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An Introduction to the NYC Rent Guidelines Board
Table of Contents

HISTORY OF THE BOARD AND THE RENT REGULATION SYSTEM
(PART II)

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(Part I) (Part II) (Part III)

Rent Stabilization

In 1969 rapidly falling vacancy rates and an increases in complaints of rising rents in non-controlled units led Mayor Lindsay to call upon a group representing the owners of unregulated apartments to propose a self-regulation program. At the same time the Mayor appointed the first Rent Guidelines Board "to make an independent evaluation of the plan for self-regulation" to be submitted by the owner's group.

Following the owner's report and review by the Rent Guidelines Board, the City enacted the Rent Stabilization Law of 1969 ("RSL"). This law applied to some 325,000 apartments that had been completed after February 1, 1947. It also applied to some 75,000 formerly controlled apartments which had been decontrolled through subdivision, conversion or luxury decontrol laws. Unlike rent control which applied to buildings with 3 or more units (and one or two unit buildings if continuously occupied since April 1, 1953), rent stabilization applied to buildings with 6 or more units. Consequently, decontrolled units in buildings with 3, 4 or 5 units remained decontrolled. Also, the law did not apply to new buildings that received a certificate of occupancy after March 10, 1969.48

Under the 1969 law, the Rent Guidelines Board continued in operation and was charged with the establishment of guidelines for rent increases within certain prescribed limitations. Any lease or rental agreement adopted after May 31, 1968 would be subject to the first guideline which governed lease renewals and new leases occurring between June 1, 1968 and June 30, 1970.

For leases coming due under the first guideline the law prescribed no more than a 10% increase for 2-year leases, and a 15% increase for 3 year leases. Also, an additional 5% vacancy allowance was granted for two-year leases, and a 10% allowance was given for 3-year leases. The Board was thereafter charged with establishing annual guidelines following a review of (1) the economic condition of the residential real estate industry in New York City including such factors as the prevailing and projected (i) real estate taxes and sewer and water rates, (ii) gross operating maintenance costs (including insurance rates, governmental fees [added in 1983], cost of fuel and labor costs), (iii) costs and availability of financing (including effective rates of interest), (iv) over-all supply of housing accommodations and over-all vacancy rates, (2) relevant data from the current and projected cost of living indices for the affected area, and (3) such other data as may be made available to it.

At the time no special Board positions for tenant or owner representation were designated. The designation of two owner and two tenant representatives was added in 1974.

The new law also placed the development of a code to regulate owner/tenant relations (with regard to appropriate supplemental charges, lease renewals, evictions etc.) in the hands of the Rent Stabilization Association ("RSA")--a private industry group--subject to approval by the City's housing agency. Also established was a "Conciliation and Appeals Board" consisting initially of owner and public members to review rent code violations. Tenant representation was added to this board in 1974. Under the Omnibus Housing Act of 1983, the Conciliation and Appeals Board was abolished. Two years later the State legislature also removed the RSA from its role in developing the rent code, along with its counterpart in the hotel sector--the Metropolitan Hotel Industry Stabilization Association. The powers of these bodies, along with the City's administration of rent regulation were transferred to the State Division of Housing and Community Renewal ("DHCR") where they remain today.49

In the mid-1980's this agency came under increasing attack from many sectors prompting a State legislative investigation of the agency's performance. The 1987 report following this review was entitled "Bleak House" and was highly critical of DHCR. It is worth noting that owner groups, while critical of DHCR, have often asserted that rent regulation in New York City is bureaucratically unmanageable. Tenant groups, on the other hand, have charged that a lack of government commitment to the proper functioning of the system is to blame for its failures. In more recent years the DHCR has implemented a number of administrative improvements addressing many of its earlier difficulties.

In 1971, under pressure from owners, the State legislature adopted vacancy decontrol (as previously mentioned) and vacancy destabilization. This allowed owners to set market rents upon vacancy and would have led to the phasing out of both rent control and rent stabilization had the measure remained in force. However, rapidly rising rents during the 1971-74 period led to the passage of the Emergency Tenant Protection Act (ETPA) of 1974. Together with the RSL and the Local Emergency Rent Control Act of 1962, this is the fundamental law now governing the rent stabilization system. A detailed review of the ETPA, excerpted from the 1980 report, is provided below.

