New Yorkers love to complain about rents. Which is precisely why New York City has more rent-controlled and rent-stabilized units than any other city in the country.
With rising home prices and rental rates rising again after falling in the Covid-19 pandemic, here’s what NYC landlords need to know about rent stabilization vs. rent control in America’s largest rental market.
Rent Stabilization vs Rent Control
Rent control is a regulation by the government on the monthly rent a landlord can charge for a particular unit. The location of the property as well as the tenancy duration affect the government-allowed rent.
In contrast, rent stabilization restricts how much property owners can increase the rent each year, usually set as a percentage. The percentage is set by the state or local government — in this case the NYC Rent Guidelines Board.
New York City is one of the oldest cities in the country to enact rent control laws. This regulation started in 1943 when the rental rates were going up at an alarming rate in the post-war economy. The following decades saw easing of rent regulations to strike a balance between landlords, renters, and the available housing. The New York state legislature has since taken over setting and enforcement of rental control laws in the city. Consequently, the NYC Rent Guidelines Board now sets the rental rates for rent-stabilized units.
Most rent-controlled properties in NYC have converted to rent-stabilized housing:
- Rent-control accounts for only 1% of available rental units. However, it is being phased out following the death of the tenant or if they move out.
- Rent stabilization covers about 44% of the rental units in NYC.
Rent-Control in NYC
Rent-control in NYC only applies to apartments built before 1947 and the tenant has lived in the property since July 1, 1971. However, once the tenant leaves, the unit converts to rent-stabilized as long as the building has six units or more.
Rent control apartments allow a maximum rent increase of up to 7.5% every two years. Also, the rent can’t exceed a maximum base rent which is set per unit to cover the maintenance costs incurred by the landlord.
Tenants in rent-controlled apartments can even leave the property to a family member upon his/her death as long as the family member has also been living there for a minimum duration of two years.
Types of rent control:
- Regulation of rental rates between tenancies
- No rental rate increase allowed
- Limited rent increases.
Rent Stabilization in NYC
Many apartment buildings with six or more units built before 1974 fall under NYC rent stabilization rules. However, landlords of new buildings can apply for rent stabilization voluntarily to enjoy certain tax exemptions.
Some of the considerations landlords should keep in mind when applying for this include:
- The Rent Guidelines Board sets the maximum rent increments per year for one-year leases and two-year leases. These rates depend on the cost of living and also real estate costs. For the last decade, the increments ranged between 0-4.5% annually.
- The name of the tenant’s spouse is automatically added to the rental agreement in a rent-stabilized unit. Also, the tenant may have one roommate who isn’t a relative but he/she can’t assume tenancy if the original tenant moves out.
- The rent-stabilized unit should be the tenant’s primary residence and he/she is allowed to sublet the unit, but only for two years in any four-year period.
However, rent-stabilization doesn’t automatically apply to all units in the building. For any particular unit to be considered as rent-stabilized in New York City it should fall in one of these categories:
- Rent of $2,000 or less for tenants who moved in between 1993 and 23rd June 2011.
- Rental of $2,500 or less for tenants who moved in between 24th June 2011 and 14th June 2015.
- Rent of $2,700 or less for tenants who have lived there since 15th June 2015.
- Rent of $2,773.75 or less for tenants who moved in after 31st December 2017.
- Rent of $2,774.76 or less for tenants who moved in after 31st December 2018 but before 14th June 2019.
Raising the Rent in Rent-Stabilized Units
Landlords are allowed to increase the rent in rent-stabilized apartments as long as they comply with the guidelines set by the Rent Guidelines Board.
The Rent Stabilization Code also gives landlords wiggle room to increase the rental rates for stabilized units based on specific grounds. The most common are individual apartment improvements or a major capital improvement to the building. However, this only happens at the end of the lease term, and not mid-lease agreement.
Rent Stabilization Lease Renewal or Non-Renewal
Generally, landlords are required by law to offer to renew rent stabilized tenants’ leases, if the tenant hasn’t violated the lease terms.
