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W ORLD U.S. N.Y . / REGION BUSINESS T ECHNOLOGY SCIENCE HEA LT H SPORT S OPINION A RT S ST Y LE T RA V EL JOBS REAL ESTATE AUTOS

Deal Will Make It Harder to Use Renovation to Free Apartments From Rent Regulation

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Nathaniel Brooks f or The New Y ork Times

By CARA BUCKLEY Published: June 22, 2011

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For years, the quickest way for landlords to unshackle their apartments from rent regulation has been to renovate units as soon as the tenants moved out, allowing them to significantly raise rents, to free-market rates. Details are still being hammered out, but under a deal reached in Albany this week, landlords will soon have more difficulty using this strategy, potentially saving many apartments from deregulation.

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2. Deal Will Make It Harder to Use Renov ation to Free Apartments From Rent Regulation

Existing state law allows landlords to increase rents by onefortieth of the value of the improvements they make to an empty apartment. So a landlord who spends $20,000 installing a kitchen can raise the rent by $500 before the next tenant moves in. If the increase raises the total above $2,000, that apartment can be removed from rent stabilization.

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Tenant advocates have called that provision a loophole allowing thousands of affordable apartments to be lifted out of rent regulation. It is terrible public policy to allow landlords to make a small investment and have that be the basis for permanently removing the apartment from affordability, said Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Development, which represents housing groups.

Under the deal reached by legislative leaders, landlords will be allowed to pass one-sixtieth of the cost of the improvements onto incoming tenants in larger buildings. Smaller buildings, like tenements, will most likely remain subject to the old one-fortieth rule. But lawmakers are still wrangling over how big a building would need to be to be covered by the one-sixtieth rule. Landlords would still be able to deregulate empty apartments after making renovations, in a process known as vacancy decontrol, but the rent ceiling would rise to $2,500 from $2,000. In a separate provision, lawmakers agreed to raise the luxury decontrol ceiling to $200,000 from $175,000, meaning that a family earning more than $200,000 a year for two years in an apartment renting for $2,500 or more could have their apartment removed from stabilization. Stabilization limits the amount landlords can raise rents, to typically around 3 percent a year, and protects tenants from eviction. From 13,000 to 40,000 apartments are priced out of rent regulation each year, said Thomas Waters, a senior housing policy analyst with the Community Service Society of New Y ork. About one million apartments in the city remain covered by rent regulation, with some 40,000 of those under far stricter rent control. Charles Brecher, executive vice president of the Citizens Budget Commission of New Y ork, estimated that an additional 1,500 to 1,600 apartments would remain rentregulated under the new $2,500 threshold. Tenant advocates said the renovation rule was ripe for abuse because landlords did not need state permission before doing the improvements, and did not need to submit proof that they spent the amount they claimed unless the tenant filed a complaint with the state. Nearly 1,900 complaints were filed last year, about a third of which were decided in the tenants favor, according to the state Division of Housing and Community Renewal. Under the new deal, landlords would have to obtain certification from the state before increasing the rent more than 10 percent in apartments where improvements had been made. Lawmakers remain undecided on how to define which improvements would be included in that calculation. Joseph Strasburg, president of the Rent Stabilization Association, which represents landlords, said requiring a landlord to get state approval before charging for improvements would slow apartment renovations to a crawl. No owner in their right mind is going to keep an apartment vacant while waiting for approval, he said. This is going to end up being a job killer.
A version of this article appeared in print on June 23, 2011, on page A23 of the New York edition w ith the headline: Deal Will Make It Harder to Use Renovation to Free Apartments From Rent Regulation.

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