Rent regulation in New York

Rent control in New York refers to rent control and rent stabilization programs in New York State, USA. Each city may choose whether to participate or not, and as of 2007, 51 municipalities participated in the program, including Albany, Buffalo and most famously, New York City, where over one million apartments are rent-regulated.

New York's rent control program, which began in 1943, is the longest-running in the United States, with New York City one of two large cities (the other San Francisco) in the United States that has strong rent control laws. From 1943 to 1950, rent control was administered by the federal government. It has been administered by state government since 1950, although state and city agencies shared administrative work from 1962 to 1984.

Rent control

Rent control exists in New York City and a small list of other municipalities in Nassau, Westchester, Albany, Rensselear, Schenectady, and Erie Counties.

Qualification

To qualify for rent control, a tenant must have been living continuously in an apartment since July 1, 1971. When vacant, the unit becomes rent stabilized, except in buildings with less than six units, where it is usually removed from the program. In some cases, a tenant living in a one- or two-family home may qualify for rent control if the tenant has lived there since 1953, however, once the apartment or home has been vacated, the home or apartment (if in a two-family) is deregulated.

In apartments within single and two-family homes, the tenant must have been residing in the unit continuously since March 31, 1953 in order to qualify for rent control. Once the unit becomes vacant, it leaves the rent control program and is not eligibile for rent stabilization.

Rent control does not generally apply to units built after 1947.

Terms

Rent control limits the price a landlord can charge a tenant for rent and also regulates the services the landlord must provide. Failure to provide these may allow the tenant to demand a lower rent.

Outside of New York City, the state government determines the maximum rents and rate increases, and owners may periodically apply for increases.

In New York City, rent control is based on the Maximum Base Rent system. A maximum allowable rent is established for each unit, and every two years, the landlord may increase the rent up to 7.5% until the Maximum Base Rent is reached. However, the tenant may challenge these increases on grounds that the building has violations or the owner does not need to increase the rent that much to cover expenses.

Maximum base rent

In New York City, the maximum base rent (MBR) is calculated to ensure the rent from rent control units covers the cost of building maintenance and improvements. As set up in the New York City Local Law 30 of 1970, the formula reflects real estate taxes, water and sewer charges, operating and maintenance expenses, return on capital value and vacancy and collection loss allowance. The MBR is updated every two years to reflect changes in these expenses. The owner if not already, must apply for the maximum base rent system for the tenants, prior to the MBR rents were annually determined by the city/state which developed its own set of regulations.

Rent stabilization

Rent stabilization exists only in New York City, Nassau, Rockland, and Westchester Counties. It generally applies to units built before 1974 and not subject to rent control (although owners of more recent buildings can agree to rent stabilization in exchange for tax benefits).

Qualification

The qualifications for rent stabilization have been changed over the years, to curb perceived abuses which allowed the wealthy to enjoy rent increase protection intended for the working class.

Since the passage of the Rent Regulation Reform Act of 1997, rent stabilization has been restricted to apartments where the legal, or stabilized, rent was under $2,000 per month. The unit would become deregulated once the rent goes above $2,000 and is either vacated (vacancy decontrol) or if the household adjusted gross income is over $175,000 for 2 consecutive years (high income decontrol). If the stabilized rent is under $2,000 then income does not affect the rent stabilized status of the apartment. A tenant has to use the stabilized apartment as their primary residence in order for the apartment to remain under rent stabilization.

Tenants living in buildings built between February 1, 1947 and January 1, 1974, or who moved into a pre-1947 building after 1971, or who moved into certain post-1974 buildings that received tax breaks, qualify for rent stabilization if the other financial terms are met, and the tenant moved into the unit before July 7, 1993. As part of city managed programs, some buildings become temporarily rent stabilized in return for a temporary reduction in real estate taxes when those buildings have been converted to residential use from another use group (i.e. commercial or industrial). Two of those programs, J-51 for renovated buildings, and 421-a for new construction grant temporary rent stabilization to tenants of apartments in those building, overriding other qualifications.

Terms

Rent stabilization sets maximum rates for annual rent increases and, as with rent control, entitles tenants to receive required services from their landlords and have their leases renewed. The rent guidelines board meets every year to determine how much the landlord can set future rents on the lease. Violations may cause a tenant's rent to be lowered.

History

Federal regulation (1943–1950)

In 1942, President Franklin D. Roosevelt signed the Emergency Price Control Act into law. The goal of the act was to prevent inflation in the booming, fully employed wartime economy by setting price controls nationwide. In November 1943, the Office of Price Administration froze New York rents at their March 1, 1943 levels. When the Emergency Price Control Act expired in 1947, Congress passed the Federal Housing and Rent Act of 1947, which exempted construction after February 1, 1947 from rent controls, but continued that regulation for properties already completed by that date.

