RGB Finalizes Allowable Rent Increases for Renewal, Vacancy Leases
On June 21, the NYC Rent Guidelines Board (RGB) voted to raise rents on rent-stabilized apartments. In a 5 to 4 vote, the RGB adopted guidelines for Rent Guideline Board Order (RGBO) #55, which sets the rent increases you may take for rent-stabilized tenants in New York City on leases beginning anytime on or after Oct. 1, 2023, through Sept. 30, 2024. According to RGBO #55, you may take a 3 percent increase on a one-year lease. And two-year leases get a 2.75 percent increase in year one and a 3.2 percent increase in year two.
Last month, the RGB preliminarily approved rent hikes of 2 percent to 5 percent for one-year leases and 4 percent to 7 percent for two-year leases. At the time, Mayor Adams had been critical of the initial numbers, stating that a 7 percent increase would be “clearly beyond what renters can afford and what I feel is appropriate this year.”
In a statement, Nestor Davidson, Chair of the RGB, highlighted the fact that the data show rent-stabilized tenants are facing growing challenges, owner costs are continuing to rise, and there is reason to be concerned about the stock of rent-stabilized housing in the city. According to RGB’s 2023 Price Index of Operating Costs Report, prices facing owners rose 8.1 percent from April 2022 through March 2023. And it’s likely that elements of these recent trends, including rising insurance costs and property taxes, will persist in the immediate future even as inflation may abate. In addition, RGB’s Income and Expense Study showed evidence that owners are having trouble mitigating rising costs with available revenue. From 2020 to 2021, average net operating income in buildings with rent-stabilized units citywide decreased by 9.1 percent, following a 7.8 percent decline from 2019 to 2020.
In balancing these considerations, Davidson stated the RGB needs to consider both current condition and long-term trends to ensure the stability of the rent-stabilized system for tenants and owners. This RGBO is the second time during Mayor Adam’s tenure that the RGB allowed stabilized rents to increase. During Mayor de Blasio’s time in office, the highest increases approved by the board were 1.5 percent for one-year leases and 2.75 percent for two-year. But the RGB under the de Blasio administration also had the distinction of freezing rents on three occasions.
To help you calculate the rent hike you may charge for each of your tenants when you renew a lease, we’ve included a rent increase calculation chart—Apartment Law Insider’s RGBO #55 Rent Computation Form for Renewal Leases. Remember that for renewal leases, you calculate all rent hikes based on the rents charged on Sept. 30, 2023.
Rent Increase Permitted
The RGBO applies to renewal leases for rent-stabilized apartments, beginning anytime on or after Oct. 1, 2023, through Sept. 30, 2024. You can take 3 percent on a one-year lease and on two-year leases you can raise rents by 2.75 percent for the first year and, for the second year, 3.2 percent of the amount lawfully charged in the first year, excluding any increases other than the first-year guideline increase.
It’s important to note that as a result of the Housing Stability and Tenant Protection Act (HSTPA), these rent guidelines apply to both renewal and vacancy leases. Remember that HSTPA eliminated the statutory vacancy rate and does not permit Rent Guidelines Boards to establish a separate vacancy rate. However, if authorized by the Rent Guidelines Board, the owner may add a one or two-year guideline to all leases. And the owner cannot add more than one guideline adjustment within the same guideline year.
If Rent Cut in Effect
How do you calculate the rent increase for a renewal lease on an apartment where a Division of Housing and Community Renewal (DHCR) order cutting the rent for reduced services was in effect on Sept. 30, 2023? Base the renewal increase under RGBO #55 on what the tenant’s rent was before the DHCR-ordered rent cut. That’s because a rent cut for a reduced service is temporary. When you fix the problem, you can apply to the DHCR to restore the rent. But don’t collect the guidelines increase until after the DHCR restores the rent.
Example: On July 1, 2023, a tenant’s monthly rent is $1,200. In August, the DHCR cuts the monthly rent by $100, to $1,100. The tenant’s lease is up for renewal on Jan. 1, 2024. The tenant decides to sign a two-year lease. To calculate the guideline increase, multiply $1,200 (the rent the tenant was paying before the rent cut order) by 2.75 percent for the first year [$1,200 x 0.0275 = $33] and 3.2 percent for the second year [$1,233 x 0.032, + $1,233 = $1,272.45].
If you use our Rent Computation Form for Renewal Leases, you would enter $1,200—not $1,100—on line 1 (rent charged for apartment on Sept. 30, 2023). But remember: You may collect the guidelines increase only after you get a rent restoration order.
> How to fill out DHCR renewal lease offer form. In New York City, owners must give written notice of renewal by mail or personal delivery not more than 150 days and not less than 90 days before the existing lease expires on a DHCR Renewal Lease Form. It can be found at https://hcr.ny.gov/system/files/documents/2023/03/rtp-8-03-2023-fillable.pdf.
When a tenant signs the Renewal Lease Form and returns it to the owner, the owner must return the fully signed and dated copy to the tenant within 30 days. A renewal should go into effect on or after the date that it’s signed and returned to the tenant, but no earlier than the expiration date of the current lease. In general, the lease and any rent increase may not begin retroactively.
On the renewal lease offer form, fill out section 2 (which shows your calculation of the rent increase) as if no rent cut is in effect. In section 2, column b, enter the rent that you could have charged on Sept. 30, 2023, if no rent cut had been in effect. Base the rest of your section 2 calculations on the rent you entered in column b. Make sure you check the box at the top of column f, which indicates you’ll be charging the tenant a lower rent than the amount you’ve entered.
Then fill out section 5. Enter the lower rent you’ll be charging the tenant until you get a rent restoration order from the DHCR. Also, check the box that indicates that an agreement is attached to the renewal lease offer form. The agreement is the lease rider discussed in the next paragraph.
Once you get a rent restoration order, you may collect the higher rent listed in section 2, column g, of the renewal lease offer form. To head off tenant confusion and complaints, let the tenant know when and why you’ll be collecting the higher rent. You can add a rider to the renewal lease offer form you send to the tenant. Here’s a sample rider that attorney Karen Schwartz-Sidrane has drafted:
A DHCR rent reduction order is currently in effect; therefore, the tenant will be obligated to pay only the reduced rental in effect pursuant to said order until such time as the DHCR issues an order restoring the rent based upon the restoration of services or upon other grounds. Upon the issuance of said order, the tenant will become obligated to pay the increased rental reserved in this lease, effective as of the date specified in the DHCR’s order.
After the renewal offer is made, the tenant has 60 days to choose a lease term, sign the lease, and return it to the owner. If the tenant doesn’t accept the renewal lease offer within this 60-day period, the owner may refuse to renew the lease and may also proceed in court after the expiration of the current lease, to have the tenant evicted.
If Rent Overcharge Order Issued
What if the DHCR has issued an order finding that you’ve collected a rent overcharge, and that order includes a finding that the rent you charged on Sept. 30, 2023, should have been lower? You must base the increase available to you under RGBO #55 on the lower amount that the DHCR found was the legal rent you could charge on Sept. 30, 2023. If you use our Rent Computation Form for Renewal Leases, enter that lower amount on line 1 of the form.
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|RGBO #55 Rent Computation Form|