Note: This article is part of a continuing series that looks at how aspects of modern Hoboken, including demographics, agencies, structure, and laws, came to be.
Since Hoboken's rent control law took affect 30 years ago this January, limiting how much property owners can raise tenants' rents each year, it has been the object of some of the most contentious debates the city has seen. Local politicians have attempted several times to adjust the law to give small-time landlords the opportunity to charge higher rents, only to meet with fierce opposition from tenant advocates. There were even three successful referendum petition drives in the last 20 years that forced city leaders to repeal amendments that had just passed.
"Rent control" applies to an estimated 8,500 rental units in Hoboken, most built before 1987. It's the common term for the municipal Rent Leveling and Stabilization Ordinance that regulates the amount that can be charged for residential rental property. It does not apply to Hoboken's roughly 4,000 government-designated "affordable housing" apartments or to most rental units built after 1986.
Over the last 80 years, the power to control rents has been passed among federal, state, and local authorities and shaped by numerous court rulings. Because the law is so complex, many of Hoboken's tenants and property owners are not certain about the exact nature of their rights and responsibilities.
The 1973 municipal Rent Leveling and Stabilization Ordinance, still in use, states that rents in controlled units in Hoboken may be increased each year by the amount of the increase in the Consumer Price Index, currently 2.8 percent. Thus, a renter paying $1,000 per month can see his rate increased to $1,028 next year. Also, after a tenant leaves voluntarily, owners may apply for a "vacancy decontrol" increase of 25 percent, but not more than once in a three-year period.
Property owners can apply to the city's Rent Leveling and Stabilization Board to surcharge tenants for increases in taxes and sewerage, as well as certain capital improvements. Or if they are not making a return of a current rate of 8.5 percent on their capital investment, they may apply for a hardship increase. But neither the capital improvement surcharge nor the hardship increase can ever be more than 33.3 percent of the base rent. (See sidebar for more details of the law.)
With periodic debates on this issue and a new round of City Council elections in May, one wonders if proposed changes will come to the surface again next year.
Hoboken Mayor David Roberts, in his earlier days as a councilman, was among those who often thought some tweaking of the law was needed. In his present position as mayor, will he or the City Council take action on earlier ideas?
Also facing the city's tenants may be future action on bills introduced in the New Jersey General Assembly in 2000 and 2002 by Michael Patrick Carroll (R-25th Dist.) to permanently decontrol all units subject to municipal rent control in New Jersey, once vacated. This statewide approach - mirroring an action that rescinded all local rent control laws in Massachusetts by a statewide referendum in 1994 - would take the issue out of the hands of local politicians and activists.
Originated before WWII
Modern rent control reaches back to "temporary measures" enacted during World War II. Before that, there had been some federal regulation in the aftermath of World War I. In 1921, the U.S. Supreme Court had ruled that in order for there to be a legitimate legal basis for a rent control, there had to be an "emergency." In 1934 the court reversed itself, allowing that "rational basis" would be sufficient legal justification for rent control legislation.
During World War II, with resources diverted to the war effort, prices - including rents - threatened to inspire such drastic increases that President Franklin D. Roosevelt enacted the federal Emergency Price Control Act in 1942. Residential rents were regulated as part of this nationwide system of price controls. Following the war, the Act expired in 1947.
In order to ease the transition back to market pricing, President Harry Truman enacted a series of price control measures. When the Korean War began and the housing market still failed to meet the demand for the returning veterans, Truman fought a yearly battle with the Congress to maintain some sort of federal rent control legislation.
Finally, by 1951, there ceased to be any sort of federal controls in place.
Thus, it was left to the states. New Jersey passed the State Rent Control Act of 1953. The act applied only to "municipalities which opted for its protection by passing a resolution reciting that a housing shortage existed and that rent control was required."
But in 1957, the NJ Supreme Court ruled in Wagner v. Newark that "municipalities did not have the power to enact legislation on rent control which it construed as a statewide matter" according to Policy Link, a California-based equitable-development advocacy group.
