Unwilling to deliver an unprecedented rent-freeze sought by tenant advocates and even Mayor Bill de Blasio when in campaign mode and belatedly before the vote, the mayor-controlled Rent Guidelines Board (RGB) Monday night agreed to a 1 percent percent increase in one-year rents and a 2.75 percent percent increase in two-year leases.

Though a 1 percent increase represents a historic low in the RGB's history, the decision infuriated tenants in the audience, who, before the vote at the Cooper Union in Manhattan, chanted, in call-and-response style, "Rent freeze! Roll back!"

"This is a huge disappointment," said Katie Goldstein, Executive Director of Tenants & Neighbors, after the meeting. "The RGB had an opportunity to begin a course correction to make up for past high increases that have contributed to the affordability crisis, and didn't. A third of rent-stabilized tenants are paying over 50 percent of their income towards rent and this decision will likely increase that amount."

Owners, however, also professed dismay at the result.

Patrick Siconolfi, executive director of the Community Housing Improvement Program, a trade group, called the 1 percent increase too little to account for owners' increases in costs. "It is wrong, irresponsible and will ultimately stifle investment in our city’s most important affordable housing stock," he said, according to Crain's New York Business.

Tensions within board

The RGB began its 2014 deliberations by voting on an increase for rent-stabilized hotels, including SROs. The owners' proposal of a 3 percent increase was voted down 5-4, with de Blasio appointees Rachel Godsil, Harvey Epstein, Sheila Garcia, Cecilia Joza, and Steven Flax in opposition.

That majority then agreed to freeze rent for hotel tenants, provoking deafening cheers from the audience and hinting that this board might do the same for rent-stabilized units. But it soon became clear that the swing vote in that first tally was moving the other way for the vote on apartment rents.

One owner representative proposing the increase for apartments, Magda Cruz, emphatically said the board was being subjected to improper political pressure, chided some colleagues for ignoring evidence, and declared, in tones verging on disgust, "I now find myself having to compromise beyond all economic facts." She then put forward not the owners' preferred 5.5 percent one-year increase—the largest of eight proposals on the table, which ranged down to a 6 percent cut—but rather one acceptable to the board's swing vote.

That provoked the board's new chairperson, freeze supporter Godsil, to observe that "we are also permitted to consider potential inequities that resulted in part by determinations made in previous years," during which landlords got a good deal.

The key vote in the 5-4 decision—supported by the two public members appointed by Mayor Mike Bloomberg and the two owner members—was public member Flax, vice president for community reinvestment at M & T Bank, one of six de Blasio appointees. (There are four public members plus the chair, as well as two owner and two tenant members.

"My colleagues just submitted a proposal that was going to come from me," Flax said, "and then accused the board, and perhaps this whole meeting" of participating in a charade.

"My intention was to push the conversation to the center-left position," he said emphatically. "I heard what you were saying," he said, gesturing to tenants in the audience, and repeating the words in Spanish. "I know what the city is going through. But I'm also want to say...I'm proud to say I developed and managed affordable housing. You're not going to be happy with what I'm going to say."

"The takeaway from that experience," he said in grave tones, was that it costs money to run buildings, adding, “I do believe that my proposal is sincerely a historic change." While not a political win for the mayor, he suggested it was a win for tenants.

Tenant member Garcia, in turn, criticized Cruz for a "political stunt" of her own for not putting forward the owners' proposal.

Public member David Wenk, a Bloomberg administration holdover, groused that "the process has really broken down this year," given that the RGB has typically "passed along somewhere between 50 and 75 percent of the increased cost burden" but instead was following "a political mandate for a rent freeze."

Godsil countered, calling such a "challenge to the process" troubling. "It is the data we reviewed this year, and not any mandate by anyone, that leads to the proposal I put on the table." She noted that, in 2008, the RGB's increase (4.5 percent) had taken into account past decisions that under-compensated landlords. "I think it is similarly appropriate," she said, to account for overestimation of owner costs.

Sara Williams Willard, an owner member appointed by de Blasio, said she came from an apolitical position. "I have taken it on the chin for this," she said, apparently referencing her vote—along with everyone but Cruz—to set a preliminary range of 0-3 percent for one-year renewals beginning in October.

Tenant representatives Garcia and Epstein supported a freeze with righteous energy—"net operating income is up eight years in a row!" Epstein declared—but it was clear that Flax held the balance on the board.

In the crowd, which frequently interrupted speakers with chants and shouts, drowning out deliberations and causing Godsil to frequently call for calm, a chant surfaced: "Steve, do the right thing!"

"Despite the disingenuous and in fact possibly duplicitous way some of my colleagues manipulated this vote, I have to vote my conscience," Flax said apologetically. "I have to say, this moment is a nightmare." He apparently was referring not to the vote itself, but the intense pressure he'd felt from both the right and the left, "some of it dirty, some of it principled."

"I would like to vote my conscience, also," Garcia countered. "Our mandate is to simulate a fair housing market," she said, indicating that the proposed increase was "not a fair housing market." Despite the seemingly small proposed increase, she noted of landlords, "they get MCIs," or major capital improvement increases.

A different year

The increase is the lowest ever in the history of the board, which, since it was established in 1969, seven times affirmed increases of 2 percent and 4 percent, respectively. There are nearly 1 million rent-stabilized units, representing some 45 percent of the city's total rental housing stock.