Basics of Rent Stabilization Laws

Rent stabilization laws have been around since the mid-1900s. These regulations were meant to protect tenants in privately owned buildings from unfair rent prices and rent increases, while still allowing landlords to increase the rent. Here are the basics of rent stabilization, as well as the pros and cons.

Rent Stabilization Law of 1969

The rent stabilization law of 1969 was a law enacted under New York City Mayor, John Lindsay. It applies to buildings in certain New York counties, including New York City, that were built between February of 1947 and March of 1969. It includes privately owned buildings with six units or more.

Emergency Tenant Protection Act of 1974

The Emergency Tenant Protection Act of 1974, also known as the ETPA, expanded rent stabilization laws in New York to include parts of Nassau County, Westchester County, and Rockland County. It also expanded coverage to buildings built before 1974.

Who Rent Stabilization Generally Applies To

• Privately Owned Buildings
• Built Between February 1947 and Before January 1, 1974
• Buildings With 6 or More Units

Rent Stabilization Basics

• Place Limit on Amount of Rent That Can Be Charged
• Limit Percentage of Rent Increases
• Limit Frequency of Rent Increases
• Unit Must Meet Certain Habitability Standards
• Tenants Entitled to Lease Renewal
• Tenant Cannot Be Evicted Unless Breach Lease
• Tenant Can File Complaints Against Landlord

Mid-Lease Rent Increase May Be Allowed for the Following Reasons

1. Landlord Increased Services to Tenant or Made Improvements to Tenant’s Apartment
2. Landlord Performed Major Capital Improvement at Property
3. Landlord's Economic Hardship

Unit Can Become Deregulated

Rent stabilized apartments can be deregulated in one of two ways.

1. If the tenant’s yearly income is over $200,000.
2. Once the monthly rent reaches a certain threshold. For example, if the monthly rent reaches $2700, the unit will become deregulated. This amount differs based on the municipality and will change every year.

Arguments for Rent Stabilization

There are many reasons people are in favor of rent stabilization laws. These include:

• Fair Rent Prices- Rent stabilization is the way to keep private landlords in check and prevent them from charging outrageous prices for their rentals.
• Affordable Rent Prices- Rent stabilization advocates believe affordable housing should be available even in the most expensive cities. They believe requiring certain units to be rent regulated is the only way to keep people from being priced out of certain areas.
• Housing Security- Since landlords can only increase the rent on rent-stabilized apartments by a certain percentage each year, long term tenants will not be priced out of their apartments by inflated rent prices.

Arguments Against Rent Stabilization

There are also several reasons people are opposed to having rent-stabilized units. These include:

• Decrease New Construction in the Area- Areas with a high number of rent-stabilized units may deter builders from building new construction in the area. The reason for this is two-fold.

1. 1. Can’t Compete With Low Rents- If you are building new construction, you will want to get the highest rent possible. If there are a lot of rent-stabilized properties nearby, you may have a hard time getting high prices for your rental. For example, if there are five rent stabilized three bedroom apartments that are all charging $1,000 a month each and you are trying to collect $3,000 a month for a 3-bedroom, you may have difficulty attracting a tenant.
   2. Deteriorating Buildings Will Prevent High Rents- In addition to competing with lower-priced rentals, many rent-stabilized buildings are not well maintained. This detracts new builders because they worry they will not be able to command high prices for their rentals in a neighborhood in such disarray.

• Increase Rate of Deterioration of Rent Stabilized Units- Rent stabilized units are often priced below the fair market value that a landlord could receive for the rental. Therefore, landlords may have a difficult time making a profit or even paying their current bills, since all of the expenses for the property are still based on current prices.
  • It is common for landlords to do the bare minimum to keep these rent stabilized units up to current health and safety codes. While the purpose of rent stabilization is to protect tenants, it often has the opposite effect, as tenants in these apartments are often living in sub-par conditions.

Housing Crisis in US Cities   

Many of the largest cities in America, such as New York and San Francisco have become a tale of two cities. There is a mix of low-rent, deteriorating rent-stabilized units and high-rent, almost unaffordable luxury units.

The theory is that because the individuals in the lower priced rent-regulated units live in their units longer with very little turnover, there is a decrease in the supply of affordable units in the city. Therefore, prospective tenants who are not lucky enough to have a rent-regulated unit will have to pay more for their apartment due to the shortage of affordable units. Increased demand increases prices.

Some argue that without rent regulation, the market would correct itself and these high priced cities would become more affordable. These rent-stabilized units would come back to the open market, increasing the supply of apartments and demand would naturally regulate their prices. While those living in current rent-stabilized units would object, the millions looking for affordable apartments would benefit.