to be particularly conscious.
- [30:50]
A
There is a question around whether the people who passed the 2019 rent law changes, who are now sort of more in power in the city, or their like minded counterparts are sort of okay with more distress in this stock and these buildings needing to be turned back over, as you said earlier, ownership going to the bank or to city government for a tax lien sale. They are looking at programs to help empower tenants to purchase their own buildings or again, nonprofit partners. The city already has a program, Neighborhood Pillars Program on this. Do you see that as some of the sort of motivation and end game here of combining those changes in law, which again were, I think largely, if not fully meant to be a. A protection for tenants and also perhaps an overcorrection, but a correction to the ways in which many units were being moved out of rent stabilization leading into this idea that you can move more of the rent stabilized housing stock into nonprofit ownership, tenant association purchases and so forth? Do you, do you sort of see that as one big part of this picture that includes the push for these rent freezes that are actually meant to further destabilize the finances of these, especially these older buildings.
- [32:31]
B
So the way I sort of think about this is whether or not this was the intent of anyone involved in here, we are seeing a slow transition from a second generation rent control system to a first generation rent control system. So this distinction, as economists discuss, is that a first generation rent control system is one that has pretty strong nominal freezes, which is to say the level of a rent is fixed in nominal terms, both within a tenancy, that is within the unit of time a tenant lives in their unit and across tenancies as well. So that sort of corresponds to what we already have and call rent control in New York City. Pretty low and pretty stable, nominally fixed amount of rent. These rent systems had many issues over the years. And so as a result, many of these rent control systems have transitioned into what we refer to as a second generation of rent control, which allows for some rental increases across tenancies. So that would correspond, for example, to the 20% bump that we had before 2019, that landlords could increase rents between tenancies and some degree of regulated costs within tenancies, depending on operational considerations, building costs and possible maintenance improvements. So what we've done is slowly tighten the screws on all these things at once. So we've lowered, as we've discussed, the scope for adjustments based on maintenance improvements. We have lowered the scope for the adjustments across tenancies. And now with the RGB's vote, we've also lowered the scope for the adjustments even within tenancy across different leases. So the combination of all these factors means that the rent control system that we have in New York City is getting closer functionally to this first generation of rent control. And this is a type of rent control that economists are typically very skeptical of. Exactly. Because the freezing of revenues and uncapped nature of costs means that building conditions can deteriorate quite rapidly until it leads to a transition in ownership into other hands. We've seen this play out already in New York city in the 80s when we had about 100,000 units go from private control to city control. At the time, the city was quite optimistic about this change and thought this would be an opportunity for the city to run a new affordable housing program. And it didn't go particularly well. So I hope that if we go through this process with a whole new regime of control of buildings and running these by nonprofits of the city, it goes better than it does the previous time. Of course, I think to make this all go well, it's going to require, I'm going to imagine, a high degree of capital fusion to make sure that these buildings are appropriately maintained if we have these transitions of ownership.
- [35:10]
A
Right. I mean, you hear landlord reps and even neutral parties that are at least neutral in the sense that they don't seem to be particularly aligned with either side of the argument, pointing out that even if you transfer ownership of some of these buildings that are either all or mostly rent stabilized units, the numbers are just not going to add up if you have, as you just said, frozen revenues and uncapped and increasing costs, and that the only way that that would really work is if you get a big infusion of funding from the government. And so. But the government is not willing to do that right now for the rent stabilized stock ownership in the private sector, is that fair to say? Even though there are a variety of other programs though that are meant to help those building owners, but they don't seem to be making a big impact. They don't seem to be workable. There's some people that say the landlords are not really taking advantage of them. At a protest, the landlords say they're overly cumbersome, they require too much money upfront, and then you're trying to recoup on the back end and you're not guaranteed that you're going to get that money back from these programs. How do you sort of see that, that landscape?
