By Kelley Boyd (@msksboyd)
So, what is NYC Rent Stabilization exactly?
Many of you are not from here - I am not from here either so anything we know about rent control is not really firsthand. Most of us get our information from the landlord...or at least I did. So, rent control remained mysterious. Turns out not really mysterious, not even complex, just dense. So to make it a bit easier to be conversant there are some high level things you should know as you look for a place to live in New York State.
Many people are under the false impression that the price is the price because that is just what it costs to get a place. Well, not always. The city has long had programs to assist landlords in the way of tax relief against their property taxes. In exchange landlords abide by some rules...among them rules on how much they can raise rents, what they can claim in the way of improvements, and a hodge-podge of other administrative stuff, such as giving you a statement on your deposit, copies of your lease etc.
NYC Rent stabilization vs NYC Rent Control:
NYC rent stabilization is different from rent control in that the rent control program has been replaced by the rent stabilization code. There are still some apartments under rent control guidelines because of longevity leases etc. I dont know a lot about rent control other than when an apartment moves off rent control to rent stabilization there is some paperwork required and the opportunity to bring the rent to market rate is in play. Both programs are administered by the DHCR, a state agency. There is an affiliate city agency that also has influence, HPD, though in my experience they have not played a role.
So - focusing on NYC rent stabilization - each year rent increases are determined by a formula that the state legislature has approved.
It is certainly reasonable for landlords to be paid a fair amount of money for their apartments, but the amount of money they legally can charge if they take the subsidies is managed...and if they cheat - well, that is not right. And it can result in some huge dollars being collected by the landlord illegally. HUGE.
But tenants also cheat and many of us unwittingly proliferate these problems by participating in a system that is built on the fraud. So that good deal on a sublet that is in the Village - the one that is only $2400 for a studio. It is through a friend of a friend who got the apartment from her grandmother, but they actually live in Connecticut and have three kids in school there. Since they only pay $600 for that apartment they are in effect paying their mortgage from the city rental...so, that is potentially a HUGE windfall - 10 years of collecting an extra $1800 a month - not right either.
We illustrate the tenant windfall with assumptive numbers but pay attention, it is the calculation for only one apartment. While there are those who will keep up the ruse, as technology evolves it will be easier to keep track of access and it may become onerous and at some point may not be possible or worth it. Alternatively, landlords windfall stand to be much bigger so it is always going to be worth it. Even small scale landlords...take that number and multiply by 20 apartments. Then times a couple of buildings, and even the small time landlords can really be raking in the cash.
New York Rent Stabilization, New York Rent Control: The Morals
The moral to this installment is there is plenty of blame to go around when it comes to the high real estate costs and challenges in New York City. We will talk about the pieces of paper you need to pay attention to in the leasing process that will signal a possible illegal rent in the next installment.
Kelley Boyd is a serial entrepreneur who is not afraid to tackle the really hard things. Three years into the abyss of the DHCR with a rent overcharge claim, this column is a conduit for all that is crazy about NY Rental Board Guidelines. Get connected at www.about.me/kelleyboyd or at www.theleanexperience.com