[Note: Certain summarized sections of the ETPA contained in the 1980 report have been edited out of this excerpt.]

Vacancy decontrol and destabilization soon became a political issue in much the same manner as the change by the State in the Fair Net Annual Return provision had been ten years earlier. The City of New York brought a court action to postpone the operation of the law but its application was denied. In 1973 Mayor-elect Beame charged that as a result of the State's mandated vacancy decontrol law many of the City's poor, moderate and middle income families had been placed in an intolerable position by not only being forced to pay exorbitant rents but in also losing the assurance they previously had against the possibility of unconscionable future rent increases, and he further asserted that many City residents were being driven out of the City as a result of vacancy decontrol. Governor Rockefeller appointed a Committee under the Chairmanship of Assemblyman Andrew Stein to conduct hearings and make recommendations on the subject. The "Stein Committee" recommended abrogation of vacancy decontrol.

In 1974 the Legislature enacted the Emergency Tenant Protection Act of 1974 (ETPA) (Chapter 576, Laws of 1974) the objective of which was to prevent excessive rent increases in the decontrolled sector of the rental housing market due to low vacancy rates, the inadequate supply of standard rental housing and the increase in new household formations in New York City and the surrounding suburban counties of Nassau, Rockland and Westchester. Chapter 576 in substance provided for a State stabilization program (ETPA) and also amended the New York City Rent Stabilization law. The provisions of ETPA are declared by the statute to be applicable only to New York City, and any City Town or Village (at their respective option) in Nassau, Rockland and Westchester counties.

Chapter 576 is a complex statute. It substantially affected the State rent control program outside New York City, and all New York City rent control and rent stabilization regulation. However, it did not affect State and City pre-1947 rent controlled housing (which in New York City and the three counties remained controlled by the State and City rent control agencies) which remained under existing law and regulation so long as the same tenant in occupancy on June 30, 1971 remained in possession. Essentially ETPA amended the vacancy decontrol provision of Chapter 371 as applicable to the areas indicated above. Section 4 of Chapter 571 is the Emergency Tenant Protection Act of 1974 and significant provisions thereof are summarized by section.

Section 3(a) provides for the local determination of an emergency for all or any class or classes of housing where the vacancy rate is 5% or less (except State or City rent controlled housing accommodations) and describes the local determination of emergency as extending to housing accommodations:

  • Previously decontrolled;
  • Decontrolled in the future;
  • Previously destabilized;
  • Presently exempt from State rent control;
  • Presently exempt from City rent control;
  • Presently exempt from the New York City rent stabilization law.

Section 3(b) and (c) requires a declaration that the emergency is at an end when the vacancy rate exceeds 5%, and permits an earlier termination in whole or in part where the local governing body finds the emergency to be wholly or partially abated. Any existence or termination of an emergency must be preceded by a public hearing. Section 4(c) provides that in New York City the Rent Guidelines Board shall be the Board established by the New York City rent stabilization law as amended. Section 5 provides that a local emergency may be declared for all or any class of housing except:

  1. New York State or City rent controlled accommodations;
  2. Government-owned accommodations;
  3. Accommodations whose rents are fixed or subject to the supervision of the State Division of Housing and Community Renewal, the New York City Housing and Development Administration, or the New York State Urban Development Corporation or, to the extent regulation under ETPA is inconsistent therewith accommodations aided by insurance under any provision of the National Housing Act;
  4. Accommodations in buildings containing less than six dwelling units unless part of a garden type maisonette dwelling complex containing six or more dwelling units notwithstanding the existence of "one or two family certificates of occupancy" for portions thereof;
  5. Buildings completed or rehabilitated after January 1, 1974;
  6. Accommodations owned by an eleemosynary institution and operated on a non-profit basis;
  7. Hotel accommodations outside New York City;
  8. Motor homes, trailer homes and tourist courts;
  9. Non-housekeeping furnished accommodations where there are two or less boarders and the remaining portion of the housing accommodation is occupied by the owner or his immediate family;
  10. Accommodations in buildings operated exclusively for charitable purposes on a non-profit basis;
  11. Accommodations which are not occupied by the tenant in possession as his primary residence.
Section 11 declares void as contrary to public policy any lease provision or rental agreement which purports to waive a tenant's rights under ETPA. Section 13 directs all state and local government agencies to cooperate with the State Division of Housing and Community Renewal, and any rent guidelines board in effectuating the purposes of ETPA. [emphasis added]