During the Vietnam War period of the early 1970s, corresponding wartime inflation once again became a major factor in the American economy, and then-President Richard Nixon briefly placed prices (and therefore rents) back under federal, rather than state, control.
Federal controls expired in 1973.
That year, the NJ Supreme Court's decision in Inganamort v. Fort Lee overturned Wagner v. Newark and again allowed local municipalities the police power to pass and enforce rent control legislation if there was a "rational basis" - such as a low vacancy rate, substandard housing conditions, or inflated rents.
Local control dates to Jan. 11, 1973, when federal controls expired.
The preamble to Hoboken's 1973 ordinance, which gives the justification for the legal action, states: "The City of Hoboken has determined that a critical shortage of housing space exists in the City of Hoboken and therefore, hereby declare[s] that an emergency exists within the City of Hoboken with respect to the rental of housing space by reason of such shortages. Undue bargaining power has been obtained by landlords, resulting in numerous increases in rent which are determined by said government body to be exorbitant, speculative, and unwarranted..."
Hoboken is one of 124 communities in the state and one of eight in Hudson County that still have rent control ordinances, according to the New Brunswick-based New Jersey Apartment Association, a statewide organization of landlords and property owners. (New Jersey actually has some of the strongest local rent control protections in the country, having been guided by a trio of 1975 State Supreme Court decisions that found that the burden was on landlords to show that a community didn't need rent control, and that rent increases didn't have to cover all of a landlord's cost increases as long as there was a provision for hardship appeals.)
Carole McLaughlin, rent regulation officer for the City of Hoboken, estimates that at present, there are about 8,500 units that would fall under the ordinance's jurisdiction. This would account for 56.6 percent of the rental units in Hoboken and 42.7 percent of the total 19,915 housing units in town, according to the 2000 U.S. Census. (In 1996, a report from a Hoboken rent control task force noted that there were 4,300 government-designated "affordable housing" units in town.)
Over the years, many of the most contentious debates over attempts at reforms would not have affected the majority of buildings but only a small number of smaller, owner-occupied buildings with two to four units. Proponents of having different rules for those buildings have said that it's harder for small-time landowners to stay afloat than it is for big-time property owners. Opponents have noted that these buildings are exempt from the state's "Just Cause for Eviction" statute, meaning that owners in these buildings are not required to justify the non-renewal of a tenant's expiring lease. This makes tenants of these buildings more vulnerable.
Any proposed changes to rent control have met with opposition, particularly decontrols upon vacancy, as tenant advocates have been worried that they might give a landlord a financial incentive to remove or harass existing tenants. Said local tenant activist Annette Illing, "If you give property owners an incentive by decontrolling their apartments when they're vacated, then you're placing a carrot before some property owners' eyes that they'll take advantage of with both fists."
Others have feared that any change would signify the beginning of the overthrow of the 1973 ordinance.
And in a city where many people died and still more were displaced in a series of arson fires in the early 1980s as young professionals began flocking to Hoboken, this is a particularly sensitive issue. Independent filmmaker Nora Jacobson's 1992 documentary, Delivered Vacant, gives one view of the period in Hoboken's past where young New York commuters were moving in and condo conversions abounded, forcing longtime residents to fear having to move.
Two decades of petition drives
Over the past 20 years, local politicians have attempted to institute one-time vacancy decontrols, as well as decontrols for smaller, owner-occupied rental buildings and for rented-out condominiums.
According to longtime tenant activist and past mayoral candidate Daniel Tumpson, there have been five petition drives over the last two decades relating to these issues. The first referendum petition drive in 1981 gathered 2,800 signatures in five days protesting an annual 25 percent vacancy decontrol that was later changed to three years - however, at the time, the petition drive wasn't enough to force a public referendum on the matter due to the state's referendum petition requirements.
The law governing referenda had been made less stringent by the next such petition drive in 1988, and from then on, according to Tumpson, all of the rent control petition drives succeeded.
The City Council has largely been unable to make changes to the rent control code by amendment, although the Rent Leveling and Stabilization Board can make minor changes in the code through regulations.
One state law passed in 1987 did make a huge change in the future development of Hoboken.
