In a transient, vibrant market like ours, approximately 76% of NYC housing inventory is made up rentals: 65% coming from rental buildings outright, with the remainder from condo and co-op rentals. Interestingly, a whopping 51% of those units in Manhattan are rent-stabilized. (This percentage is 42% in Brooklyn, 42% in Queens, and 59% in the Bronx.)
So what does rent-stabilization get you and what should you watch out for?
- Limited rent increase potential: there is a cap on the amount of rent increase that a landlord can impose upon the renewal of the lease. For example, as of June 23, 2009, any lease for a rent-stabilized apartment commencing between October 1, 2009 and September 30, 2010 will have a maximum increase of 3% for a one year lease and 6% for a two year lease. These limits are set every year and are intended to protect tenants from exorbitant rent hikes or greedy landlords.
- Semi-guaranteed renewal rights: you are basically guaranteed a right of renewal of your lease, short of any egregious acts that would warrant an actual eviction. (Note that this is unlike co-op rentals, condo rentals, and non-stabilized units where landlords can choose to not renew your lease.) This feature is a significant plus for those looking for a long-term home without the risk of having to move when your lease expires. Due to this feature, you will often find it easy to sign a 2-year lease for rent-stabilized apartments, as landlords can’t kick you out yet you are committing to stay put for 2 years. Remember this in your negotiations process.
What renters need to watch for when they sign leases, however, is the base price considered for rental increases. There is a difference between preferential rent and legal rent. You may well find, particularly in luxury rental buildings benefiting from government tax incentives, that the legal rent for your apartment is almost double what you’re paying … and it’s the legal rent that’s typically considered the base for rent movements. In such a case, the key is to try make sure that the rent increase will be calculated off the preferential rent, if at all possible. Though the market largely dictates landlord behavior and rental pricing, trying to get a rider to your lease spelling this out is a no-lose proposition.
