By Roland Li

As the city’s nine-member Rent Guidelines Board prepares to vote on new rent increases for rent-stabilized apartments on Monday evening, landlords are bracing for higher costs.

The most recent reports from various city agencies indicate that taxes, fuel and other expenses are rising. A report in April from the Rent Board stated that citywide rent income from rent-regulated buildings increased by 1.4% in 2009. Meanwhile, operating costs increased by 0.1%, and net operating income increased by 5.8%.

The greatest expense for property owners was taxes, which averaged $200 per unit. The other expenses included maintenance (an average of $117 per unit), fuel ($92 per unit), labor ($89 per unit), utilities ($81 per unit), miscellaneous expenses ($71 per unit), and insurance ($38 per unit).

“We find real estate taxes are the big expenses for owners,” said Andrew McLaughlin, executive director of the Rent Guidelines Board. “The most volatile is likely the fuel expense, which changes from year to year.”

Recent numbers indicate that the price of fuel is increasing. A report from New York State Comptroller Thomas DiNapoli’s office in May found that oil prices had risen to $100 per barrel in recent months, compared to $30 per barrel in December 2008.

The estimated cost for New York City annual home heating bills was $1,470 from April 2010 to March 2011, an increase of $249 compared to the previous year. Energy costs in the next year were projected to be $516 greater than 2010, according to data from the New York State Energy Research and Development Authority.

In reaction, the Rent Guidelines Board has proposed a 1% fuel surcharge for rent-stabilized apartments where tenants do not pay for heat, as well as a 3% to 5.75% rent increase for one-year leases renewed during October 2011 to September 2012.

Smaller landlords, particularly in the outer boroughs, seem to have borne the brunt of the additional costs.

“We’re still trying to pay off the oil bills from the winter,” said Dov Rakower, president of Tamrak Management, which manages 500 rent-regulated units in the Bronx, Brooklyn and Manhattan. He said oil costs increased from $2 a gallon to around $3.50 a gallon, along with city water and sewage costs, which have gone up around 14% in each of the last few years.

“There’s a lot of pressure,” said Rakower. “We’re just trying to cover bills.”

He added that some tenants, particularly in outer boroughs, have struggled to find employment, hurting vacancy rates. He suggested that the city allow for rent-regulated apartments with monthly rents under $1,000 to allow a higher annual increase, in order to relieve costs.

Property taxes remain the primary issue for landlords, and citywide taxes have increased at a steady pace in the past decade, according to the Department of Finance. In past fiscal year, the tax was 17.364% for residential properties up to three units and 13.353% for other residential properties, including co-ops and condos. In 2000 to 2001, the tax rates were 11.255% for properties up to three units, and 10.847% for other residential properties.

Taxes for next year may be increased further for some buildings by the Department of Finance’s assessed value of properties, which go into effect in July. According to data, the total taxable value of residential properties of up to three units rose by 2.65% to a citywide total of $15.3 billion. Other residential properties increased by 7.98%, to $54.8 billion.

A panel at the Interface Multifamily conference on June 7 underscored the frustration of real estate industry figures regarding rising costs. Steven Spinola, president of the Real Estate Board of New York, Robert Knakal, chairman of Massey Knakal Realty Services, Paul Korngold, a partner of Tuchman Korngold Weiss Lippman & Gelles, LLC and Robert Nelson, president of Nelson Management Group, Ltd expressed dismay, particularly regarding real estate taxes.

They said that real estate taxes were around $1 per s/f in 1984, and are now $20 per s/f, an increase of 2000%, while rents have only increased 169% in the same time.

In addition to costs for existing owners, the rising taxes have seen new rental developments relying on subsidies such as the 421a tax credit, which give tax incentives to new buildings with 20% affordable housing. Meanwhile, sales of existing multifamily could be hampered by cost concerns.

“There’s very heavy equity that’s required. There’s very little positive cash flow,” said Knakal.

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