FAQs to Understand Changes to Rent Stabilized Law (RSL)
FAQs to Understand Changes to Rent Stabilized Law (RSL)
A discussion on Individual Apartment Improvement (IAIs) changes in 2024
Subject: FAQs – 2024 Changes to the Rent Stabilized Law (RSL)
The 2024 -2025 Budget Resolution includes one fundamental change directly impacting rent stabilized owners: the amendment to Individual Apartment improvement. Instead of listing out all the rule changes available here courtesy of Rosenberg & Estis P.C., today’s issue will use a questions-and-answer format to address and consider ambiguities and things between the lines.
Frequently Asked Questions
1. Will I be able to increase the rents on my apartments more than before?
Yes, if you perform apartment renovations. If you perform apartment renovations, you will be able to raise rents on apartments by double the previous cap on increases. The catch is that it will cost you double the cost. The ceiling on the maximum investment that one can use as a criterion for raising rent has increased, but the ratio of dollars invested into an apartment to rent increase has stayed the same.
The previous maximum was about $89 / month * 12 = $1,071 a year
The new maximum (Tier I IAIs) was increased to $179 / month * 12 = $2,143 a year
2. If I renovate my apartment and file for a rent increase, will the increase amortize after a given time, and will the rent eventually be reduced?
Rent increases delivered via Individual Apartment Improvements (IAIs) have been made permanent with this new law.
3. If my apartment has been vacant for a while, do I get any special treatment?
Yes, apartments that were warehoused and kept vacant during 2022-2024 are eligible for larger renovation budgets and more considerable rent increases as a percentage of dollars invested in them than usual. Owners whose tenants recently vacated but previously held tenancy for 25+ years can also benefit from these special rules.
The previous maximum increase was about $89 / month * 12 = $1,071 a year
The new maximum for Tier II IAIs $347 / month = $4,167 a year, with a spending cap of $50,000 instead of the previous $30,000
4. How many IAIs can be completed per apartment?
Regular IAIs: There is no limit. However, the sum of job costs must be no more than $30,000
Post warehoused-unit IAIs: Yes, there is a limit. The expanded IAI can only be performed once per qualifying event: a long warehousing or tenancy vacatur.
25+year tenant vacatur IAIs: There is no limit. However, the sum of job costs must be no more than $30,000
My commentary:
IAIs will be one of the primary gateways to further loosening the rent stabilization laws. Below are some of my ideas, both in support of why I believe this to be the case and as to how it could happen:
IAIs are very easy to defend. They’re highly justifiable even to the staunchest of tenant advocates. Apartments need overhauls and repairs to house tenants properly. Making apartments hospitable costs money, and investors need to recoup their funds since they do not operate buildings pro bono, let alone as acts of charity.
The fact that there is no limit to the number of Tier I (classic) IAIs that can be filed and that the recent 2024 law has raised the ceiling for maximum costs that can be applied towards rent increases provides straightforward levers to loosen the stringency of laws down the road and make investing in this housing stock more favorable. The faucet is loosening, and the legislature has illuminated a path toward further loosening.
Investment groups with whom I have met are beginning to accept the contrarian view that rent stabilization laws will loosen and that investing today can prove a successful long-term approach.
I am bullish on NYC multifamily. Call me at 212 658 1471
Sources: Rosenberg & Estis, P.C. Summary of the 2024 Housing Laws