Going Beyond Legal Rents: Senate Bill S6914

How to make RS buildings in the outer boroughs more profitable

May 05, 2025

While New York's Private Housing Finance Law Section 610 program, which I discussed last week, appears to be on hold, the legislature is now considering Senate Bill S6914, a promising new initiative that could substantially benefit investors. If passed, S6914 would allow owners of rent-stabilized (RS) apartment buildings to raise their rents above the legal rent if they rent to voucher tenants. The mechanism for charging higher rent mirrors Section 610's but without the time-consuming process of securing regulatory agreements and complying with Housing Preservation & Development (HPD) / Department of Housing and Community Renewal (DHCR) restrictions.

Senate Bill S6914

The talented New York Apartment Association leaders who spearheaded the bill designed it to work for tenants and landlords. Landlords benefit by raising their rents, increasing their property values, and returning to profitability. Mark Willis of the Furman Center pointed out in his RGB presentation that building owners with 75-100% RS buildings in the Bronx struggle to break even on their operating expenses. Reversing that trend and making properties profitable once more not only benefits landlords but it helps tenants as well. Tenants benefit from solvent and cash-flowing buildings because that means better-maintained buildings: more broom-clean lobbies and fewer displays of chipped paint, rodent sightings, or water leaks. It also means more reserve funds for major capital improvements like boiler repairs and roof upgrades.

When RS apartments in good condition become vacant, landlords usually rent them out to cash-paying tenants rather than voucher tenants because they are limited by the ceiling DHCR places on rents. If they have to choose between cash-paying tenants and voucher tenants, and there is no other difference between them, they will vie for cash-paying tenants because of the more streamlined leasing process. Senate Bill S6914's promise to allow landlords to collect full voucher amounts could change how landlords make decisions and encourage them to house voucher tenants in greater numbers than before.

But more than simply redirecting which tenants get apartments, S6914 seeks to rearrange economic incentives to grow the supply of apartments in NYC. Somewhere between 25,000 and 100,000 apartments sit vacant in NYC today, and S6914 hopes to re-align the incentives to allow low-income New Yorkers to find the affordable housing they need while creating conditions that encourage landlords to bring units back into service.

When RS apartments in poor shape become vacant, they cannot be re-rented. Instead, they require deep upgrades, including some work to comply with building codes that didn't exist before the most recent vacancy. The agencies carry out the burden of regulating this work, but the actual work is borne entirely by landlords. With 2019's HSTPA tightening the screws of rent regulations, breaking even on apartment renovations takes much longer than before. The lower the existing rent, the longer it takes to break even on renovations performed. The cost of renovating apartments won't vary tremendously per square foot because the goal will be to spend as little as possible over the allowed $30,000 (or $50,000) IAI amount. See below for examples of how long it would take to get paid back on renovating apartments in RS properties.

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Renovation Economics Today

Example A: Three Bedroom Apartment in Washington Heights

Size: 1,000 sq. ft.
Registered Rent: $1,525/month
Monthly Expenses: $1,000/unit
Rent Increase via IAI: $167/month
Exit Year: Year 10
Net Operating Income Growth: 0.0%

In today’s incentive framework, if a building owner invested $65,000 into an apartment, it would take him/her about seven years to be made whole on the $65,000 investment.

If the cost to maintain an apartment is $1,200 per month and the apartment is rented for ($1,525 + $167 IAI) = $1,691 per month, it would take more than 10 years for net operating income to cover the costs of an $80,000 renovation.

When dealing with very degraded apartments, it could take ten years before the cost to deliver the apartments back into service gets paid back, as the sensitivity tables show. Investing $50,000 into an apartment to get an increase of $166.7 per month (1/180^th on $30,000) amounts to a yearly return of 4.0%. Compared to standard real estate private equity structures, where investors can grow their equity investments by 50-100% within five-year cycles, 4.0% returns don't encourage investors to open their wallets. Because of these unappealing economics and the possibility that rent laws may slacken over time, many owners keep apartments empty when they are in rough shape. Some owners will say that apartments with rents below $1,000 per unit just don't cover the costs to maintain them, meaning there's no viable model for renovation. As a result, these low-rent units are the most likely to be warehoused.

Warehousing apartments constrains the housing supply and contributes to faster rent growth in free-market apartments. More importantly for policymakers, warehousing prevents people who need housing to have access to it. A lot has been written on warehousing, and the main takeaway I'd like to offer is that it will continue to happen until landlords start making good returns from renting out their apartments. And Senate Bill S6914 could help with just that.

Under the new proposed bill, the same three-bedroom in Washington Heights that I used in the prior examples could rent for close to ~$3,465, according to the fair market voucher rents for 2025 in New York County. Even if the cost to take the apartment back online exceeded $100,000, the payback period for such an investment wouldn't exceed four years. Working with the numbers I have below implies a yearly return of ~25% at minimum. That level of return would ignite speedy and swift permit filings and job deliveries to house new tenants. That could create an impressive dent in housing the group of 11,000 voucher holders who sought housing but couldn't find it in January 2025.

Renovation Economics - under Senate Bill S6914

When investors and property owners can exceed their registered rents, this chart illustrates that break-even can be reached much more quickly. In almost all cases, break-even is reached by the fourth year.

Even when expenses per unit hover around $1,400 per-unit, having high rents from voucher tenants can deliver break-even points on renovations within 3-4 years.

Sizing the Opportunity

S6914 opens the door for any rent-stabilized apartment to participate in the program – if it becomes vacant. According to the NYC Housing Vacancy Survey of 2023, about 586,800 apartments rent for under $1,100 in NYC. Let's take an educated guess that these are all rent-stabilized. Now, consider that 49% of those apartments that rent for under $1,100 have bedroom counts of 2 or greater. The Fair Market Rent, according to HUD, for two bedrooms in NYC is $2,780 in 2025. Putting this all together means there are approximately ~293k apartments whose rent could grow by ~150% by being assigned to voucher tenants. Doing some back-of-the-envelope math here that is directionally correct at best, we get this:

$1,680 in increased rent * 293k apartments * 0.39% vacancy rate* = ~$1.92m in gross rent per month created by the policy, or ~$24m per year in additional rent.

24 million dollars using conservative estimates (note that I did not delineate the number of 3 bedrooms to calculate the additional upside that exists there from the higher three-bedroom rent) is a significant number. Using a Gross Rent Multiple of 5x, 24 million in extra rent represents $120m of value. This could reinvigorate owners in the outer boroughs who are warehousing units into delivering those units back into service. In our example of the three-bedroom in Washington Heights, the rent has more than doubled, and NOI has gone up even more. Even with hefty investments of, say, $80,000 to bring apartments back online, investors could see +30% yearly returns on their renovating expenditures.

Some winners of this policy may include:

Broad: Building owners in secondary and tertiary markets in the outer boroughs of Brooklyn, the Bronx, and even Queens.
Specific: Investors whose buildings that were rejected for Substantial rehabilitation by DHCR.
Broad: Free market building owners with big bedroom layouts in outer boroughs

The opportunity here is exciting. This Senate Bill could create a major source of value for landlords and tenants for years to come. On the investing side, there will be opportunities to buy vacant properties, there will be cap rate compression, and there will be lenders to finance these acquisitions at higher, government-backed rents.

What do you think about the prospect of higher voucher rents in place of low legal rents in your properties?

Romain Sinclair's NY Multifamily Newsletter