First, what are rent-controlled and rent-stabilized units?
Rent-controlled units are the rarest form of regulation in New York City, with only around 24,000 units being rent-controlled. This form of regulation applies to units built before February 1st 1947, and whose tenants have lived in the same unit continuously since at least July 1st, 1971. Such stringent restrictions are what makes rent control so incredibly rare in New York. Rent increases are minimal, following the state’s Maximum Base Rent system. Landlords of rent-controlled units do not have much control in this form of regulation.
Rent-stabilized units are by far the most common form of regulation in the city, with about 1 million units being rent-stabilized. Rent increases for these units are determined annually, but the NYC Rent Guidelines Board, or RGB. Tenants of rent-stabilized units also have the perk of being guaranteed the option to renew their lease for 1 to 2 years after their original lease is up. The lease renewal factor, as well as the limit on rent increases, give the landlord little freedom and control.
What about the rest of NYC?
The vast majority of rental apartments in NYC are free market rentals. This means that these units have no rent increase restrictions placed on them, giving the landlord much more control over their pricing. Pricing is often dependent on the market demand for similar units or the financial circumstances of the owning entity. Tenants are also not guaranteed a lease renewal, and must negotiate their terms when their lease is up.
Would Mamdani be Able to Freeze the Rent?
Mayoral candidate Zohran Mamdani has promised a multi-year rent freeze for rent-stabilized units. However, there are many hurdles that stand in the way of this proposal. The legal authority to set rents belongs exclusively to the Rent Guidelines Board. The RGB is a nine-member board that is mandated by state law to review a massive amount of economic data before they can set a rent guideline vote. This makes the process of solidifying a multi-year rent freeze difficult (even though the mayor appoints the RGB members).
The Downside Risk
While a freeze sounds great for tenants, critics warn of a major downside: disrepair and deferred maintenance. Landlords rely on regulated rent increases to cover the rising costs of heat, water, and essential repairs. If the rent is frozen while expenses soar, the owner loses the financial incentive to maintain the building, leading to severe deterioration of the living conditions for the tenants.
What’s the Right Course of Action?
Regardless of political outcomes, rent-stabilized and rent-controlled units will remain a regulated part of the New York real estate market. Free-market units will continue to be driven by supply and demand. At Batra Real Estate, we stay on top of every change in the law and market to ensure our clients are always making informed decisions. If you’re concerned about the state of the real estate market or your own properties, inquire with us about how to stay on top of the ever-changing real estate market.