State regulation (1950–1962)

The State of New York took over when Federal regulation ended in 1950. Under the first permanent state laws in 1951, New York took a similar regulatory approach to the Federal Government. At the time there were about 2,500,000 rental units state-wide, 85% of them in New York City. The initial laws covered all rental units, and regulated all relationships between owners and tenants concerning rents, services and evictions.

Into the 1950s, a severe housing shortage prompted the first deregulation of rental units. In New York City, apartments in single and two-family homes became deregulated after April 1, 1953. Cities and towns outside New York City were given permission to deregulate when ready. The most expensive luxury apartments in New York City began to be deregulated starting in 1958. By 1961, only New York City and 18 of New York's 57 other counties had rent regulation.

Mixed regulation (1962–1984)

New York City and the state government began dual administration of rent regulation in 1962, and 75,000 expensive apartments were gradually deregulated by 1968. In 1969, construction and vacancy rates slumped, causing non-regulated rents to rise nationally. This rapid increase in rents caused New York to pass the Rent Stabilization Law of 1969, which introduced rent stabilization to units built after the 1947 cutoff for buildings to be eligible for rent control, covering approximately 325,000 units in New York City.

The Local Law 30 of 1970 introduced a new method of rent control price calculation, based on the Maximum Base Rate, which adapted to the changing costs faced by landlords, allowing them to pass those costs on to renters. A 1981 law took away New York City's ability to regulate rents and gave the power to state government in Albany.

State regulation (1984–present)

In February 2009, the New York State Assembly in Albany voted to further restrain rent increases in New York. The legislation, if passed by the New York State Senate, would mandate a return to rent control of thousands of apartments that had been returned to the market in past years.

The legislature reduced to 10% (from 20%) the amount rent could be increased between tenants. The legislature also returned some powers of regulation to the New York City Council. The spokesman for the landlords' group opposing the legislation said that the legislation was not helpful during an economic crisis when "rents are actually going down."

Criticism

Rent control in New York City is controversial, with some claiming that it has led to a lack of an "adequate supply of decent... housing". Megan McArdle wrote in February 2009:

"Rent control allows some people to stay in artificially cheap apartments, but only by forcing the people who would have rented them into some other, less desirable place. Those people bid up the price of the uncontrolled housing, so that you essentially end up with two housing markets, one with rents above the natural market price, and one with rents below it. There is no way to ensure that the deserving middle class folks you want to see stay in the city end up in the latter, and indeed, many of the owners of rent stabilized apartments were notorious for finding the richest tenants they could. Rich tenants rarely get behind on the rent, and move sooner than people who can just barely afford their below-market place.

"Meanwhile, the stabilized stock deteriorates, because, especially in inflationary times, it does not pay the landlords to maintain them beyond the barest minimum required by law. And no one wants to build any new housing except luxury units which will not be controlled.

"Then everyone wonders how come there are no houses for middle income people in the city."

The worsening in the rental market led to the enactment of the Rent Stabilization Law of 1969, which aimed to help increase the number of places put up for rent. The current system is very complicated, which is especially troublesome as most of the protected renters are elderly, and understanding the city's complex rent-control regulations is difficult even for experienced lawyers. Move-in fees typically cost one to two months' worth of rent payments.

The system has also been criticized for the ability of some to take advantage of it. Attorney Ralph Charrel published a book in the 1970s called How I Turned Ordinary Complaints into Thousands of Dollars; among other things, he detailed how he had used NYC's rent control laws to extract a $25,000 cash payment, in addition to all moving and hotel expenses, from his landlord when the landlord wanted him to move to a larger apartment with equal rent.

Rental unit distribution

New York City

	2002		2005		2008
Type	Units	% of Units	Units	% of Units	Units	% of Units
Non-Regulated	665.0k	31.9%	697.4k	33.3%	772.7k	36.0%
Rent Controlled	59.3k	2.8%	43.3k	2.1%	39.9k	1.9%
Rent Stabilized Pre 1947	773.7k	37.1%	747.3k	35.7%	717.5k	33.5%
Rent Stabilized Post 1946	240.3k	11.5%	296.3k	14.2%	305.8k	14.3%
Other Regulated	346.5k	16.6%	308.0k	14.7%	308.6k	14.4%
TOTAL	2,085k	100%	2,092k	100%	2,144k	100%

Further reading

• Block, Walter. "Rent Control". The Columbia Concise Encyclopedia of Economics.

External links

• Text of the Rent Stabilization Law of 1969
• Text of the Rent Regulation Reform Act of 1993