- [36:28]
B
I think this is totally right, that a shift in the structural nature of rent setting, if we do see that in the future, will require some greater degree of operational subsidy that the city is providing to landlords, either if they remain in private hands or into some alternate set of nonprofit or public landlords. Because the nonprofit landlords, for example, the, they're struggling now themselves, they have the benefit of not paying property taxes. So if we shifted ownership, it would have the benefit of lowering one important component of costs while at the same time taking away from the city one important source of revenue into the future. So one way or the other, I think there's this prospect that we might need additional amount of government support for the sector. And the real trade off is that comes with costs of its own and will potentially crowd out other things that the city might want to do. So we already have a budget for city vouchers. Obviously that's a huge debate right now what to do with city fabs. We have a budgetary plan for the city's own preservation programs and construction programs. And the budget items for all these different segments, many of which are producing new housing or providing means tested benefits to residents, is going to be stressed if we also have to layer on additional amounts of support for this legacy rent stabilized talk.
- [37:44]
A
Did you hear anything or see anything in the rationale from those who supported this rent freeze that made you think twice? Was this just a no brainer for you in coming to this conclusion because of what you said about the distress in the particular segment of the rent stabilized stock, which is large, as you pointed out? Was there anything that made it close for you? Was there a rationale that the other side of the vote had that you were sympathetic to anything that sort of caught you up here or you felt like if you're really just looking at all the data here, this is the clear, logical conclusion.
- [38:22]
B
You know, one thing I have been very influenced by is the arguments that we've heard from the city themselves over the years. Which highlight the importance of predictable rent increases or adjustments into the future. Right. So this is what city officials tell us, that they're trying to deal with the housing system, and it's very challenging for them if the RGB process is so discretionary that they can't plan for it easily one year to the next. So that's one of the biggest things I was hoping to get from other board members is some sense of the policy, some sense of not just how are we going to vote one particular year, but what is the plan for future years? What will be the conditions under which existing board members are thinking about rental adjustments into the future? And so one thing I have been encouraged by in some of these discussions is many of the members I've talked to indicate that they do want to see a future in which we have regular, predictable rental increases. But what I'm fully seeing is how we get from here to there. Right. Because we obviously have a mayoral pledge to have four years worth of rent freezes. And, you know, the question is whether the members of the board are actually going to execute on that in a predetermined way, regardless of cost increases or regardless of future support from the city. Because we all agree that what we'd love to see is more city support in ways that shore up the finances of rent stabilized buildings, in ways that mean that we don't have to make the poorest tenants pay for all these necessary building improvements. What's that?
- [39:54]
A
Yeah, I was just saying part of that support is not necessarily an infusion of city voucher dollars or capital funding, but is also a change in some of the regulatory regime, like property tax reform.
- [40:06]
B
Right, Absolutely. Just highlight that one property tax issue. This is something that, again, the Furman center has done a lot of great work on. They highlight this issue in particular of caps in how expenses are estimated for this stock. So the whole property tax discussion is very complicated, and many of the changes would require, you know, discussions with Albany. But just to pick one example of a reform that would make a big difference here, the way the city and Department of Finance calculates tax liabilities for building owners is they say if you make $100 in revenue, the city says the maximum you can declare as expenses is $64. That if you in fact spend $80 in genuine expenses on your building, that is that the city says, no, no, no, we think those are not real expenses. The max expenses you can claim is $64, and therefore, $36 is going to be the basis of your tax liability. And what the furman center has shown is that this cap is really increasingly binding for these rent stabilized buildings as the cost environment has continued to escalate. Many of these building owners probably have genuine costs which go above the cap but are not recognized. And this amplifies the doom loop issue that even when expenses continue to go up and true revenue and profits continue to fall behind, the building owner can't really claim that as a benefit in property taxes. So this would be a change that doesn't require Albany, would just require the city to recognize the true nature of costs in rent stabilized buildings. So something like this just to raise an example of something that I hope owners and tenants and everyone else can get behind, because it's really just about trying to get to a more equitable system.
- [41:44]
A
Come back to this predictability argument in question. So one of the things you raised in one of your pieces related to this process that was in City Journal was this idea that, you know, there's, there's been experiments in the past. You just talked about one relevant experiment, but with sort of capping costs and therefore revenues and then, and then seeing the challenges of financing the system. And that was around the subway fare.
- [42:14]
B
Yeah.
