Lawmakers just re-wrote the rulebook for rent regulation in New York State. “It will affect values,” says Shimon Shkury, president of Ariel Property Advisors, a commercial real estate advisory firm. “We are re-evaluating many buildings—re-evaluating what it is reasonable for investors to expect.”
Nearly one million apartments are affected by the new laws, which makes it much more difficult to substantially raise rents for rent-regulated units. There are also far fewer ways an apartment can now leave the rent regulation program.
“The reforms adopted will protect renters from harassment, displacement and rapidly escalating rents,” says Rachel Fee, executive director of the New York Housing Conference (NYHC), a non-profit affordable housing advocacy organization.
What happened?
In New York City, 966,000 apartments are currently rent-stabilized. That’s nearly half (45 percent) of the city’s total rental stock, according to data from the New York Housing Conference. The number is already much smaller than it used to be—nearly 150,000 apartments that were once rent-stabilized have left the program since 1994.
Over the last few decades, unregulated rents rose quickly in New York City and property owners had a massive incentive to move apartments out from the rent stabilization program. The law only allows property owners to raise their rents by a certain percentage every year set by local officials (typically between 1 percent and 4 percent annually). But the law had certain exceptions, especially when an apartment became vacant. Some owners regularly offered hundreds of thousands of dollars to tenants to get them to move out. Others used harsher tactics.
“For far too long, unscrupulous landlords have gotten away with subjecting rent-regulated tenants to dangerous and horrific conditions in an attempt to force them out of their homes,” according to New York State Attorney General Letitia James, who has prosecuted many cases against property owners. Most recently, New York reached a $3 million settlement with landlord Raphael Toledano over accusations that he harassed tenants and violated rent-stabilization laws.
Gov. Andrew Cuomo signed the Housing Stability and Tenant Protection act of 2019 on June 14.
It removes many of the most common ways property managers have used to substantially raise the rents or take apartments out of the rent stabilization program.
Under the old system, if an apartment became vacant, the law allowed property owners to raise rents by 20 percent for the next tenant—the new law repeals that. Property owners use to also be able to raise rents significantly if they spent money to improve an individual apartment or a whole building—the new law allows for a much smaller, temporary rent increase. And if the monthly rent of a single apartment rose higher than $2,750 a month, then the unit would leave rent-stabilization program once the existing tenants eventually left. The new law repeals that too. The old rules often let property owners raise rents at vacant apartments by more than $1,000 a month or free them from rent regulation altogether.
“A lot of people purchased multifamily, residential buildings with the idea of adding value on every turn,” says Shkury. “That business plan in many cases is not viable now.”
Some housing advocates worry, however, that the new rules will also make it difficult for property owners to justify spending money to improve rent-stabilized buildings, which are often a half-century old or older. That may become challenging since New York City just passed another set of laws that will eventually require many property owners to renovate their buildings to use less energy.
“The incentives for owners to invest in their buildings are probably not strong enough,” says NYHC’s Fee. “It may be difficult to finance improvements with some of the rent increases being temporary under the new laws.”
Investors are likely to buy fewer apartment properties in New York through the rest of 2019, while they assess the impact of the new rules. Once this reset period is over, apartments buildings are likely to trade at more consistent prices, based on their current rents and New York City’s dependable demand for apartments, according to Ariel Property Advisors. “There may be an opportunity for new investors to come in… who are going to look for stable, bond-like returns,” says Shkury.
Lawmakers may spare new development
Housing advocates say the changes to rent stabilization are not meant to stop the construction boom now underway in New York City. However, a provision of the new law would include all new, unsubsidized apartments in rent stabilization if property owners accept the state’s “421-A” tax incentive program. Lawmakers are expected to resolve that issue by the end of June, after an outcry from developers.
“This will lessen the impact on construction of new rental housing,” says Fee.
The development community in New York is holding its breath until the issue is resolved. “The Durst Organization which had planned to build seven towers on the Queens waterfront which would contain 2,500 units at a cost of $1.5 billion has ‘ceased’ work on the project after completing just one tower,” according to Crain’s New York. “Other developers of large projects are reportedly re-considering those projects as a result of the new measures.”
FAQs
“It may be difficult to finance improvements with some of the rent increases being temporary under the new laws.” Investors are likely to buy fewer apartment properties in New York through the rest of 2019, while they assess the impact of the new rules.
How does an apartment become destabilized in NYC? ›
With the current rent laws, destabilization (also called vacancy decontrol) may happen when a rent-stabilized apartment's monthly rent exceeds $2,700 while the apartment is vacant.
What are the new rent laws in NYC 2024? ›
For a two-year lease beginning on or after October 1, 2023, and on or before September 30, 2024: For the first year of the lease: 2.75% For the second year of the lease: 3.20% of the amount lawfully charged in the first year, excluding any increases other than the first-year guideline increase.