Chapter 576

The following sections of Chapter 576 also enacted significant changes as to the State's rent control and New York City's rent control and rent stabilization programs.

Section 2 amends Chapter 371 Laws of 1971 by repealing vacancy decontrol for New York City rent stabilized accommodations and by providing that all previously destabilized apartments and all decontrolled apartments - past and future - are to be subject to ETPA.

A provision which denied decontrol of rent controlled accommodations where a finding by the City Rent Agency that the vacature of the accommodation had been achieved via tenant harassment was retained.

Section 7 amends section YY51-3.0 [now §26-504] of the Administrative Code of the City of New York by adding housing accommodations made subject to the provisions of the Rent Stabilization Law by ETPA. These are:

(a) Vacancy decontrolled accommodations (in buildings containing six or more accommodations) which were formerly subject to rent control;
(b) accommodations formerly subject to New York City rent stabilization which had been vacancy destabilized;
(c) accommodations in New York City created between 1969 and 1974 and had been exempt from both rent control and rent stabilization.

Section 9 amends section YY51-5.0 [now §26-510] with respect to the New York City Rent Guidelines Board by staggering the terms of the members, and prescribing criteria for guidelines orders.

Section 12(b) (1) repeats the language of section 9(b) of ETPA except that in addition to designating the Conciliation and Appeals Board as the agency for determining fair market rent applications,50 it also requires that decisions by the Conciliation and Appeals Board on such applications consider, in addition to the special guidelines to be established by the City's Rent Guidelines Board, the "...rents generally prevailing in the same area for substantially similar housing accommodations." [Fair Market Rent Appeals are discussed at here and here, infra.]

Section 15 provides that all rights, remedies and obligations created pursuant to the New York City Rent Stabilization Law, the Rent Stabilization Code, and the orders of the Conciliation and Appeals Board inure to the benefit of all owners and tenants made subject to the rent stabilization law by ETPA. It also declares that nothing in Chapter 576 is intended to diminish the powers of the Conciliation and Appeals Board, or the New York City Rent Guidelines Board to make, amend, or modify rules, regulations, or guidelines.

Section 17 declares the provisions of ETPA to be effective immediately subject to a declaration of a public emergency by the local legislative body.

*** end of edited excerpt from the 1980 report ***51

The Omnibus Housing Act of 1983

The next major revision of the rent regulation laws occurred in 1983 with the passage of the Omnibus Housing Act. This Act had only a limited impact on the operations of the Rent Guidelines Board, however, and its main features, including the transfer of administration of rent regulations from the City to the State and the abolition of the Conciliation and Appeals Board, have previously been mentioned. Three changes imposed by the new law did affect the Board's operations. Prior to this act the Board routinely adopted special rent adjustments or surcharges at different times within a single guideline period. The new law ended this practice by limiting the Board to one guideline package per year. In addition, the law eliminated the availability of three-year leases as an option for tenants faced with lease renewals. Finally, the law added "governmental fees" to the list of cost considerations that the Board is required to review.

Also worth note is the fact that the 1983 law significantly overhauled certain enforcement provisions of the rent stabilization laws. Treble damages were imposed for willful rent overcharges [limited to two years / straight damages for overcharges up to four years]. A four-year limitation period was established for filing overcharge claims.52 In addition, for the first time owners of rent stabilized apartments were required to register rents on an annual basis.

As mentioned earlier, subsequent legislation in 1985 ended the official involvement of the Rent Stabilization Association and the Metropolitan Hotel Industry Stabilization Association in the stabilization system.