- [42:15]
A
And eventually what we did was we got to a place of creating the MTA trying to remove the decision around the subway fare, I should say subway and bus fare, to remove the politics from it, because there's, you know, no government official who wants to announce an increase in the fare. Now the ranked Guidelines Board, you know, you could say is some cousin of the MTA board, but we're talking about very different things here. When you have, you know, a government authority running the buses and trains and railroads, and then you have the Rent Guidelines Board that is overseeing a largely private sector owned building stock. But it gets at this idea that we have in recent years, although there's been some exceptions to this at times seen the idea that the mass transit fare would regularly be increased a small amount to help account for increases in expenses, for the MTA to therefore be able to count on increases in revenue. So is that the answer to more of what should happen in the rent stabilized system? That there should just be more of a formula, you know, that it should be more of a mathematical formula that really sets what people would hope would be relatively small but regular increases in rents or that are responsive, as you got at, to the cost environment, what would make more sense here?
- [43:51]
B
So I'm certainly sympathetic to the idea that it should be a rule rather than a discretionary process. We actually have the landlords to Think for that. They actually pushed for a board system back when this whole process was initiated. And many other cities across the country do a formula in California where they have something called Costa Hawkins, which means that you cannot have this vacancy control issue. So the rents reset between vacancies. In California they actually have programmatic or algorithmic setting of rents based on CPI which are often below CPI itself. So the rents may go up, for example, by only 80% of CPI or something like that in different cities. So that tells you we can have a link between rent setting and a formula. And this formula could even be below inflation. And if you're willing to accommodate for some increases across tenancies, if you want to keep the structure of 2019 and limiting that, then we can have a different formula, but something that might involve cpi. The Fiscal Policy Institute has suggested something which would be a CPI linked rule in their version. They want to exclude shelter from the component as well. But I'm certainly very sympathetic to it. The trade off is the benefit of the existing board structure is that it allows for a certain degree of discretion in extraordinary circumstances. So I think Covid is the best example. When the board exercised its discretion and kept rents frozen. Again, as I said, the circumstances I think clearly warranted it. But a pure rule based system of CPI may not have done that. Other conditions I think in which the board could exercise this discretion would relate to future recessions. So if we have a recession or downturn in the future, I'd love to see the board exercise its discretionary ability and keep rents a little bit more stable to help protect tenants. But of course, the ability to do so in a future downturn environment requires that you also have certain rental adjustments in other periods. So if we were going to also have rent freezes even in times like now when the overall labor market is continuing to be quite expansionary, even though we have these issues in certain segments of the labor market, that lowers the ability of the board to respond to future downturns in the future.
- [46:07]
A
Isn't one of the answers here. This idea that we've been getting at repeatedly in this conversation has been brought up across this discussion now for a long time, which is this point that there's really now two very distinct segments in this larger building stock and they should probably be treated very differently. One being the largely or fully rent stabilized buildings, the largely pre1974 stock, and then the other being the more modern version that is largely in mixed income and mixed regulatory environment, including largely or mostly market rate apartments that in Part can cross subsidize the rent stabilized apartments. Shouldn't those two basic, I mean, isn't that sort of the very clear idea in front of us that those, those two systems should be, should, should become two systems? That it should be, there should be two rent guidelines boards basically for those two sets of the stock? Or am I thinking about this, you know, in a silly way that people are going to say, well, you have landlords that own properties across those two systems and it's really okay to mix them?
