Going beyond Legal Rents with Vouchers: Section 610

It is possible for landlords and investors to lease rent-stabilized apartments above their legal rents, and that began through the implementation of New York’s Private Housing Finance Law (PHFL) Section 610 program. Section 610 was enacted in late 2022 as a targeted relief measure for certain rent-regulated housing. Critically, the policy was intended to preserve affordability by allowing landlords to increase their incomes from building operations without requiring voucher tenant rent contributions to increase.

Section 610 doesn’t permanently raise the legal, regulated rent of a unit. It simply permits the landlord to collect a higher contract rent from the subsidy as long as a voucher tenant occupies the unit. The subsidy provider (city or federal) pays any amount above the legal rent and is subject to the voucher program’s usual payment standards and rent reasonableness checks (to ensure the total rent is in line with market comparables). The legal rent remains on record and can only increase by regular Rent Guidelines Board (RGB) allowances; it must be “preserved and registered” with annual increases as if collected, so that when the unit is no longer subsidized, it reverts to that regulated rent level.

To make their buildings eligible, landlords must have pre-existing regulatory agreements with NYC or NYS housing agencies and contain rent-stabilized units occupied by voucher holders. New construction projects and buildings that simply have 421-a tax abatements are ineligible. For buildings that could generally work, getting approvals is highly variable and discretionary. Though we are still in the early innings of Section 610’s impacts, I imagine the program had some of the following noticeable effects:

Direct impacts

Increased Revenue for Troubled Properties:
For owners who did receive Section 610 approval, the most direct effect is improved cash flow. They can collect a higher rent (often hundreds of dollars more per unit monthly) from the subsidy source without charging the tenant more. This infusion of income helps stabilize struggling affordable buildings. By design, much of Section 610 is a preservation strategy: boosting rent rolls to fund operating expenses, maintenance, and debt service in buildings where regulated rents were too low to cover costs. In other words, it averts the potential loss of housing by keeping these properties financially afloat. Had Section 610 been more fully implemented, one would expect a measurable reduction in the number of affordable units at risk of physical deterioration or foreclosure, especially in older HUD/HDC-financed portfolios that were running deficits under low rent limits. Property owners gain immediate financial relief, which can translate into better building repairs and continued participation in affordability programs rather than opting out or defaulting. As one industry alert put it, the law’s intent was “increasing cash flow for building owners while preserving long-term affordability,” essentially, shoring up supply by saving existing units.

No Rent Impact on Tenants; Potential for More Voucher Acceptances:
Section 610 was carefully structured so that tenants saw no increases in their rent burdens. Voucher holders already pay a fixed percentage of income, and Section 610 explicitly does not affect that. Thus, tenants in 610-approved units continue paying the same affordable rent, and they benefit indirectly if their building is better maintained thanks to the owner’s higher subsidy income. The program’s direct goal wasn’t to help individual tenants (who were already housed with vouchers), but to help owners. However, one first-order effect for voucher holders in general could be improved access to units: with the incentive of higher rent collection, owners might be more willing to accept voucher tenants in their regulated units. In the eligible affordable projects, landlords who previously might have been reluctant (if the voucher would only pay up to the legal rent, which was low) now have an economic reason to lease to voucher holders, since they can get the full voucher value. This could modestly increase the utilization of vouchers by opening up units that owners would otherwise have left vacant or rented to non-voucher tenants. In a city where tens of thousands of voucher holders struggle to find landlords willing to rent to them (e.g., an estimated 11,000 CityFHEPS voucher holders remained in shelters due to lack of landlord acceptance as of January 2025), any policy that improves landlord uptake of vouchers can help move those families into permanent housing. Section 610, in the limited sphere where it applied, likely improved voucher placement rates by making subsidized deals financially attractive to owners. Still, given the narrow eligibility, this first-order benefit was confined to specific buildings and did not dramatically change the overall success rate of voucher holders finding apartments citywide.

