We’re about to see rent regulation in the news more. Here’s what our Policy Committee thinks you should know.
The relevant laws have to be renewed by the State by June 2019. Many advocates see this as an opportunity to restructure how the program works and make it more favorable to tenants. This important discussion is filled with jargon that can make it hard to follow, so we’ve unpacked some of the key concepts.
The Urstadt Law: The Urstadt Law is a New York State law that gives the State legislature power of New York City’s rent regulations, thereby preventing New York City from enacting its own regulations. As a result, the State legislature, not the City, determines which housing units are regulated and in what way/to what extent. The Law was passed in 1971.
Rent Regulation: Rent regulation, in simple terms, are regulations that limit how much a landlord can charge a tenant and restricts the landlords right to evict tenants. In New York City, Rent Regulation comes in two forms: (1) rent control and (2) rent stabilization.
Rent Control: Rent controlled units are scarce -- only 2 percent (approximately 30,000) of NYC apartments are controlled. To be a controlled unit, the building has to have been built before 1947 and occupied by the same tenant or their related successor continuously since 1971. Once the occupant of a rent-controlled unit moves out of the unit or dies, the unit loses its protection. A landlord of a rent controlled unit is allowed to increase a tenant’s rent by 7.5% every other year pursuant to the Maximum Base Rent set by New York State’s Department of Homes and Community Renewal -- as long as there are no violations in the building. However, many landlords are unable to meet this challenge and therefore do not always raise the rent.
Rent Stabilization: Rent stabilized units represent about 50 percent of NYC apartments. Most rent stabilized apartments are in privately owned buildings, containing 6 or more apartments, built before 1974 -- but many stabilized units have become deregulated over the years. New rent stabilized units are being added to the market through regulatory and tax abatement programs (421-a, J-51, and Mandatory Inclusionary Housing). A landlord of a rent stabilized unit may only increase the tenant’s rent by the percentage allowed by New York City’s Rent Guidelines Board, unless the landlord undertakes major capital improvements (to be discussed later). Renters in these units have a right to renew their lease.
Vacancy Decontrol: Every year, landlords of rent-regulated units are allowed to raise their tenants’ rent by a certain percentage -- as dictated by the City Rent Guidelines Board -- meaning even in rent regulated units, a tenant’s rent will continue to increase. In 1997, the State legislature passed a rent law amendment allowing for ‘vacancy decontrol’. Vacancy decontrol means that when the maximum allowed chargeable rent exceeds a certain rate, it will no longer be subject to rent regulations upon being vacated. Currently, that amount is $2,733, but it increases each year by increments similar to the increase in rent (so that units do not automatically price out, although there are other methods a landlord can use to increase the rent, to be discussed below). Once the unit is no longer subject to rent regulations, the landlord can charge market rate. In 2017, 53% of deregulations occured due to vacancy decontrol.
Vacancy Bonus: Also in 1997, the State legislature introduced the Vacancy Bonus. The Vacancy Bonus kicks in each time a tenant leaves a unit and a new tenant moves in and allows the maximum chargeable rent to automatically increase by 20%. This creates a huge incentive for landlords to get rid of long-standing tenants. In addition, by increasing the maximum rent by 20% each time the unit is vacated, the Vacancy Bonus accelerates the unit reaching the vacancy decontrol rent (the rent at which it becomes unregulated).
Preferential rent: Every rent-regulated unit has a maximum chargeable rent. A landlord can choose to rent the apartment for less than that rate, charging what’s called preferential rent. They may do so because the legal maximum rent is more than the market can bear (i.e., more than anyone is willing to pay). This creates a situation in which a landlord can, from one lease to the next, increase a tenant’s rent from the preferential rate to the legal maximum rent when they think they will be able to find a tenant willing to pay the maximum rent. This is sometimes a sizable jump in rent that often makes it difficult for a tenant to stay in their apartment.
In 2003, the State Senate altered the rules around preferential rent. Prior to 2003, a landlord could only increase the rent of a preferential rate to the maximum rate when a unit was vacated. The 2003 law allows them to increase the rent at the end of a lease, even if the same tenant is staying in the unit.
Major Capital Improvements: Another threat to rent regulation is the use of Major Capital Improvements to increase the allowable rent to unaffordable levels and beyond the vacancy decontrol level. Currently, if a landlord performs work to improve a unit (referred to as a Major Capital Improvement), they are allowed to offset the cost of the improvement by increasing the rent permanently. There are limits on how quickly they can do this, but this has proven to be an effective strategy to increase rents, force move-outs, and decontrol apartments.
On January 8, NKD's Policy Committee will host Boris Santos, Julia Salazar’s Chief of Staff (and NKDer), to talk through legislative priorities with regards to Rent Regulations. Check out his op-ed in Gotham Gazette.