- [47:18]
B
No, I think that's completely reasonable. And I see increasing realization across both tenants and owners that this one size fits all solution is really starting to fail. So one dimension on which we've already discussed this is whether or not you could have conditioning of rents based on building conditions. But I think segmenting based as you're suggesting on building age that kind of tries to bifurcate these two segments of the stock is also worth thinking about. The challenge of doing so with the version that you propose is that the buildings that arguably need the most financial support, those pre 1974 buildings also have the poorest tenants, as we've discussed. So the equity and building condition considerations are sort of cross cutting in this segment of the housing stock. I think one possible way forward is something I propose as well, which is to expand the existing programs we have in housing assistance, which are called SCREE and dri, to cover low income tenants more broadly. So the way these housing programs work is they for disabled tenants and for senior tenants, provide the incremental rent increase year to year, which sort of freezes the existing tenants rent without covering the entirety of the rent. So that makes them very different from City FAPs vouchers and Section 8 vouchers, which are much more costly because they take up a much larger component of the entire rent bill. They're only covering this incremental upfill which still serves to further freeze the rents in place for those tenants. I can imagine a world in which, and I propose expanding these programs to help lower income tenants more broadly, which will help cover the neediest tenants from rental increases. And in the future you can imagine that if we had more of these coverage protections for low income tenants, you could then have this bifurcated rental adjustment mechanism which allows for necessary increases in rental revenue for this old segment of the stock, protecting the neediest tenants within those stock through direct government support. And we could have a completely different rental adjustment system for that post 1974 stock. When we talk about that post 1974 stock or the deregulated units we're taking, we're talking about buildings that are typically at much higher levels of rent. So freezing their rents or having a different rental adjustment system I think is much more justified, especially considering the cross subsidy that we discussed as well.
- [49:39]
A
Taking the political environment out of it, as I hear you doing throughout your answers, but taking the political environment out of it, is it your View that the 2019 changes to the state rent laws, the state Housing Stability and Tenant Protection act of 2019, needs to be revisited in particular ways? And if so, what would your top, you know, one or two changes be?
- [50:03]
B
So we really had this perfect storm that hit the system we had. The impact of the 2019 law is that it really led to drastic changes in how the RGB should, I think, execute its mandate, because it's no longer the case that you have alternate mechanisms to provide rental assistance. It's no longer the case that all buildings are going to be able to see these increases. It means that the pressure is really focusing on the subsegment of the stock, which now become a large focus of the board discussion. So you have sort of a structural need to probably increase rent setting to make sure it matches costs. At the same time, we hit, in Covid, this extraordinary cost increase, which meant that the rate of increases now necessary to match those costs is far higher. And we also hit tenant affordability really badly as well. So it was really just this worst perfect storm of all considerations happening at the same time that made this whole environment very challenging to navigate. If we're thinking about reforming or changing the system, I do think one place to target is the adjustments across vacancies, because that means that no existing tenant is necessarily impaired in their ability to pay. But we're able to possibly bring online more of these 57,000 vacant rent stabilized units, which are currently not helping anybody the longer that they remain in vacant form. I hear the concerns, of course, from tenant advocates, which is they're worried that if these units escape to deregulation status or have larger increases, that's going to impair the broader affordability framework that the city is operating in. And so one thing I proposed is to try to make sure that any rental adjustments on these vacant units preserve the overall affordability of the whole building, following what the city does elsewhere in mix and match programs. So the basic idea is that if I'm a building that has two vacant rent stabilized units, what the city could do is say, okay, one of these units, you're able to increase the rents to get the next tenant in that increase in rents is going to help make it affordable for the building owner to pay for the building in general, and in particular pay for the necessary renovations that are going to be necessary to get this vacant unit up to code up to standard so that it can be rented out again. And in exchange for that, you would take another unit that is also vacant and maybe even lower their rents to make it more deeply affordable, or you would in some way preserve the affordability envelope of that building overall. So without allowing for kind of like mass increases in rents for all vacant units, I think there are creative ways that we can allow for some amount of rental adjustments on vacant units to make sure the building owners have the affordability to rent them out again, while preserving at a building level the overall affordability status.
- [52:47]
A
Now, as you say, that there's some of that makes plenty of sense to me, but the other thing that goes through my mind is, oh, boy, you're making. You're making a complicated system even more complicated with proposals like that. Like, is it shouldn't the idea in a lot of these situations and a lot of public policy to be to make them less complicated?
- [53:10]
B
That's fair enough. So another thing I'm suggesting, it just might be a little bit simpler, is reform of the J51 tax abatement program. So this is, I think, a critical tool that we have to try to fund and ensure necessary repairs. And it contrasts with some of the other programs we've had, which have been criticized by tenants because they would allow for cost increases that were passed on to tenants. So with the J51 design, this is a property tax abatement, where the way I think we can improve this program further is to make sure that we have sufficient funding so that building owners can actually pay for necessary repairs. And the benefit of that will be seen in a property tax reduction that doesn't impact tenant affordability at all. Right. So I think these targeted property tax abatement programs can also provide some of this necessary funding to ensure for building maintenance in a way that's a little bit simpler.