The Rent Regulation Reform Act of 1993

Another major change in the rent regulation system came with the adoption of the Rent Regulation Reform Act of 1993. Following a pattern set decades earlier, there were four last minute extensions of the rent laws, including one in which Governor Cuomo entered the Senate chamber at 11:57 PM to sign a three day extension before the midnight deadline. In the final bill State legislative leaders agreed to the first decontrol initiative in over twenty years. The key provisions of the 1993 law are briefly as follows:

  • Apartments renting for $2,000 or more between July 7, 1993 and October 1, 1993, which were vacant on July 7, 1993 or thereafter, were exempted from rent regulation.53
  • Apartments which 1) are occupied by persons who have a total annual income in excess of $250,000 per year for two succeeding years, and 2) that have legal rents in excess of $2,000 per month as of October 1, 1993, were exempted from rent regulation. The $250,000 threshold would be modified four years later with the adoption of the Rent Regulation Reform Act of 1997.
  • The law established a system of income certification to be administered through the Division of Housing and Community Renewal with the cooperation of the Department of Taxation and Finance.
  • The law established one-fortieth the cost of individual apartment improvements as the allowable monthly rent increase when such improvements are made. The DHCR had considered implementing a longer "amortization" period via administrative regulations. The establishment of one-fortieth as the appropriate amount by statute eliminated the possibility of such an administrative change.54
  • The law limited the availability of damages in cases where stabilized tenants claim a rent overcharge because the owner failed to register the apartment with the Division of Housing and Community Renewal.55
  • The law provided that the chairperson of the Senate Committee on Housing and Community Development, jointly with the chairperson of the Assembly Housing Committee would establish a study group on rental housing which would produce a report for the Governor, the President Pro Tem of the Senate, and the Speaker of the Assembly no later than June 30, 1995. The study was to examine a number of issues relating to the impact and effectiveness of rent regulations and was to include, among other things, "recommendations regarding: (1) the methodology and criteria employed by rent guidelines boards in establishing guidelines for rent adjustments." This study and accompanying recommendations were apparently never completed.
  • The law extended the ETPA until the fifteenth day of June 1997.

The Rent Regulation Reform Act of 1997

The Rent Regulation Reform Act of 1997 followed one of the most bitter state legislative battles of the 20th century. Following a failed effort to work out a compromise between the Republican led Senate and the Democratic led Assembly, existing rent laws expired at midnight on June 15, 1997 -- the first time in over fifty years that the state was without some kind of rent regulations. After four days of intense negotiations, the laws were renewed for six more years, with some major changes.

  • The law imposed a complex statutory vacancy allowance which provides as follows:
    • If the incoming tenant selects a two-year lease, the increase shall be 20% over the prior legal regulated rent.
    • If the new tenant selects a one-year lease, the increase shall be 20% over the legal regulated rent, less the difference between (a) the RGB two-year renewal lease guideline applied to the prior legal regulated rent, and (b) the RGB one-year renewal lease guideline applied to the prior legal regulated rent. For example, if the one year guideline is 4% and the two-year guideline is 7%, the vacancy allowance is 17% (i.e. 20-(7-4)=17).
    • In addition to the above, if an owner has not collected a vacancy allowance for the vacant apartment for at least 8 years, the owner is entitled to an additional six-tenths of one percent (.6%) for each year since the last vacancy allowance for the apartment was taken (or since the apartment fell under rent stabilization). For example, if the prior tenant was in occupancy for eleven years, and the new tenant takes a two-year lease, the vacancy allowance is 20% plus (.6% x 11) or a total of 26.6%.
    • If the prior legal rent was less than $300, an additional $100 increase may be added. If the prior rent was above $300 but below $500, the owner is entitled to all increases allowed by law or a minimum increase of $100.
    These vacancy allowances are in lieu of RGB one or two-year renewal increases, but in addition to other increases authorized by statute, such as major capital improvement increases, individual apartment increases, and any additional vacancy increase adopted by the RGB.

