Rent Controlled and Rent Stabilized Apartments in NYC

The PropertyClub Team
Apr 27th 2019
Currently, over one million apartments in New York City are subject to some form of rent regulation. The majority of these apartments are classified as rent-stabilized apartments, while less than 2% of apartments are subject to the oldest form of rent regulation, known as rent-controlled apartments.

The New York City rental market has historically been costly, dating back to the early 1920s. However, shortly after World War I, to ensure that average New Yorkers were not priced out of the housing market and to address the growing housing shortage, New York became the first in the nation to adopt rent control laws. Fortunately, for New Yorkers, newer versions of the rent control laws still exist today.  In addition to protecting tenants from unreasonable rent increases rent control laws grant average New Yorkers a plethora of rights to ensure that they have access to comfortable yet affordable housing.

What is a Rent-Controlled Apartment?

For starters, if you have a Rent-Controlled Apartment in New York City, then you have hit the Jackpot! These apartments are very cheap and are often found in great neighborhoods (e.g., Upper West Side, Chelsea, etc.). However, an apartment can only qualify as "Rent Controlled" if the tenant/family has been continuously living in the apartment since July 1, 1971, and the apartment is located within a building that was built before 1947. Unfortunately, there are no new Rent Controlled apartment created and the only way to get one is to move in with a relative who already has one and then assert succession rights when they die. 

Rent Controlled apartments are subject to a system called "maximum base rent" which prescribes a maximum amount that a landlord can increase the rent. The rent in Rent Controlled apartment can be increased by 7.5 percent each year until the rent reaches the maximum-based rent. Maximum-Based rent can be increased every two years. However, practically speaking, due to the complexity of increasing the Rent in Rent Controlled apartments, the majority of landlords in New York City opt out of raising the rent altogether. 

What is a Rent- Stabilized Apartment?

Rent Stabilization is the newer and more common form of rent-regulated apartments in New York City and is overseen by the NYC Division of Housing and Community Renewal ("DHCR").

Traditionally, Rent Stabilized apartments are in buildings with six or more units that were built before 1974. However, to create more affordable housing in the tight New York City rental market, New York currently gives tax incentives to developers, with three or more apartments constructed or substantially renovated after 1974, who voluntarily provide some Rent-Stabilized apartments to the public. 

Like Rent Controlled apartments, there is a cap on yearly rent increases for Rent Stabilized apartments. In June of each year, the Rent Guidelines Board votes on how much stabilized and controlled rents should be raised for the following year. Currently, for renewal leases beginning between Oct. 1, 2018, through Sept. 30, 2019, the rent increase for the rent-stabilized apartment are:

1-year lease: 1.5 percent

2-year lease: 2 percent

Can I inherit a Rent Stabilized or Rent Control Apartment?

Rent Controlled, and Rent Stabilized apartments can be inherited (i.e., "succession rights") by family as long as the heir to the apartment living in the apartment for two years before the death of the former tenant of record. However, if the person asserting succession rights is disabled or at least 62 years of age, then the period of co-occupancy with the former tenant is only one year.

How Can A Rent Stabilized Apartment Lose its Classification?

It is important to note that Rent Stabilized apartments can be taken out of Rent Stabilization in a process known as deregulation. Deregulation can occur in various ways: 

  1. High-Rent Vacancy Deregulation:  If the legal, regulated rent exceeds $2,700 and the tenant leaves, the apartment can be deregulated through a process known as "vacancy decontrol."
  2. High Rent-High Income Deregulation: If a rent-regulated tenant's rent is Two Thousand Seven Hundred Thirty-Three Dollars and Seventy-Five Cents ($2,733.75) or more per month, and the tenant's annual income is Two Hundred Thousand Dollars ($200,000.000) annually, in each of the two (2) preceding calendar years, the landlord may deregulate the apartment
  3. Individual Apartment Improvement: Additionally, once an apartment becomes vacate, (voluntarily or by eviction) the owner can increase the rent equal to either 1/40th or 1/60th of the cost of any renovations and improvements that they perform on the unit. This increase can be taken after any other vacancy increases are applied. Practically speaking, when an apartment becomes vacant, a landlord will renovate a unit to raise the legal, regulated rent so that it exceeds the $2,733.75 threshold and qualify for deregulation. 
  4. Conversion: If a building is converted to a co-op, any rent-regulated units within the building may be deregulated upon vacancy.
  5. Expiration of a tax abatement: Once tax abatements, such 421-a, and J-51,  on a building expire, owners can legally charge market rate rents (assuming they followed the proper procedures while the tax abatements were in effect).
  6. Buyouts:  Depending on the individual circumstances, sometimes it's worth it for the landlord to pay the tenant(s) money to move from their rent-regulated apartment, this process is commonly known as a "buy-out." While numerous factors dictate whether a landlord may want to buy-out a tenant, it essentially boils down to the question of "how much can make the landlord profit if it were allowed to rent the apartment at market rate?". In booming neighborhoods in Brooklyn, such as Crown Heights and Prospect-Lefferts Gardens, buy-out negotiations can go well into the six figures, while apartment located in some areas of the Bronx may see buy-outs a little as $2,000. Once a landlord buys out a tenant, it may use various means, including Individual Apartment Improvement to deregulate the apartment.

How can I find a Rent-Controlled or Rent-Stabilized Apartment?

Search the official city database: The Rent Guidelines Board maintains a list of all buildings registered with the DHCR. While this PDF can be time-consuming to look through, it's a fantastic resource, for someone adamant about finding a rent-stabilized apartment.

Search by Location: While rent-stabilized apartment can be found throughout New York City, the highest concentrations of rent-stabilized apartments can be located in Upper Manhattan (Harlem, Washington Heights, Inwood), the South Bronx, and central Brooklyn (Crown Heights). 

Search by Year: Search for buildings built between 1947 and 1974 because if the building was built after 1974, it probably isn't rent-stabilized. 

Search for Apartments under $2700: Search for apartments under $2,700 per month. If the apartment is rent-stabilized the monthly rent will be under $2,700 unless it's new construction, in which case the developers may have some stabilized units as a requirement to take advantage of 421-a or J-51 tax abatements. Rent-stabilized units in new construction are typically not attractive as they are often stabilized at an above market rent (for example you may sign a lease for a 1 bedroom apartment in a new development for $3,000/month, but that will likely be a "preferential rent" due to "market conditions" while the actual stabilized rent could be hundreds or thousands more, making it easy for the landlord to raise rents as they see fit).