How new rent laws in NY help all tenants? ›
If you are a renter in New York State, there are significant changes in the laws affecting tenants. The “Housing Stability and Tenant Protection Act of 2019” provides important protections for renters across the State, like how much a landlord can charge for a security deposit on new leases.
What is the rent stabilization law in NY? ›
Rent stabilization provides protections to tenants besides limitations on the amount of rent increases. Tenants are entitled to receive required services, to have their leases renewed, and may not be evicted except on grounds allowed by law. Leases may be renewed for a term of one or two years, at the tenant's choice.
Can a landlord kick you out of a rent stabilized apartment NYC? ›
Under the Rent Stabilization Law, an owner may begin an eviction proceeding when the current lease expires, but only after the tenant is given written notice that the lease will not be renewed. This notice must be served at least 90 and not more than 150 days before the current lease term expires.
Can a landlord refuse to renew a rent stabilized lease in NYC? ›
In NYC, an owner may refuse to renew a rent stabilized tenant's lease because the owner has an immediate and compelling need to possess the apartment for use as his or her primary residence or as a primary residence for his or her immediate family.
Is rent stabilization ending in NYC? ›
New York City Council Votes to Declare Continuing Housing Emergency to Maintain Rent Stabilization Laws. City Hall – Today, the New York City Council voted to declare that there is an ongoing housing emergency to extend the Rent Stabilization Law from expiring on April 1, 2024, to April 1, 2027.
How much can a landlord raise rent in NYC not rent stabilized? ›
If you find that your apartment is not rent stabilized, there is no limit on the rent increase that can be charged at the end of your lease. If you have no lease, or your lease has expired, you are considered a “month-to-month” tenant.
What apartments are rent stabilized in NYC? ›
Rent Stabilization in NYC
Rent stabilized apartments are most often located in buildings containing 6 or more units, which were built before 1974. If you live in a rent stabilized unit, you are entitled to additional protections and rights, so it is important to know your status.
You can stay in a New York City apartment for 90 days without paying rent before the landlord can initiate eviction proceedings against you. This does not mean that that the landlord will take no action prior to the 90-day mark; there are several steps leading up to the eviction notice.
What is illegal for a landlord to do in NY? ›
New York landlords must follow a strict legal process for evictions, which includes serving proper notices, filing a court action, and obtaining a court order before an eviction can take place. Self-help measures such as changing locks or physically removing a tenant are illegal.
Do landlords have to paint between tenants in NY? ›
Yes, the landlord must paint occupied apartments in multiple dwellings (buildings with three or more apartments) every three years. (NYC Administrative Code §27-2013). Tenant occupied apartments in private dwellings are also required to be painted as necessary.
What is the rent stabilization in NYC 2024? ›
For two-year increase periods commencing on or after October 1, 2023 and on or before September 30, 2024: For the first year, 2.75%; and. For the second year, 3.20% of the amount lawfully charged in the first year, excluding any increases other than the first-year guideline increase.
Who is eligible for rent freeze in NYC? ›
If you are at least 62 years or older or a person with a disability and earn $50,000 or less, then you may be eligible for the NYC Rent Freeze Program. To see if you qualify or if you have questions about the application process, please visit Freeze Your Rent to learn more.
What is the difference between rent control and rent stabilized NYC? ›
In New York City, Rent Control tenants are generally in buildings built before February 1, 1947, where the tenant is in continuous occupancy prior to July 1, 1971. Tenants who took occupancy after June 30, 1971, in buildings of six or more units built before January 1, 1974, are generally Rent Stabilized.
How long does rent stabilization last in NYC? ›
"The landlords kind of take advantage of that, kinda like spiking up their rent so they can pay more, so I feel like that's a good thing. It benefits the people," one Manhattan resident said. The law, which was set to expire on April 1, will now remain in effect until April 1, 2027.
What makes a NYC apartment uninhabitable? ›
Warranty of habitability
A landlord might violate a tenant's right by, for example, not providing heat or hot water on a regular basis, or not ridding an apartment of an insect infestation. The warranty of habitability includes public areas of a building in addition to individual apartments.
What makes an apartment rent controlled in NYC? ›
In New York City, rent control tenants are generally in buildings built before February 1, 1947, where the tenant is in continuous occupancy prior to July 1, 1971. Under rent control law, tenants are not obligated to sign renewal leases, as these tenancies are statutory.
What makes an apartment illegal in NYC? ›
Examples of an illegal conversion include: Creating a rooming house (single room occupancy) or dividing an apartment into single room occupancies. Adding an apartment in the basem*nt, attic or garage without obtaining approval or permits from DOB.
