Market Rate vs. Rent Regulated Housing
Market-Rate Housing includes apartments which have never been regulated and apartments which have undergone deregulation. Vacant apartments in buildings with one to five units are generally not rent regulated. Vacant apartments renting for over $2,000 per month also fall within the market-rate class. (However, deregulation of these apartments is subject to challenge by the new tenant.) Apartments in buildings rehabilitated or newly constructed after January 1, 1974 are not rent regulated unless the owner has taken advantage of special tax abatement programs known as the J-51 and 421-a programs. There are a number of exceptions to these generalizations.
Rent-Regulated Housing includes both "rent-controlled" and "rent-stabilized" apartments. About half of all apartments in the city fall under rent stabilization. Over 100,000 of these units become vacant each year. If the lawful rent exceeds $2,000 per month, upon vacancy rent stabilized apartments are deregulated. If the rent is below $2,000, the vacant unit remains under stabilization. As a rule of thumb for an apartment to be rent stabilized the building must have been built before 1974, have six or more apartments, and the new rent must be below $2,000 per month. Some rehabilitated and newly constructed buildings also fall under rent stabilization if the owner has received a tax abatement.
Rent Control For an apartment to be under rent control, the tenant must have been living in that apartment continuously since before July 1, 1971. When a rent controlled apartment becomes vacant, it either becomes rent stabilized, or, if it is in a building with fewer than six units, it is generally removed from regulation. An apartment in a one- or two- family house must have a tenant in continuous occupancy since March 31, 1953 in order to be subject to rent control. Once it is vacated after that date, it is no longer subject to regulation. Previously controlled apartments may have been decontrolled on various other grounds.
Rent control limits the rent an owner may charge for an apartment and restricts the right of an owner to evict tenants. It also obligates the owner to provide essential services and equipment.
In NYC, rent control operates under the Maximum Base Rent (MBR) system. A maximum base rent is established for each apartment and is adjusted every two years to reflect changes in operating costs. Owners who certify that they are providing essential services and have removed violations may raise rents by up to 7.5% each year until the MBR limit is reached.
Rents can be increased: (1) if the owner increases services or substantially rehabilitates a building or installs a major capital improvement; (2) hardship; (3) increased labor costs; or (4) increased fuel costs (passalongs).
Rents may be decreased in certain cases by DHCR. Such cases include: substantial, uncorrected code violations and reductions in services including facilities, space or equipment, or ancillary services warrent an increase, or the owner is not maintaining essential services.
Rent Stabilization In NYC, rent stabilized apartments are those apartments in buildings of six or more units built between February 1, 1947 and January 1, 1974. Tenants in buildings of six or more units built before February 1, 1947, who moved in after June 30, 1971 are also covered by rent stabilization. A third category of rent stabilized apartments covers buildings with three or more apartments constructed or extensively renovated since 1974 with special tax benefits. Generally, these buildings are stabilized only while the tax benefits continue.
The local Rent Guidelines Boards in NYC set maximum rates for rent increases once a year which are effective for leases beginning on or after October 1st of each year. The Rent Regulation Reform Act of 1993 (RRRA) provides for the deregulation of apartments with legal rents of $2,000 or more at any time between July 7, 1993 and October 1, 1993 that were or become vacant on or after July 7, 1993. In New York City, Local Law No. 4 of 1994 further provided for deregulation for apartments with legal rents of $2,000 or more at any time which were or become vacant on or after April 1, 1994.
Both the RRRA and Local Law No. 4 in New York City further provided for deregulation of high rent apartments occupied by high income tenants. In New York City, Local Law No. 4 provides for deregulation of apartments whenever the legal rent for those apartments reach $2,000 or more and are occupied by tenants with an income in excess of $250,000 in each of the two successive years prior to the owner's application for deregulation. The RRRA of 1997 reduced the income threshold to $175,000 for New York City and New York State effective January 1, 1998.
Like rent control, stabilization provides other protections to tenants besides limitations on rents. Tenants are entitled to receive required services and to have their leases renewed, and may not be evicted except on grounds allowed by law. Leases must be entered into and renewed for one- or two-year terms, at the tenant's choice.
If the tenant's rights are violated, DHCR may reduce rents and impose civil penalties on the owner. Rents may be reduced if services are not maintained. In cases of overcharges, DHCR may assess penalties of interest or, in the case of willful overcharges, treble damages, payable to the tenant.
The Omnibus Housing Act required owners to initially register with DHCR the rent and services for all rent stabilized apartments that were occupied on April 1, 1984 by June 30, 1984. Owners were required to serve a copy of the registration upon tenants, who had 90 days to challenge the information provided by the owner.
For apartments becoming subject to rent stabilization after 1984, owners must initially register all apartments within 90 days after they become subject to rent stabilization. In New York City, tenants may file a challenge to the initial registration concerning the rent of formerly rent controlled apartments now becoming subject to rent stabilization for the first time. This challenge is known as a "Fair Market Rent Appeal." Owners are also required to register annually or they may be denied rent increases. Owners must provide tenants with a copy of the annual registration.