Lawmakers Look to Stop Landlords from Raising Rents Based on Major Capital Improvements

One of the most pressing issues affecting many New York City residents and landlords today is the rising cost of rent.  While some residential building owners have voiced concerns that rent stabilized and rent controlled apartment rents are not commensurate in keeping on pace with rising property taxes, labor and fuel costs, many New Yorker’s believe that the cost of rents are rising at an exorbitant rate making it impossible for many middle to low income New York City residents to stay in their homes.

Two state lawmakers have introduced a bill that may offer some respite to New York City renters but possibly deal a major blow to New York City Landlords.  New York State Senator Michael Gianaris (D-Queens) and New York State Assemblyman Brian Barnwell (D-Queens) have introduced legislation that will prohibit building owners from obtaining rent increases tied to major capital improvements and would instead offer tax credits to offset any major building upgrades.

Since the 1970’s, building owners in New York City have been able to recoup the costs associated with making major capital improvements to their buildings by passing the costs on to the tenants in the form of rental increases.  In New York City, if a building owner makes an improvement to the building in the form of a “new installation” such as installing a new boiler or new roof, a building owner may increase the rent of each tenant up to 6% to recover those costs[1].  Under current state law, even after a building owner has recouped the cost of a major capital improvement, the rent increase remains in place.

Many tenant advocacy groups believe that building owners use major capital improvements as a way to increase legal base rents for rent regulated apartments as a strategy to reach the coveted free market status.  Assemblyman Brian Barnwell noted, referring to the major capital improvement rent increases, that since the program has been enacted, the program has led to hundreds of millions of dollars in rent hikes on regulated tenants that ultimately serve to push middle to low income residents out of their home.[2]

Under the proposed bill, not only will building owners no longer be able to increase rents tied to major capital improvements, but once the major capital improvement program is repealed, tenants will be able to petition to have their rents lowered to pre-improvement levels.  Because the program has been in place for over 30 years, Senator Michael Gianaris anticipates that the bill will limit rent reductions to a ten-year look-back period. [3]

Unsurprisingly, landlord groups are not in favor of the new proposed legislation.  Frank Ricci, spokesman for The Rent Stabilization Association, which represents landlords describes the bill as, “ridiculous.”  Mr. Ricci stated, “The only way to preserve the existing housing is to keep putting money in and rehabbing.”  He also added, “tax credits offer no guarantees landlords will recover capital improvement payouts.” [4]

It is hard to anticipate how this bill, if passed, will affect all the parties in the rental market.   It is easy to predict that the bill in its current form will provide tenants much needed relief from overwhelming rent increases.  What is more difficult to predict is whether the proposed bill, if passed, will cause landlords to be more reluctant to invest in making major improvements to their buildings.

*The information in this article is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Rozario & Associates, P.C. or the individual author(s), nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this article without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. For assistance with Real Estate related matters, please contact our office at info@rozariolaw.com or 212-301-2770. 

[1] DHCR Fact Sheet #24: Major Capital Improvements (MCI)

[2] Kenneth Lovett, Exclusive: Bill would end rent increases tied to capital improvements, Daily News (August 29, 2018 4:00am), http://www.nydailynews.com/new-york/ny-pol-gianaris-rent-capital-barnwell-landlords-stabilization-20180828-story.html.

[3] Id.

[4] Id.

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