Case of Nerves on Rent Rules Hits Owners

ALBANY — A Democratic takeover of the state Senate would likely result in a legislative push for a dramatic tightening of rent regulations in New York City, preserving hundreds of thousands of apartments in the government price-control regime, according to lawmakers and real estate industry leaders.

If Governor Spitzer succeeds in toppling the Senate Republican majority, landlord groups would lose their most powerful ally behind their efforts to phase out New York City's rent regulation system. Such a possibility looms large for landlords, with Republicans hanging on to their majority by only two seats.

"It makes property owners nervous," the president of the Real Estate Board of New York, Steven Spinola, told The New York Sun. "It doesn't mean it will be terrible, but it clearly makes us nervous."

Rent increases in the city's 1 million regulated apartments are set annually by a government board, and the units usually rent at a fraction of what they would fetch on the open market. Senate Democrats said they would favor shrinking the pool of apartment units eligible for high-rent vacancy decontrol, a state statute dating back to 1993 that permits landlords to charge market rates when rent reaches $2,000 and an apartment is vacated. Democrats interviewed said they would support lifting the threshold to $4,000 from $2,000.

The dramatic change would keep hundreds of thousands of apartments that would soon be eligible for deregulation in the regulated system for many more years. The cost of the change to the city's landlords would be extraordinary.

The Senate Democrats are a conference dominated by New York City members who have traditionally been far more sympathetic to tenants' groups. For such housing groups, a power shift would give them allies in both legislative chambers, presenting to them the best opportunity in decades to clamp down on deregulation, whose pace has greatly accelerated in recent years.

The Democratic leader of the Senate, Malcolm Smith, declined to comment on his conference's position on rent regulation. But members of his conference say they would favor joining the Assembly in pushing for changes in rent regulations that would significantly slow down the rate at which regulated apartments in the city are decontrolled and eligible for higher market rents.

They say there is a greater urgency to act in light of MetLife's $5.4 billion sale of the Stuyvesant Town and Peter Cooper Village mega-complex to Tishman Speyer. Democrats say they would push for regulatory changes that would force the complex's new owner to wait decades before deregulating many of the units, costing it millions of dollars.

They also say they back a repeal of the so-called Urstadt law, passed in the Rockefeller era in 1971, which put New York City rent regulation laws in the hands of Albany. Tenants' groups have long fought for a repeal, thinking they would have greater success in lobbying the New York City Council to tighten rent regulations than the state Legislature.

"The most popular opinion within my conference around rent regulation is the belief that Albany shouldn't be making the decision about New York City housing policy," state Senator Liz Krueger, the ranking Democratic member of the Senate standing committee on housing, said.

Ms. Krueger, who represents the East Side of Manhattan, said she believes her conference would support raising the threshold to $4,000, but called such a change a "sidebar issue to the question of who should decide New York City rental policy."

Landlord and real estate groups, who have poured millions of dollars in recent years into the campaign and committee accounts of Senate Republicans, say they doubt that Senate Democrats, once in charge, would consent to giving up a major regulatory power. They are also hoping that Mr. Spitzer, who is expected to have a strong influence over the conference, would put the brakes on such legislation.

As a candidate, Mr. Spitzer has said he favors incremental increases to the decontrol threshold, proposing to link it to an inflation index. A spokeswoman for the governor said he has not taken a position on the Urstadt law, but said that governor opposes changing the rent system in its "totality."

The number of apartment units in New York City that have been deregulated has shot up in recent years, as more and more units are approaching the $2,000 threshold.

In 2005, New York's stabilized housing stock lost 9,272 units, about 50% more than it lost in 2002, according to the New York City Rent Guidelines Board. Between 1994 and 2005, 50,702 units were taken off rent regulation, about 5% of the city's regulated housing stock, which numbers about 1 million and accounts for about half the city's total rental housing stock.

Tenants' groups predict that if the law doesn't change, hundreds of thousands of apartments will be deregulated over the next decade. They argue that such an increase in market rate apartments will drive more New Yorkers out of the city in search of more affordable housing. Real estate groups say the solution to New York's housing crisis is to decrease regulations that would encourage developers to build more units.

For landlords, Democratic advances in the Senate represent a stark change of fortunes from 10 years ago, when they came close to dismantling rent control altogether. In 1997, the majority leader of the Senate, Joseph Bruno, proposed eliminating rent control laws but decided to roll back the measure to protect his members in New York City districts who came under sharp attack by housing groups.
Rent decontrol laws were renewed for another eight years in 2003, following another heated legislative battle.

Rent regulation in New York began in 1947, in part to relieve a historic housing shortage and to maintain diversity in New York City's neighborhoods.