What does Rent Stabilization mean?

Rent stabilization is a sensitive topic. It was created to preserve housing for city residents at an affordable price. There are two sides to this story. Many people owe there life in New York to a rent stabilization while others claim it is causing unfair housing scenarios for renters and owners. 

Affordable housing is broken up into a few different parts. 

What is Rent Control? 

Just after WW1 around 1920 the city experienced a heavy housing crisis with high rents and large scale rent strikes. To help remedy the problem, the New York State legislature “…passed a rent-control program designed to keep costs down and limit baseless evictions.”

Since then, there have other programs to remedy housing issues. Rent control is now defunct and the only people living in rent-controlled apartments are able to do so if it is inherited from a family member.

Rent-controlled apartments can be passed down within a family from one person to the next whenever the existing tenant of the apartment vacates or dies. It’s worth noting that the inheriting family member must live in the apartment for two years prior to the previous tenant’s vacancy or death.

There are about 38K rent controlled apartments in NYC and are occupied largely by an elderly, low income population who have been in occupancy since July 1, 1971 or by their lawful successors.

What is Rent Stabilization? 

We more commonly now see Rent Stabilized apartments available on the market. These apartments are usually built before 1974 and contain more than 6 units under the rent threshold of 2700 dollars a month. The perks of rent-stabilized apartments include limits on how much your landlord can increase your rent each year and a guaranteed right to renew your lease. You should have the option to sign a one- or two-year lease with a rider. The rider is an amendment to the lease stating a concession to the rent.  For example, if a rent-stabilized apartment is listed at $1,850/month, the lease would contain a rider for $850 to cover the discrepancy between the ostensible market value and the rent which the tenant will actually pay on a monthly basis. You are not responsible for covering the rider but the total monthly rent (rider + base rent) will be used to calculate 4 percent increase your landlord can issue the following year if he does minor renovations to the building or unit. Each year the city votes on the allowed rental increase or free on rent stabilized apartments. 

What happens if somebody buys your building? 

A huge perk to having a rent stabilized apartment is a buy out, depending on what you decide to do. You may have heard a mythical story of a friend of a friend who has a rent stabilized apartment and the new owner is looking to spruce up the place. They may come by nicely and say "Hey Ill give you some free rent if you leave so we can do some work." Don't immediately take this offer, talk to an attorney. You do not have to leave, you can stay if you want. The new owner purchased this building well aware of the rent stabilized tenants. He or she has a large financial incentive to get rent stabilized tenants to leave. If you want to leave, talk to an attorney as you could walk away with a hefty departing gift. If you want to stay, you have the right. Sometimes land lords will "fix up the hallways" in a fashion that might make it unlivable and will drive you out. This tactic tows the line of legal or maybe not legal. You can read any New York City blog and find dozens of articles profiling landlords using not so legal tactics to clear out a building. Hopefully if this happens to you, you won't have an issue!

Is it possible to de-stabilize an apartment? 

The short answer is YES. A land lord can make a certain amount of improvements to the building or the unit to bring it out of rent stabilized classification. These improvements should be filed with the city. Once an apartment can achieve a market rent of 2700, the apartment will then become market rate. If you are in a rent stabilized apartment and are paying above the stabilized rent, you maybe entitled to rent back and the land lord might be in a little bit of heat with the city. 

Here is another break down with help from Nakedapartments.com

Rent Regulation

Rent Stabilization and Rent Control

New York has two forms of rent regulation: rent control and rent stabilization. Both are mandated by the New York State government with the intention of preventing average city-dwellers from getting priced out of the rental market. It goes without saying that price controls are always controversial and a source of heated debate.

Rent control

Less than 2% of NYC apartments are rent-controlled, which means they're in a building built before 1947 and have been occupied by the same family since 1971 (when Nixon was president!). These apartments can only be passed down within a family - but only to a family member living in the unit for two years before the existing tenant leaves or passes away. It's NYC's own perverse form of nepotism. So unless you're in one of these blessed families, wipe the term "Rent Control" from your brain.

% RENT CONTROL

stabilized:45%controlled:2%

Rent stabilization

There are no set requirements for an apartment to qualify as rent stabilized, but most are in 6+ unit buildings built before 1974 and were priced below $2,000 before 2011 or below $2,500 today. Once an apartment is stabilized by the government, the landlord can only increase the rent by a small percent (for 2014 - 2015, the increase was capped at 1% for a one year lease and 2.75% for a two year lease. ).

However, once rent reaches $2,500, or if the tenant's income exceeds $200,000 for two consecutive years, the landlord can deregulate the apartment and bring it up to market-rates. Part of this law dictates that even if the tenant is a complete nightmare, the landlord is forced to renew their lease annually. For that reason, landlords are extremely picky when they "marry themselves" to a rent stabilized tenant.

Why it stinks to be you

Rent stabilized apartments are very common (about 50 percent of all apartments) but nearly impossible to find because once you land a rent-stabilized apartment, you don't leave it. With rent-stabilized apartments priced $1,200 cheaper (on average) in Manhattan, it's understandable why renters don't leave them. Not only are they saving $14,400 in after-tax cash each year; but to qualify for the equivalent market-rate apartment, you'd need $48,000 more in annual income. This limited turnover in the rent-stabilized market puts more price pressure on all other apartments.

 

FIG 5.3: RENT CONTROL BY AREA

PEOPLE IN CHEAP APARTMENTS STAY LONGER!

How to find a rent-stabilized apartment

By their nature, rent-stabilized apartments are an incredible deal, so landlords don't have a tough time finding a tenant, which means... they aren't well advertised, if they're advertised at all. Or, when rent-stabilized apartments are up for grabs, the leaving tenants typically alert their friends and family. Accordingly, there's no tried-and-true formula for finding these gems, but generally your chances are higher if you're looking for a 1-bedroom or studio in older buildings. They're also higher if you are well-networked and keep your ear to the ground, or have a well-networked agent.

I hope you found this article useful! Please feel free to reach out to me with any questions and subscribe to our podcast "Housed" on Itunes.