After the State budget passed on April 1st, State legislators immediately turned their attention to rent regulation before the laws expire on June 15th.
On April 9th, Assembly Speaker Carl Heastie of the Bronx and Assembly Housing Committee Chairman Steven Cymbrowitz of Brooklyn led a press conference with other Assembly Members in Albany and reaffirmed their commitment to enacting pro-tenant and anti-owner changes to the rent laws by June 15th.
Although the following items are not set in stone, the pro-tenant legislators in the Assembly have made it clear that these are their priorities in some shape or form. Highlights of the legislative package include:
Eliminating MCI and IAIs: Over the last few months, various legislators have proposed radical changes to the existing laws regarding Major Capital Improvements (MCIs). As you know, owners cannot raise their tenants’ rents as a result of MCI work without proper approval from DHCR. One proposal would not only eliminate all MCI rent increases going forward, but would also reduce rents for any tenant whose rent increased as a result of an MCI back to the pre-increase level. Additionally, all pending rent increase applications as a result of an MCI would be denied. According to DHCR, in the past five years alone, owners have claimed more than $1 BILLION in MCI investments in their rent-stabilized buildings, the majority of which pre-date World War II. In sharp contrast, the failure of the City to make these types of investments in NYCHA buildings has led to the deterioration of that portion of the housing stock.
Furthermore, the Assembly is seeking to eliminate Individual Apartment Improvement (IAI) rent increases. This is a far more complicated process and the legislators have not mapped out a legitimate proposal for this, aside from simply stating that IAIs will be “discontinued.” Assemblywoman Diana Richardson of Brooklyn, who is the primary sponsor of the bill, stated that “170,000 families have been displaced from rent stabilized apartments with the help of Individual Apartment Improvement increases, which invite landlord fraud. IAIs are the key factor that is gentrifying my community, and pushing tenants out of their homes across the City.” Despite Assemblywoman Richardson’s statements, IAIs are essential for property owners who, given the long periods of time in which stabilized tenants remain in their apartments, need to update aging and outdated apartments for prospective tenants. According to DHCR, approximately 14,000 apartments received IAI rent increases which, invariably, occur after the tenant in occupancy has vacated their apartment.
Protecting Tenants with Preferential Rents: Building owners with rent-stabilized apartments are permitted under law to offer a tenant a preferential rent, which is lower than the legal regulated rent that an owner is actually permitted to charge a tenant. While preferential rents can be raised at the owner’s discretion upon lease renewal as long as the new amount does not exceed the legal regulated rent, in the typical case owners increase preferential rents by 3%, which is needed to cover increased taxes and other costs at a time when the Rent Guidelines Board (RGB) has effectively frozen rent increases. Assemblyman Cymbrowitz has now introduced a bill that would limit the rate at which owners can raise a preferential rent upon lease renewal. Any changes to the preferential rent laws will have an enormous impact upon owners. According to DHCR, over 270,000 rent stabilized tenants currently pay less than what the owner is legally allowed to charge.
Eliminating Vacancy Decontrol and Vacancy Allowances: Under current law, building owners can remove a unit from rent stabilization when the apartment becomes vacant and the legal regulated rent exceeds $2,774.76. Assemblywoman Linda Rosenthal of Manhattan would repeal deregulation and would also re-regulate apartments that were previously deregulated.
Furthermore, the legislation would repeal vacancy allowances, which since 1997 have allowed owners to increase the rent upon vacancy by 20% for a two-year lease and a slightly lower amount for a one-year lease (20% minus the difference between the two-year guideline and one-year guideline enacted by the RGB). The vacancy allowance was enacted to shift rent increases to incoming tenants and to compensate owners for the fact that the RGB increases are consistently inadequate. Vacancy leases would once again be subject to increases authorized by the RGB.
Extending the Four-Year Statute of Limitations: As the law currently stands, tenants who pursue an overcharge complaint must do so within the four-year statute of limitations. A bill, also introduced by Assemblywoman Rosenthal, would extend the statute of limitations from four years to six years for tenants to file an overcharge complaint. The bill would also build in a critical exception to the rule, allowing DHCR to consider a larger scope of rental history where deemed necessary. This legislation is alarming due to the fact that since 1997, the law has required owners to maintain only four years of rent history for the purposes of rent overcharge proceedings. How will owners who relied upon the four-year recordkeeping requirement be able to defend themselves in the future if this legislation gets enacted?
Capping Increases for Rent Controlled Apartments: As you already know, rent increases for rent-controlled apartments are set every two years by DHCR. For the past two cycles, these increases have stood in sharp contrast to the historically low rent guidelines enacted by the RGB for rent-stabilized apartments over the same time period. Assemblywoman Rosenthal has also introduced a bill that would cap rent-controlled increases at the lesser of 7.5% or an amount equal to the average of the previous five RGB increases for one-year stabilized lease renewals.
These are just some of the legislative proposals introduced by the Assembly and are indicative of the types of proposals that will be seriously considered over the next six short weeks.
urthermore, it is important to note that all of these proposals have been put forth by members of the Assembly that represent districts in the City. They have prioritized an agenda clearly favoring the tenant constituency without realizing or caring about the consequences that these radical changes will have on the City’s aging affordable housing stock.
On May 2nd, dozens of property owners testified at the public hearing held by Chairman Cymbrowitz’s Committee on Housing that focused on the rent laws. Your testimonies, coupled with RSA’s continuing advocacy efforts, are critical to the process that will determine the outcome of the rent law debates.
If you were not able to attend the May 2nd hearing, it is absolutely vital that you reach out or visit these elected officials as soon as possible even if you do not own properties in their districts.
We will provide updates as frequently over the next month via the RSA Reporter, email blasts, Facebook and Twitter.