- [54:04]
A
Now, in your piece for Vital City, you've got a variety of proposals. You've touched on a few of them already. Do you want to mention a couple of others? One of the ones that I was going to ask you about was this idea of that you titled, Let Stabilized Buildings Build Up.
- [54:21]
B
Yeah, absolutely. So one of the constraints that we face in our New York City housing system, of course, is just a lack of supply. So that's really the fundamental issue that dictates why it is that we don't have more abundant, more affordable housing. And so it sort of annoys me as well to be a person that believes in lower rents overall, that wants more supply, that I'm also on the board that has to have these rental adjustments. So I appreciate the opportunity to think more creatively about how we can have broader design changes to our system that will ultimately unlock more supply and bring down rents for more tenants. I think one of the big constraints to allowing that to happen is the design of rent stabilized buildings themselves. So when we look at where new development takes place, it's often the case that new development or further redevelopment does not take place on ren stabilized buildings themselves. And there are a variety of reasons for this. The simplest one is that if I take a rent stabilized building and let's say I demolish it and build a higher building, the incremental units in that building are also going to be rent stabilized. Right. So we preserve rent stabilization at the building level. What that means is that the incentives to redevelop and build up aren't necessarily there. Further, we have all these.
- [55:38]
A
I mean, the purpose of that sounds like it's purposely to stop rent stabilized buildings from being demolished in the first place.
- [55:43]
B
Right? Right. So the whole idea that you're going to demolish or convert a rent stabilized building is seen as something to avoid, something that we don't want to enter into. And hence, the requirements for where you put the tenants in that particular building are also quite complicated and also mean that rent stabilized buildings are sort of frozen in place as a result of these requirements. Now what we've recognized in other parts of our housing system is these kinds of freezing in place rules aren't necessarily helpful if we actually want to change our building environment and unlock more housing. So one place that we recognize that is in nycha. So we have these new developments which the administration is supporting, which would take NYCHA developments like the ones in Chelsea and build new market rate units on these campuses. This will require some degree of disruption. And so there are plans for where to temporarily house some of the tenants that will be temporarily displaced. But the idea is that they're able to come back to a unit and we're going to have these new market rate units which will provide this cross subsidy and support. And by the way, it also adds a little bit more social integration because we also know that socially integrating tenants across different income levels is essential towards the city that offers opportunity for all. So these kinds of ideas already work in nightshed public Housing developments. And I think there's an opportunity to try to make them work for more re stabilized buildings which would have the same effect of allowing for more development that takes place on these lots that would create new units. Some of these units can be market rate in ways that will help cross subsidize and support the tenants that live in those buildings.
- [57:19]
A
Interesting. Again, political environment might make that difficult, but, but there's, there's interesting aspects to that. All right, last couple of things free and I got to let you go. But I appreciate all the time here. Do you foresee this rent freeze on the one and the two year leases that was just passed? Is this going to wind up being litigated and is this in your view, something of an opening for those who have challenged the rent stabilization system in the past to get a fresh look at this? Because you know, again of their claims that this process was predetermined by the political environment.
- [58:01]
B
I imagine there will be litigation on this. I can't really speak myself yet to the natures of any hypothetical lawsuit. Of course, as I mentioned, the statute that we're working with is pretty broad. And my understanding is courts have historically upheld the ability of rent boards such as ours to make determinations under a wide set of conditions. But I do agree that the overall environment for landlords seems to be constricting as a result of a variety of these factors between the vacancy decontrol, the limitations on increases as a result of the RGP and so forth. And so I can definitely see more lawsuits coming that will target these from takings arguments that historically, again my understanding is courts have been quite differential on. But as we kind of shift from this second to first generation type of rent control, I can imagine the legal
- [58:48]
A
argument being stronger as an RGB member. Is there one thing that's a reasonable reform to the way this process is done that you think would be helpful? Is there sort of a different type of RGB system that's not a massive overhaul, but something that's maybe more on the lines of a significant tweak that you would make to how this all happens.