The direct impacts of Section 610 should be very positive. The program should bolster owners of certain affordable units, maintain those units in the housing stock, and marginally improve voucher utilization, all without harming tenants. These direct effects, however, remained limited in scale due to the program’s cautious rollout. Had Section 610 been fully unleashed, we would expect a larger number of voucher families housed (within the affordable stock) and a more noticeable improvement in the financial stability of that stock.

Downstream Effects

Beyond the immediate impacts, Section 610 and the policy of enabling vouchers to exceed legal rents will also have consequences that may not be immediately obvious. These include unintended market consequences and strategic responses by both private actors and policymakers. Key among these are changes in investor behavior (notably in boroughs like the Bronx), an uptick in owners seeking regulatory agreements to qualify for benefits, and shifts in property valuations (cap rate compression), as well as pressure for legislative solutions. We discuss these cascading effects below:

Investor Activity and Property Market Dynamics

The prospect of higher rental income from voucher-supported units has altered investor calculations, particularly for rent-stabilized buildings in lower-rent areas. In neighborhoods like the Bronx, which has many rent-stabilized apartments with low current rents relative to HUD Fair Market Rents, investors took note of Section 610’s revenue potential. If an apartment’s legal regulated rent is $1,000, but a Section 8 voucher could pay $1,500 for that unit, the owner stands to gain a 50% increase in rent per unit by leveraging the program. This potential may lead to increased acquisition activity for buildings with significant voucher tenant populations or the ability to attract them. Real estate buyers could begin targeting portfolios of affordable or rent-stabilized buildings in the Bronx and similar markets where they could, in theory, implement Section 610 (or a future expansion of it) to boost rent rolls. Even though Section 610 required a regulatory agreement (which most private owners didn’t have), it signaled the broader shift that policymakers were willing to let voucher rents exceed stabilized limits under certain conditions, and investors took note.

This new policy should increase transaction levels and continue the demand for such assets. Owners of distressed rent-stabilized buildings may see opportunities to sell at higher prices to buyers who are bullish on voucher incomes. Conversely, mission-driven affordable housing operators may also seek to acquire troubled properties, now that an extra subsidy tool is made available to make the finances work. The expected outcome should be more aggressive bidding on buildings with lots of voucher potential, especially in the Bronx, where the spread between existing rents and voucher caps is the widest. And what does lots of voucher potential look like? It means high-vacancy properties, or properties with pathways to high vacancy. Properties with warehoused apartments check that box, as do apartments with economic vacancy and non-paying tenants. Counterintuitively, non-paying tenants or ‘non-pays’ could deliver value to prospective buyers by providing paths to repossession of the impacted apartments. Getting those apartments vacant meant nothing before because rents were frozen at their legal rents + 2.75% RGB increase, but now when those units can rent for perhaps 50% more than in-place income, landlords will have strong incentives to deploy their legal budgets and work to renovate the units to be able to get those voucher tenants in place.

This new incentives framework will push competition and drive up property values for those assets that have higher voucher tenant potential, and that could compress cap rates. Investors could begin to price in future higher rents (from subsidies) even before they were realized, resulting in lower current yields (cap rates) at sale. For example, a building currently earning $800,000/year in NOI in the Bronx might normally sell at an 8.5% cap rate (around $9.5 million). But if a buyer believes Section 610 could raise the rents to $1,000,000/year with vouchers, he might be willing to purchase the building for $10 million because on a pro forma cap rate that works out to a 10% cap rate (before inclusion of capex costs and legal fees).

Cap rate compression in this case is a double-edged sword. On one hand, it reflects optimism that more low-income tenants can be housed at sustainable rents, which is a great social good. On the other hand, it opens up buyers to the risk that they purchase properties that aren’t eligible for Section 610, or that the program never quite takes off and gets the funding it deserves. If an investor paid a premium for a Bronx building assuming they’d quickly get HPD approval to increase voucher rents, they could be in trouble now that HPD has paused the program. There are anecdotal reports of deals now in limbo or buyers seeking concessions because the anticipated Section 610 rent bumps are not forthcoming. This dynamic illustrates that policy uncertainty can whipsaw the market and really jam things up. Initial policy enactment of Section 610 boosted market confidence in voucher-backed investments, and the subsequent program suspension injected new uncertainty, potentially cooling that segment of the market or stranding leveraged bets.

