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With midterm elections looming, I’m curious how having new representatives in the New York State legislature might impact rent stabilization laws in the city.
Much depends on how the State Senate races turn out, says Sam Himmelstein, a lawyer who represents residential and commercial tenants and tenant associations, but tenant advocates are pushing for several changes to rent stabilization law that could come to pass if Democrats take over the legislature.
“There are bills pending on a lot of these issues,” Himmelstein says. “I don’t think they’re going to get all of these done, but if Democrats get a majority in the Senate, there is a chance.”
Here are some of the most substantial potential changes that could unfold over the next year:
- Ending vacancy deregulation: Under the current policy, if a tenant moves out of a rent stabilized apartment and the landlord can raise the rent over the stabilization threshold (currently $2,733.75) by making substantial improvements to the apartment and/or taking the rent increase permitted when a unit is vacated, that apartment is removed from rent regulation after a subsequent vacancy. Ending this would yield substantive changes: “Every apartment in buildings built before 1974, with six units or more, would remain stabilized,” Himmelstein says. “New tenants would still be stabilized regardless of landlord improvements. This bill would also re-regulate many apartments that landlords had previously de-stabilized are now market-rate.”
- Closing the preferential rent loophole: Some landlords of rent-stabilized apartments offer tenants a “preferential rent” that is lower than the legal rent. However, these rents are not subject to the law that limits by how much stabilized rents can be increased each year, so when these tenants renew their leases, the landlords can then raise their rents by substantial amounts. Eliminating this loophole would make the preferential rent the base rent for all future increases, and thus prevent landlords from attracting tenants with a more affordable-seeming rent, and then surprising them upon lease renewal.
- Ending vacancy increases: State law permits landlords of stabilized apartments to increase the rent by 20 percent when a new tenant moves into a vacated apartment and signs a two-year lease, or by 19.25 percent if a new tenant signs a one-year lease. Tenant advocates argue that this is too high, encourages landlords to evict tenants, and should be ended.
- MCI and IAI reform: Major Capital Improvements and Individual Apartment Improvements are substantial renovations that landlords make to apartment buildings or to individual units, which then enables them to raise the rent on stabilized units by a percentage based on the cost of the updates. “There have been all different kinds of reforms proposed,” Himmelstein explains. “One is to make MCIs a temporary surcharge instead of a permanent rent increase, and once landlord is paid back for their work, it would end. There are also proposals to tighten the definitions of what counts as an MCI or IAI.” Another possible reform to MCIs and IAIs would be to extend the amortization period, so that monthly rent increases would be reduced. In addition, the current 50 percent offset for landlords who receive J-51 tax benefits could be increased to 100 percent, and a mechanism established to require the state housing agency to verify the J-51 benefit before granting the rent increase. This is important because currently there is no enforcement or coordination between state and city agencies, and many landlords get away with “double-dipping,” that is collecting both full MCI rent increases and J-51 tax benefits.
- Ending MCI rent increases: Another bill proposes to end MCI rent increases entirely and grant landlords tax subsidies instead. And a bill is being drafted that would simply bar rent hikes for building-wide improvements, without any tax benefits to the landlord. Given the recent expose of how the Trump family used fraudulent bills to inflate MCI rent increases for their rent-regulated tenants, a change in the state legislature could mean new laws that eliminate or vastly reduce MCIs.
- Mitchell-Lama reform: Mitchell-Lama buildings provide affordable rentals and co-ops to low and moderate-income New Yorkers, but currently, when these buildings leave the Mitchell-Lama program, only those built before 1974 go into rent stabilization, while the rest turn market-rate. A change in state leadership could mean reforming this program so that all Mitchell-Lama apartments, regardless of their date of construction, would become rent-stabilized. Post-1973 Mitchell-Lama and project-based Section 8 buildings would be covered by the bill. The bill also bars the use of "unique or peculiar circumstances" as the basis for a rent increase when a building transitions from Mitchell-Lama or Section 8 to rent stabilization.
- Allowing more municipalities to opt into rent-stabilization: “There is legislation being considered that would allow any municipality in the state to opt into rent regulation, as opposed to just New York, Westchester, Rockland and Nassau Counties,” Himmelstein says. Currently, those are the only New York State municipalities with rent stabilization laws in place.
- Greater eviction protection: Another bill pending in the state legislature, Himmelstein says, would give tenants in small buildings not subject to rent-stabilization greater protection from being asked to move out when their leases expire. “Landlords could only do good-cause eviction of tenants,” he explains.
- Lowering rent increases on rent-controlled apartments: Currently, tenants of rent-controlled apartments pay higher annual rent increases than those of rent-stabilized apartments; pending legislation would lower those increases.
It’s difficult to predict which, if any, of these changes could come to pass, but the most sweeping would be ending vacancy deregulation, Himmelstein says: “We’ve lost hundreds of thousands of stabilized and controlled apartments, and this would bring them back and stop the tide of deregulation.”
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Sam Himmelstein, Esq. represents NYC tenants and tenant associations in disputes over evictions, rent increases, rental conversions, rent stabilization law, lease buyouts, and many other issues. He is a partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph in Manhattan. To submit a question for this column, click here. To ask about a legal consultation, email Sam at [email protected] or call (212) 349-3000.