That year, new residential rental buildings of four units or more were exempted from rent control for the length of their mortgage. Property owners had to apply for an exemption before obtaining a certificate of occupancy, and there are buildings in Hoboken that failed to do this and are still subject to the Rent Leveling and Stabilization Ordinance. (In 1999 the exemption was expanded to include all new rental multiple dwellings of four units or more regardless of how the building was financed.)
In 1993 and 1994, there were attempts to decontrol small owner-occupied buildings, but they failed. In 1996, after another cycle of debate, the administration of Mayor Anthony Russo put together a Hoboken Task Force on Rent Control Revision and Modernization to make suggestions on how to modernize the 1973 code. But despite producing a hefty 350-page report on the issue and making 17 suggested changes, few alterations resulted.
Suggested changes included exempting one condominium per landlord which had been inhabited by that landlord for a minimum of six months, exemption of one- to three-unit owner occupied buildings, implementation of a disclosure policy for new tenants, the streamlining of the bureaucratic system, and a one-time vacancy decontrol after a tenant leaves voluntarily.
As a result of this, according to Carole McLaughlin, the only real change that took place was that the base years for calculating surcharges were updated from 1973 figures to 1988 for taxes and 1996 for sewerage and water. This allows owners only to pass a smaller portion on to the tenants and can be seen as a tenant-friendly change.
Still a need today?
Is there still a need for rent control today? With so many new - albeit expensive - apartments being constructed in Hoboken in the last few years, does the government still have the right to regulate rents as if there is a "housing emergency?"
Arguments vary. Some say that the people who give the city its character - artists, activists, old-timers, families with children, minorities, senior citizens - would be pushed out if their reasonable rents escalated. They fear it would become a town of young, professional roommates working in Manhattan and only using Hoboken as a place to sleep.
But others say that changes to parts of the law should allow property owners to get a better return on their investments, while still protecting vulnerable groups. And some wonder why the government has the right to determine rents on someone else's land at all.
One thing the controls do is work in conjunction with the state's "just cause for eviction" law to make homelessness less likely, allowing a person to set down his or her roots and belongings rather than fearing he or she might have to move every year. The "just cause for eviction" law applies to larger multifamily dwellings and mandates that landlords renew leases for tenants who have paid their rent on time and followed the other terms of their lease.
"I think with the downturn in the economy, it's important that the protections be in place and that people be able to live in places like Hoboken and not be priced out," said longtime Hoboken tenant activist Annette Illing last week. "It's important to maintain the diversity. Hoboken isn't Hoboken without the diversity."
But Mark Villamar of Hoboken, a partner in the Pegasus Group LLC, which owns, manages and develops real estate in Hudson County, said some changes are needed. The company has 600 units in Hoboken, of which Villamar estimates about half are subject to rent control and half are exempt.
"The reality is, rent control is here to stay, but we want to make it simpler and more equitable and ensure that people who need it are the ones who are getting it," he said. "The law should be a benefit to those who truly need it - not a lottery."
He said, "An additional element of difficulty is that over the last 25 years, the interpretation has varied dramatically. You have a situation where no property owner can be completely clear that what they're doing is within the law. That uncertainty has implications not just for owners, but also for tenants and potential buyers."
He would like to see changes to the current capital improvements surcharge system, which he believes is intentionally difficult and discourages the use of it.
"Even if you had a one-time vacancy decontrol," he said, "that would be a workable situation, but it still doesn't solve the problem that the person who really needs [a rent controlled unit] may not be the one who gets it."
Carole McLaughlin's job is to interpret the ordinance and enforce the rules and regulations. The responsibilities of her rent stabilization office in City Hall include performing the calculations of legal rent, and maintaining the rental registrations. Said McLaughlin, "There is still a rational basis [for rent control], but I do think changes can be made to make it fairer to landlords and tenants. I still think it's needed. I do think that if we try to make changes, that will spark the tenants' organizations to come out. [But] where are the landlords at the council meetings? They're not at the council meetings."