Regulatory Agreements and Policy Leverage

Another notable effect of Section 610’s framework was the incentive it created for owners to enter regulatory agreements with the City to qualify for the benefit. Since only properties with affordability regulatory agreements could use Section 610, some landlords began exploring ways to bring their buildings under HPD/HDC regulatory jurisdiction voluntarily. One common avenue was through tax incentive programs like Article XI of the NYC property tax code, which provides a tax exemption in exchange for entering an affordability agreement with HPD. Attorneys working with owners reported that clients were trying to secure Article XI deals (which typically mandate a portion of units at affordable rents for a decades-long term) by June 2025 so that, “by extension, [they’d] be eligible for Section 610,” according to The Real Deal. These owners were willing to accept new affordability restrictions and partner with HPD if it meant unlocking the higher voucher rents to make their projects viable. That’s to say, despite HSTPA’s aggressive regulatory reach into the workings of privately owned apartment buildings just six years ago, some investors are willing to submit their buildings to even more regulatory scrutiny if it means growing profits. Section 610 could increase HPD’s regulatory reach and bring more buildings into public-private affordability agreements.

From a policy perspective, the alignment of incentives was great. Section 610 implementation meant that more landlords were coming to the table to preserve affordability than might have otherwise. It was inducing participation in programs that ensure long-term affordable units. If Section 610 had continued, HPD might have leveraged it to negotiate extensions of affordability on properties that were otherwise nearing the end of their restriction periods or that had none at all. In this way, Section 610 could have been a tool not just for shoring up existing agreements but for expanding the stock of regulated affordable housing through voluntary conversions.

However, with the program’s suspension, this trend may reverse. Those owners considering Article XI solely to access Section 610 may now reconsider if that benefit is off the table. The “quid pro quo” opportunity has vanished for the moment, and some deals will get cancelled or ‘retraded’ after HPD’s announcement that the program is on pause. Any future approach (including Senate Bill S6914 or others) that maintains some form of incentive for affordability commitments could capitalize on this lesson.

NYC Housing and a Shifting Paradigm

NYC housing appears to be in a moment of change. Speculative ‘pops’ in value and heavy reposition deals are harder to find outside of 1/2a/2b deals in great neighborhoods, and there is an increased focus on affordable housing — be it in Section 610, 485-x, Mandatory Inclusionary Housing, or City of Yes’s Universal Affordability Preference. Though it is on pause for now, Section 610 exists within this new framework that prioritizes affordability and encourages collaboration between private owners and city government. Though it’s early to tell, Section 610 may illustrate that deeper government reach can be a good thing that puts dollars in owners' pockets.

Section 610 was a small, discretionary program that few landlords benefited from or knew about. But for all the value it left on the table in its limited scope, it appears to have inspired Senate Bill S6914, which is gaining lots of momentum and takes the most valued pieces of Section 610 and strips away some of the more tedious elements for landlords. Next week, I will dive into Senate Bill S6914, evaluate what it could do for owners, and confirm whether I think it will pass into law.

Sources:

New York City Department of Housing Preservation & Development, PHFL Section 610 Overview and Update​

NYC HPD, PHFL Section 610 Consolidated Guidance for Owners (March 2025)

The Real Deal – K. Brenzel, “City freezes reprieve for landlords with voucher tenants” (Mar. 31, 2025)​

Nixon Peabody LLP, Client Alert: New York legislation resolves rent stabilization and rental subsidy conflict (Dec. 16, 2022)

NY Senate Bill S6914 (2025), Introduced Text

I am bullish on NYC multifamily

Best Regards

Romain Sinclair

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