- [59:14]
B
So I think one change that I've already seen happen in previous years that I think can still be pushed a little bit forward is to make sure that all of the data that the board and staff put together really reflect the reality that we've been discussing of this bifurcated stock. In that sense, I almost don't think it makes sense to talk about one number, one profit number or one revenue number for this entire stock. That consists of such completely disparate units. I'll just give you one example of this that we saw this past year. What we were looking at is changes in prices of the units, right? So the sale prices of different rent stabilized units and the way this is conventionally measured by the board is by, you know, putting all the units together and giving you the average and having some sort of breakdowns. And it was only after additional data review that we determined that. Okay, well, if you really separate it out into these two stocks, the price trajectories do look completely different. The sale values of the free 1974 highly stabilized stock are on a downward trajectory and they're actually doing reasonably well for the other part of the stock. So I think just being completely consistent throughout all of our deliberations and data work, that we're talking about two completely different parts of the stock, I think would lead to better decision making.
- [60:26]
A
There's not to overuse the word stock, but there's a lot of stock being put into efforts to reduce costs for landlords. And this is something that even the Mamdani administration, again, seems pretty keen on, in part as an effort to also encourage more housing development more broadly. Do you see that as the place to really focus in and for people to not get too caught up in this one RGB decision? And again, as you noted, there'll be, you know, significantly more on the line as the process unfolds next year and the year after to see if this is really going to continue to be a compounded rent freeze and how that could raise questions, especially about the revenue for the most distressed elements of the stock. But right now, should the focus really be on the cost controls, on property tax reform and things like that? I mean, is that sort of the obvious place that almost everybody should be getting together and landlords and tenants should find common cause and so forth to really focus on those issues.
- [61:28]
B
I completely agree with that. I completely agree that at this point, focusing on cost containment efforts is essential to try to ensure the stability of all these housing units. We've talked about many of these issues before, the property tax and so forth. The insurance is also a critical issue because we've seen these just dramatic increases in insurance costs these last several years. And I have to credit the administration for thinking about this issue and proposing various reforms that would try to address and contain insurance costs. My understanding is a lot of the issues here also pertain to liability, which relates to issues that Governor Hochul has also brought up with respect to car insurance, which is also elevated and growing in value as well. So I think there are a variety of broader reforms that can help improve the cost system for the structure. And this is something where I hope the tenant movement also kind of heads to. Because one thing that we see in all of our meetings is that the RGB process has been the focal point, obviously, of a huge amount of tenant organizing. And I think that's great. I think this is an excellent use of democracy, and it's a way for people to see the government functioning in ways that directly impact them. But the focus of a lot of this tenant effort is highlighted on exactly us as the RGB board members focusing on rental adjustments. And I think there's a great opportunity for these tenants to also think about broader issues. So I always had the sense in going to these public hearings that this kind of energy that people are bringing into the room will be fantastic if it were deployed in a community board meeting to try to encourage for more construction, or if it was also deployed in ways that advocated for property tax reform. Because we have this inequitable property tax system, which means that homeowners pay far lower in property taxes than do the owners of these rental buildings. And us, as the rgb, who considers costs, we pass on these costs to renters. So the reason that happens is the homeowners are politically active and agitate for lower property taxes. I think it would be great if the tenant movement also gets involved and thinks about this broader, you know, cost environment that impacts them as well.
- [63:29]
A
And lastly, as we say goodbye, correct me if I'm wrong, but your term on the RGB is due to end at the end of this year.
- [63:36]
B
Is that correct? Yes.
- [63:37]
A
Are you hoping to be reappointed by Mayor Mamdani? And do you worry that your vote against the rent freeze will make that very unlikely?
- [63:46]
B
You know, this is like one of the worst jobs in the city. You're just constantly being yelled at by everybody all the time. And so I serve at the pleasure of any public administrator. But I am looking forward to, well enjoyed relaxation with my wife and two boys.
- [64:04]
A
Okay, Arpa Gupta, really appreciate the time and thoughts. Thanks very much. And again, people can check out your writing on this in City Journal, Vital City and elsewhere. And thanks for taking the time here today.
- [64:16]
B
Thanks so much for having me. Sa.
- [64:47]
A
It.