Bricktionary

First rent: How landlords of rent-stabilized apartments can hike the rent on a newly combined place

By Emily Myers | September 13, 2022 - 12:30PM 

First rent refers to the rent a landlord can charge for a newly configured apartment with no previous rental history.

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If you find a listing for a large apartment in New York City that is the result of combining two rent-stabilized apartments—you may notice the rent for the combination apartment is proportionally higher than other rent-stabilized units in the building. That's because the landlord has set a "first rent," and it refers to the much higher amount a landlord can charge for a newly combined apartment that has never been on the market before.

However, the apartment will continue to be subject to the rules of rent stabilization: limited rent increases and automatic rent renewals.


[Editor's note: An earlier version of this article was published in November 2021. We are presenting it again with updated information for September 2022.]


Possible changes for ‘first rent’

Combining or changing the configuration of units (splitting a larger apartment into two or combining a large amount of common space like a hallway into an apartment) is a way for landlords with rent-stabilized apartments to increase the rent they can generate from a building. It's also one of the few routes that remain thanks to changes in the housing laws. 

Recently the Division of Housing and Community Renewal proposed eliminating the practice of first rent with an amendment to the Housing Stability and Tenant Protection Act of 2019. One of the main goals of that landmark legislation was to make it more difficult for landlords to cycle affordable apartments out of the stabilization program and closing this loophole could put an end to big rent increases for combined or significantly altered units.

The changes need to go through a review period and a hearing will take place in mid-November.

Combining apartments to increase the rent

In the meantime, creating a combination apartment continues to be one way to hike the rent of a stabilized unit. There is no cap on what that new rent is, so the apartment can be rented out at whatever rate the landlord chooses.

That rent becomes the legal rent and any renewal would only raise the rent in line with annual increases set by the Rent Guidelines Board. As a tenant, you have all the protections offered to tenants in rent-stabilized apartments, including automatic lease renewals. 

Why apartments might be sitting empty

When the law changed in 2019, there was a lot of talk of landlords warehousing apartments in order to combine neighboring units and increase rents. Noah Rosenblatt, co-founder and CEO of real estate analytics firm UrbanDigs, has previously said that thousands of rent-stabilized apartments are sitting empty while landlords consider their options for these apartments. 

It sounds improbable but from a landlord’s point of view it’s very difficult to move a tenant out of a rent-stabilized apartment—it could be decades before they get it back—so some landlords would prefer the apartments sit empty for now and hope that legislation shifts in their favor.

Edward Josephson, supervisor at Legal Aid’s Law Reform Unit, says the whole point of the Housing Stability and Tenant Protections Act was to take away the incentives for landlords to evict tenants. “If you’re a tenant and you live next to a vacant unit, the landlord has a big incentive to evict you so that they can combine the unit,” he says. That’s why Legal Aid supports the changes. 

“DHCR’s new regulations are in harmony with the purpose of the HSPTA, which is to disincentivize landlords from evicting people,” Josephson says.  

The changes face opposition 

Landlords will inevitably fight any changes. Attorney James Marino, a partner at Kucker Marino Winiarsky & Bittens, says the proposed changes could also result in “a dearth of affordable larger apartments.” That is, landlords will lose the incentive to create larger apartments in older prewar rental buildings in popular neighborhoods like the Upper West Side and East Village, leaving families limited to expensive luxury developments in gentrifying neighborhoods. 

Tenant advocates say this argument doesn’t hold water. There’s nothing to prevent landlords from creating larger apartments if there’s a market for it. “It’s just that under the new system one plus one equals two and under the old system one plus one used to equal 10—and that didn’t make any sense,” Josephson says.

Cea Weaver, a tenant activist with Housing Justice for All, says new regulations are common sense. "[They] will keep housing stable for families in the face of rapid gentrification in NYC," she says. 

 

Emily Myers

Senior Writer/Podcast Producer

Emily Myers is a senior writer, podcast host, and producer at Brick Underground. She studied journalism at the University of the Arts, London, and graduated with a MA Honors degree in English Literature from the University of Edinburgh.

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