What is a 'major capital improvement' and how does it affect the rent?

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By Emily Myers  |
November 28, 2018 - 2:00PM

MCIs push the rent up, but there are efforts to change this. iStock

While you want our apartment to be kept in good condition, tenants of rent controlled or rent stabilized units in New York City might not feel so happy when the see the phrase, "major capital improvements." That’s the term used for upgrades that justify a landlord permanently hiking the monthly rent, even in the middle of a lease.

The city defines an MCI as an improvement benefiting all the tenants in the building. MCIs also need to involve replacements rather than repairs. For example, a new boiler or a new roof qualifies as an MCI but not a repaired or rebuilt one. 

Exceptions to this rule can create confusion. Pointing is one of them—it’s the technique used to fill joints in the brickwork or masonry of exterior walls—and it does fall within the MCI category, as does waterproofing.

There’s political pressure to revise the definition of MCIs. Mike McKee of the Tenants Political Action Committee says the term is being used to justify excessive and repeated rent increases that in many cases are just repairs.

The nitty gritty of MCIs

To qualify as an MCI, the city requires the work to relate to the operation, preservation, and maintenance of the building. That includes things like replacement elevators, fire escapes, and water tanks.  Another requirement is the system that's being replaced needs to have outlived its state-mandated useful life schedule, so plumbing fixtures can only be counted at MCIs if the landlord replaces them after 25 years, the estimated life-span of this equipment, not if the owner just installs new fixtures in the hopes of putting up the rent.

There are 27 categories on the list, including rewiring, intercom replacements, mailboxes, air conditioners, and siding, as well as courtyards and walkways.

Rent hikes are capped

For rent stabilized apartments in NYC, 6 percent is the maximum annual rent increase allowed after an MCI is approved. For all rent controlled apartments, the increase for the year is capped at 15 percent. Tenant advocates argue landlords are getting unwarranted profits and MCIs can push rents beyond the stabilized threshold.

In order to qualify as an MCI, a landlord needs to file paperwork with the city and have the work signed off by the Department of Housing and Community Renewal. There's generally a period where tenants are notified about the work and have an opportunity to object. A landlord can't just tell you they've done some work and put the rent up. The Department of Works is a good place to start if you want to check the work has been registered, and if you think you're being overcharged, you can file a complaint.

Changes in the pipeline

Efforts to tighten the definition of these kinds of improvements could come in 2019. In addition, there could be changes to the way the improvements are paid for, so instead of rent increases, landlords and owners would get tax credits.

Landlords are going to oppose any move that reduces rents. LandlordsNY, a network of New York landlords, argues proposed changes don't take into account the fact that owners often have to take out loans to pay for the improvements in the first place.


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Emily Myers

Senior Writer/Podcast Producer

Emily Myers is a senior writer, podcast host, and producer at Brick Underground. She writes about issues ranging from market analysis and tenants' rights to the intricacies of buying and selling condos and co-ops. As host of the Brick Underground podcast, she has earned four silver awards from the National Association of Real Estate Editors.

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