Housing deal may include provision to let landlords increase rents on vacant rent-stabilized apartments

As budget negotiations drag into the second day past the start of the new fiscal year with no deal in place, discussions around housing may have hit yet another hiccup. 

Three sources with knowledge of budget talks told City & State that real estate interests are pushing for a housing deal to include rollbacks to the 2019 Housing Stability and Tenant Protection Act, which removed most loopholes that previously allowed landlords to raise rent higher than usually permitted or take a unit out of regulation. The housing deal is also expected to include a new tax incentive for developers to build affordable housing in New York City and new tenant protections for non-stabilized apartments.

After this story was published, Assembly Speaker Carl Heastie confirmed on Tuesday that bringing back rent increases for individual apartment improvements of rent-stabilized apartments is on the negotiating table. “It’s trying – the question of trying to get the apartments that have not been put back online because, I’d say, the landlords don’t want to spend the money to put the apartments back online – those are the discussions we’re having,” Heastie said. He was careful not to characterize the discussions as rollbacks to the landmark 2019 rent laws. “There’s no such thing – not going back to vacancy decontrol, like those types of things,” Heastie said, referencing an old provision that allowed landlords to take units out of rent regulations if they hit a high enough rent after a tenant moved out. The 2019 laws removed that provision, also called high rent vacancy deregulation.

Under the old rent laws, landlords could raise rents significantly higher than would normally be allowed by the New York City Rent Guidelines Board if they made qualifying improvements in order to recoup the costs. They needed to register those improvements with the state, but tenant advocates have long complained that the program was rife with abuse due to lax enforcement mechanisms to ensure the promised improvements took place. Landlords have argued that increasing rents made it possible to make necessary improvements. The 2019 Housing Stability and Tenant Protection Act all but eliminated that benefit by greatly restricting how much landlords could raise rents after completing apartment improvements.

Another proposal that may be part of the mix is the Local Regulated Housing Restoration Adjustment bill, also known as the LRHRA. This legislation would permit landlords of rent stabilized units to raise the rent on apartments vacated by long-term tenants to federally-determined “fair-market” rates. This would not remove the units from the rent regulation program; their subsequent annual rent increases would still be limited to those approved by the New York City Rent Guidelines Board. Heastie did not specifically comment on this legislation, but real estate groups say it is necessary to ensure landlords have the financial incentive to repair vacant apartments.

Under the state’s pre-2019 rent stabilization laws, landlords would receive a significant “vacancy bonus” when a tenant left a regulated unit that allowed them to raise the rent by up to 20%. If they could raise the rent high enough, the apartment could be removed from regulation altogether, and tenant advocates argued that it provided landlords an incentive to harass tenants out of their stabilized housing. The 2019 laws removed both the vacancy bonus as well as “high-rent decontrol,” meaning that apartments can’t be taken out of regulation even if rents become higher. 

The push for the rent regulation rollbacks are not new, but sources suggested that the longer the talks go on, the higher the chance that it will make it into the current housing negotiations for a budget deal, potentially complicating the ongoing discussions.

Groups representing landlords of rent-stabilized units, including the Community Housing Improvement Program and the Rent Stabilization Association, are backing the LHRHA legislation. City Limits reported in February that the Real Estate Board of New York, the industry’s most powerful lobbying group, supported a similar proposal. The landlord groups argue that rents are currently so low that landlords cannot afford to do repairs on long-occupied units when they become vacant, and the ability to raise rents closer to market value is necessary to ensure that rent-stabilized units are repaired and kept on the market. The Rent Stabilization Association and REBNY released a study in February on what they called the “disastrous” effects of the 2019 rent laws, which found that landlords with small portfolios and a significant number of rent-stabilized units had trouble getting vacant apartments filled because they could not afford to make improvements to the units. 

The study from the Rent Stabilization Association and REBNY found that filings for both dropped significantly after the 2019 rent laws, with respondents blaming the lack of financial feasibility for the repairs. In response, tenant advocates have noted that profits for rent-stabilized landlords have on average gone up in the past year.

Tenant advocates have been staunchly opposed to any rollbacks to the 2019 rent laws, and Assembly Housing Chair Linda Rosenthal called the landlord-backed legislation a “non-starter” when it was first introduced last year. And a recent report from the Pratt Center for Community Development warned that it would “threaten the affordability of more than half of rent-stabilized apartments” and would incentivize landlords to remove long-time tenants in order to raise the rent. As recently as last year, lawmakers approved new laws to close loopholes in the rent laws that would have allowed landlords to raise rents above rates approved by the New York City Rent Guidelines Board.

At the same time, tenant advocates and lawmakers are pushing for new protections for renters in non-stabilized units in exchange for a new developer tax break. Real estate and landlord groups, including REBNY, have spent big money lobbying against “good cause” eviction tenant protections, which are at the heart of negotiations. Meanwhile, negotiations over a developer tax break have seemed to reach a standstill as union leaders and developers have failed to find a compromise on wage standards for eligible projects. Although some trades have called for lawmakers to step in to write the standards themselves, state Senate Majority Leader Andrea Stewart-Cousins didn’t seem ready to do that last week.