However, there are exceptions to this law. The landlord is required to mail the rent-stabilization lease renewal 90-150 days before the expiry of the existing lease. The tenant should accept or decline the rent-stabilization lease renewal offer in writing within 60 days of receiving the offer. If the tenant fails to honor this timeline the landlord has the right to non-renew the tenant once the lease period is up.
Circumstances under which the landlord can refuse to renew a lease in a rent-stabilized rental unit include:
- The unit is no longer the tenant’s primary residence.
- The landlord’s relative needs the apartment as their primary residence and there is an urgent and compelling need for that. However, this can be challenged if the tenant is a senior citizen, disabled, or has lived in the apartment for more than 15 years.
- Tenant’s failure to answer the offer for lease renewal within 60 days upon receiving it.
- The landlord plans to rehabilitate or demolish the unit. Failure to demolish or rehabilitate the property if this was the grounds for the eviction gives the tenant a right to sue for wrongful eviction. Therefore, don’t give this as the reason for eviction if you don’t plan to go through with the plan.
Evictions in Rent-Stabilized Units
Landlords can evict tenants from rent-stabilized units but the process is more complex than in unregulated units. Any official communication to tenants should be in writing including eviction notices and late rent notices. The grounds for evictions as per the NYC Rent Guidelines Board are:
- Tenant’s failure to pay the agreed rent.
- Any violations of the lease terms.
- Proof that the tenant has been causing significant disturbance to the neighbors and fails to cease even after warning.
- If the landlord plans to use the apartment for his/her family upon lease expiry.
- If the apartment is no longer the tenant’s primary residence. A tenant ought to live in the apartment for at least 6 months annually for it to be considered your primary residence. Nevertheless, evictions on these grounds are only applicable at the end of the lease.
● Subletting the apartment without following the legal guidelines for doing so could also be grounds for evictions.
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Important Considerations for NYC Landlords
New York City ranks among the worst cities for landlord regulation in the country. Some landlords still manage to earn a return there, but they need to make sure they follow the complex landlord laws to the letter.
To stay on the right side of rent laws, keep an eye out for the following.
a) Honor anti-discrimination laws
Understanding the fair housing laws is crucial before advertising vacancies in your apartment. You need to know what you can do or say in tenant selection. Any statement or action that can be interpreted as discrimination in a court of law can be grounds for a lawsuit.
b) Refer to the NYC Rent Guidelines Board rules in setting the rent
All the information you need regarding rental rates, responsibilities of the tenants, and also landlord’s responsibilities is provided by the Rent Guidelines Board.
c) Adhere to the state laws on security deposit limits and refund
Security deposit refund is the cause of most disputes between tenants and landlords. Being conversant with rent-stabilization laws in NYC regarding the legal amount of security deposit to demand from tenants and also refunding the same is crucial.
d) Ensure the apartment is habitable
Rental premises should be livable in NYC. Failure to complete essential repairs can be grounds for the tenant to withhold rent. Should the tenant pay for the repairs or replacements the law allows him/her to deduct the incurred amount from the rent.
e) Follow the correct procedure in evictions or tenancy terminations
To avoid long legal battles it is better to follow the law when it comes to terminating a tenancy or eviction. It calls for patience but it’s better than the nightmare of court battles.
f) Draft a legal lease agreement in writing
The contractual basis of the landlord-tenant relationship is outlined in the lease/rental agreement. Together with the local, state, or federal laws, they ensure everyone gets fair terms. The tenant is allowed to review the agreement prior and demand the removal of any illegal clauses.
Being a landlord in rent-stabilized NYC has its pros and cons. Understand your responsibilities and rights to avoid fines, penalties, or lawsuits for crossing affordable housing regulations.
When in doubt, contact the NYC Rent Guidelines Board for legal rent questions and answers.♦
Would you consider investing in New York City rental properties? Why or why not?