  • The RRRA of '97 also modified succession rights. It eliminated nieces, nephews, aunts and uncles from its definition of family members eligible to succeed departing tenants of record. These individuals still might qualify for succession rights if they can prove "emotional and financial commitment, and interdependence between [themselves] and the tenant." The new law also imposed a vacancy allowance on the second succeeding family member. Thus, if a parent passed away leaving an apartment to a son, the son would not have to pay a vacancy allowance. If, however, the son were to depart, leaving the apartment to a brother (a brother who meets the requisite two year co-occupancy requirement) the brother would have to pay all vacancy allowances in effect.
  • The RRRA of '97 further modified the luxury decontrol provisions first adopted in 1993. Tenants residing in apartments renting for more than $2,000 per month earning more than $175,000 per year for two consecutive years (down from $250,000) are now subject to high income decontrol.
  • An amendment to the Rent Stabilization Law adopted by the New York City Council in 1997 provided that the high rent vacancy decontrol adopted in 1993 only applied to apartments renting for $2,000 or more at the time they are vacated. The DHCR had taken a different view, and concluded that if the rent lawfully reached $2,000 (through the vacancy allowance, improvement allowances etc.) after the prior tenant vacated, it could be deregulated. The State adopted the DHCR's view and codified it in the RRRA of '97. Subsequently, the City Council adopted a local law requiring owners to disclose prior rent histories to new occupants of deregulated apartments.
  • The RRRA of '97 restricted consideration of evidence to establish rent overcharge claims to events occurring within four years of the claim. Thus, if a tenant does not file an overcharge claim within four years of the rent registration filed with the DHCR claimed to include the excessive amount, the rent is final and the complaint will not be considered.
  • To eliminate any fear developers may have of subsequent rent regulations, the RRRA of '97 allows the Commissioner of DHCR to enter into contracts with developers to exempt new construction from any form of rent regulation for a period of fifty years.
  • The RRRA of '97 also provides a mechanism to remove "hold-out" rent controlled tenants from buildings where the owner seeks to demolish and construct new units. If such tenants occupy less than ten percent of the units in a building (or one apartment in a building with 10 or fewer units), the owner may remove such tenants, but must provide relocation benefits established by the DHCR.
  • The RRRA of '97 imposes strict requirements that tenants engaged in Housing Court proceedings deposit rents into court on a second adjournment or if more than 30 days have passed following the party's first appearance (unless the owner has requested the adjournments.)
  • The RRRA of '97 also stiffens criminal penalties for physical harm to tenants caused by landlords engaged in harassment, making such acts a Class E felony. The Legislature's requirement of physical injury makes this particular enactment rather illusory. Under most circumstances, it is already a felony to deliberately injure someone.

Go To:
(Part I) (Part II) (Part III)

An Introduction to the NYC Rent Guidelines Board
Table of Contents

Footnotes

48 Later, this date would be changed to January 1, 1974, and newly constructed buildings may have become subject to rent stabilization if the owner/developer took part in the City's J-51, 421a or similar tax abatement programs. These programs are discussed here.

49 For an overview of the administrative history of rent regulation and a critique of the system as a failed attempt at owner self regulation, see Keating, Landlord Self-Regulation: New York City's Rent Stabilization System 1969 - 1985, 31 J. of Urb. & Contemp. L. 77 (1987).

50 Now a DHCR function.

51 This edited excerpt was taken from pp. 1-84 through 1-94 of the 1980 report.

52 Under this rule an overcharge was viewed as a continuing infraction. Thus, a tenant was allowed to challenge the last four years of any overcharge even if the unlawful increase began prior to the four-year period. Subsequent changes in 1993 and 1997 made the limitations period absolute. Thus, unlawful increases in rent that are more than four years old are now completely immunized from challenge.

53 The July 7, 1993--October 1, 1993 time period was later extended by Act of the New York City Council so that an apartment reaching the $2,000 threshold AFTER October 1, 1993 was subject to vacancy decontrol.

54 See here for a discussion of individual apartment improvements.

55 See here for a discussion of the consequences of a failure to register


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