City Councilman Tony Soares said that he believes there is still a need for a Rent Leveling and Stabilization Ordinance in this city, pointing out that there is a chasm between the rich and the poor. However, he added that he believes there are large inequities in the current system. Said Soares, "It is needed in Hoboken, but it should be updated to current thinking."
Soares' ideas include exemptions from rent stabilization for the owners of a single condominium who rent it out, a possible one-time vacancy decontrol or some other equitable means to allow small property owners a break in these difficult times, and limiting to two years the time frame that tenants can ask for refunds on overpaid rents once they find out what their controlled rent should have been. (Currently, tenants who suddenly become aware of rent control can go to McLaughlin's office, find out what their rent should have been for many years, and sue to get it all back. In the 1980s, the Rent Leveling Board passed a two-year statute of limitations on this practice, but this was later overturned.)
Soares, pointing to the example of his own parents who owned a three-family property, said, "You have good landlords. They shouldn't be demonized just because they need to make a profit on their investment."
Other people's visions of suggested changes are different.
Illing pointed to better education and enforcement. She said, "People should be notified immediately that [the apartment they are renting] comes under rent control, and what the legal rent is or where they can go to find out. I also think that the Rent Leveling and Stabilization Board should check that the rents that are registered are accurate."
Tumpson would not want to see any changes made, except perhaps for even new units to be brought under rent control's protection. But he noted the units would unfortunately have to come in at the present, high market rates.
Cathy Cardillo, a Hoboken-based tenant lawyer who became interested in rent laws after she started fighting her own rental issues in Hoboken in the 1980s, said, "[Rent control] doesn't work in every community, but it does work in a community like Hoboken." She said that this is an "environment ripe for abuse" and that there are a lot of abuses going on. "I would have to give up my practice if landlords weren't greedy," she said. "I'm a bane to their existence, but if they weren't greedy I wouldn't exist."
McLaughlin said that her office sees an average of eight to 10 tenants coming in each week to ask if their rent is legal or request a calculation of legal rent. There are also bankers and real estate agents checking on legal rents.
There is little agreement on anything about the rent control issue, except that this is one of the most emotional issues in the political arena. Tenant activists have always taken to the streets after attempts to change rent control, telling residents of the city's many older buildings that their protections might be taken away.
Said Villamar, "I'm not sure the political situation in this town will ever allow for a proper consideration of this issue."
Soares said he wasn't sure if the issue will come up in May's City Council elections. "Local people will never go for reforming it right now, especially in today's economy," he said. "But it's something to be looked into if not acted upon right now." Soares indicated that an issue that should be dealt with sooner than later is the statute of limitations for rent rollback refunds.
Mayor David Roberts, when he as a councilman, often pushed for changes that would help small-time landlords. These were fought by activists. Roberts said that he is not sure if the issue will come up this year, and he said that tenant activists often make it difficult to approve any reforms.
Like Soares, Roberts seemed angry at the fact that former tenants can sue landlords for high rents from years ago.
"There are some unfair situations going on where landlords are being sued who rented to someone in Hoboken 10 years ago, and they're being sued for $20,000, $30,000, $40,000," he said. "Is that helping the working-class family that's trying to maintain their homes in Hoboken, or has that created a whole new level of opportunism? The object of rent control is to keep families that are working-class living in our city without the fear that the market conditions are going to force them out."
Roberts said that a more important piece of the puzzle is that the government-subsidized affordable housing in the city should stay affordable even when the management company's contractual obligation with the government has run out.
Roberts complained that any changes to rent control would be rejected by activists who sometimes "mislead people, telling people that public officials are going to chase people out of town."
"There should definitely be changes made," he said. "It's politically impossible. It becomes such an emotional subject. It's like any other law. It needs to be freshened up and made to address today's needs. I feel committed to maintaining affordable housing apartments in Hoboken."
To find out more
Anyone seeking further information may contact Pat Caulfield, Hoboken's new full-time tenant advocate, in City Hall. Tom Olivieri, Hoboken's long-term advocate, retired two years ago. City Hall is located at 94 Washington St. and also contains the Department of Constituent Services. Caulfield's number is (201) 420-2369.
