As the hours count down before the laws governing New York City’s rent-regulated apartments are due to expire, the New York Senate and Assembly have come to an agreement on permanent and far-reaching reforms which affect nearly 1 million rent regulated units. Deemed the strongest tenant protections in the history of rent regulation, this controversial rent reform package sets out to redistribute the balance of power, which lawmakers argue has been “tilted in favor of landlords” and “restore equity and extend protections to tenants across the state.” (New York State Legislature. “Statement from Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie on Historic Affordable Housing Legislation.” New York State Assembly Press Release, June 11, 2019) If written into law by Governor Cuomo, the new legislation would remove the systems used by landlords to increase rent-regulated apartment rents and arm tenants with even more safeguards to avoid rent increases and deregulation.
The reformed rent laws will be permanent, instead of requiring a fresh look every four to eight years, as permitted by the current rent laws. A landlord’s ability to increase rent following a tenant vacancy has been eliminated, whereas the current rent laws permit landlords to enjoy a 20% vacancy increase following a tenant’s departure. Similarly, landlords no longer receive a “longevity bonus”, which allows rents to be raised in proportion to the duration of the previous tenancy.
The most a landlord can be reimbursed for Individual Apartment Improvements is $15,000 over a 15 year period, through modest rent increases. Similarly, landlords can only raise rents by 2% of the annual rent amount during a 12 month period, in return for making Major Capital Improvements. Any rent increase for a Major Capital Improvement will expire after 30 years. Current rent laws allow landlords to raise annual rents by 6% in return for completing Major Capital Improvements.
The ability for landlords to deregulate a unit occupied by tenants who collectively earn over $200,000 has been removed. Therefore, a tenant’s personal income, whether it is $5,000 or $5 million, no longer incentivizes deregulation.
While it may take time for the reformed rent laws to become New York City’s “new normal,” change always welcomes new opportunities, and the reformed laws will likely heighten demand for free market buildings.
Although the proposed rent reforms will not be considered final until the current laws expire on June 15th, and are subsequently voted into law, lawmakers have set the stage for a groundbreaking reform. While some may find the reform to be disappointing, this industry has seen its fair share of highs and lows, and will no doubt adapt to the changing atmosphere.