The Rent Leveling and Stabilization Board also is located in City Hall. Residents who want to find out if their apartment is covered by rent control, or landlords inquiring about the rules, may contact the Rent Regulation Office at (201) 420-2062. It is open Monday through Friday from 9 a.m. to 4 p.m.
The Hoboken Campaign for Housing Justice sets up shop one evening a week in Hoboken in order to assist tenants with free rent regulation advice. They are available on Thursday evenings in the St. Matthews Trinity Lutheran Church's Parish Center, located on the corner of Washington and Eighth streets, from 6:30 p.m. to 8 p.m. They usually see several tenants each week.
If you have suggestions for or comments on this series, please write to firstname.lastname@example.org or fax (201) 798-0018, or call (201) 798-7800, ext. 411.
R U "RC"?
Not every rent increase must be wrong, as some tenants may feel. Nor can a property owner justify any and all rent increases.
The code is not easy to understand at a glance, but it is quite certain not only about what is allowed but also about the procedures that property owners must follow to apply for increases other than the annual rent adjustment.
What are 'rent control' laws? The city's 1973 rent control ordinance states that rents on an estimated 8,500 older units in the city may only be increased annually by the amount of the increase in the Consumer Price Index. In December it was 2.8 percent. In addition, after a tenant has vacated a unit voluntarily, property owners can apply to the Rent Leveling and Stabilization Board for a vacancy decontrol to increase the rent on a unit by 25 percent, only once in a three-year period.
Which units are covered? Much residential property available for rent falls under the scope of the law and the authority of Hoboken's municipal Rent Leveling and Stabilization Office, with the exception of certain new residential rental construction built after 1987 and federally-funded or state-controlled affordable housing. (According to Rent Leveling Officer Carole McLaughlin, condominiums, regardless of when they were constructed, are subject to rent control when rented out. But the beginning, or base, rent depends on the occupancy and rental history of the unit after the conversion to condominium, according Regulation 18:62, which was approved and adopted on Jan. 8, 1997.)
What if a landlord isn't earning enough? One way property owners can seek an increase in the base rent is to apply for a "hardship increase." This is only approved if the landlord is able to substantiate that he has made a "prudent investment" and yet is not making a return of 6 percent above the highest interest rate available locally on a regular savings account. At present, this is a total rate of return of approximately 8.5 percent. This is calculated not on the market value of the property but on "the real capital investment," or the money he has actually put into the property less any interest payments.
In addition, by applying to the Rent Leveling and Stabilization Board, increases in taxes and sewerage may temporarily be passed on to tenants. These are not permanent increases and must be removed and reapplied for each year. So can the cost of certain capital improvements in the form of a surcharge. If the capital improvements are to fix a code violation, then only 60 percent of the cost of these may be passed along. In addition, surcharges are not permanent increases in the base rent. Once these have been paid off, then the surcharge must be removed and rents revert to the previous base level plus any other approved increases. Rent Regulation Officer Carole McLaughlin points out that neither the capital improvement surcharge nor the hardship increase can ever be more than 33.3 percent of the base rent per tenant, per year.
With the exception of the annual cost of living increase, all other increases must be applied for and approved by the Rent Leveling and Stabilization Board. Landlords who fail to maintain and update their rental registrations may not be eligible for certain rental increases for which they might otherwise have been eligible.
What about tenants in new construction? Even those who live in new construction that's exempt from rent control and who are handed what they feel to be an overwhelming rental increase may challenge it in court. State law does say that a rental increase - no matter whether the property is rent-controlled or not - cannot be "unconscionable." According to local tenant attorney Cathy Cardillo, rental increases in the range of 25 percent or more are generally termed unconscionable. However, Cardillo added, "It depends on previous increases and what the motivation is for the increase. If you can link it to something that's improper, you may have a chance."
Tenants cannot go to the local Rent Leveling and Stabilization Board in this case, but they are entitled to seek legal counsel and challenge the rent increase in court under the state's anti-eviction law, NJSA 2A:61.1, which states that rental increases are allowed "provided that the increase is not unconscionable." - Sharon Henry