Michael Cavadias

A Brief History of Rent Regulation in New York


ISSUE 81 | BUILDINGS | DEC 2017

Every tenant knows the enormous power imbalance inherent in the landlord-tenant relationship. Part of this imbalance can be described in the language of economics: landlords have an enormous information advantage over tenants. When you rent an apartment, the landlord knows whether the heat will come on in the winter, but you don’t; the landlord knows what a fair rent in the neighborhood is, but you may not; the landlord knows your credit history, but you don’t know if he’s a slumlord. But there’s a deeper, social asymmetry at work too: for the landlord the apartment is an investment, but for the tenant, it’s home. For the tenant, moving out means the cost and stress of finding somewhere else to live, of course, but it may also mean the disruption of neighborhood social networks, the emotional toll of pulling children out of their school, the challenge of finding a new apartment accessible to family and to work (if such an apartment can be found at all); it means a thousand forms of risk, stress and disruption. For the landlord, though, evicting a tenant just means terminating a contract. Given this enormous imbalance of power, tenant abuse is to be expected, and such abuse happens every day.

To remedy this imbalance, a few US cities in the middle of the twentieth century introduced rent control. Rent control laws recognize that tenancy isn’t simply a private contract between individuals; society at large has an interest in ensuring affordable and stable housing for working-class renters. Nowhere was this principle taken farther than in New York; in 1950 nearly every rental unit in the city was subject to rent control.

But New York’s rent control and stabilization laws (more on this distinction later) have been in decline for decades. Although 45% of New York’s apartments are still rent-regulated, hundreds of thousands of stabilized units have been lost in the past forty years. Simply put, the tenant movement in New York has been beaten back by the landlord lobby; nearly every time the New York rent laws are renewed, new loopholes are introduced allowing some units to leave the stabilization system. This trend, combined with rapidly increasing market-rate rents, has been catastrophic for poor and working-class New Yorkers; if it continues, the stabilization system will become a thing of the past.

The rent laws are up for renewal again in 2019; understanding their history and the history of the political struggles that shaped them is key to preserving and expanding them in the coming years.

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The modern era of rent regulation in New York State began during World War II when the federal government imposed price controls nationwide. The federal price controls began in 1942 and New York’s rental properties were included in 1943. In 1947, the Emergency Price Control Act expired and congress passed the Federal Housing and Rent Act, which kept controls in place but exempted properties constructed after 1947. Federal controls ended in 1950 and that’s when New York State stepped in and codified rent control for all rental units built before 1947. There was some limited deregulation of high-rent, luxury units over the next few years, but the vast majority of New York rental units were rent-controlled during this time.

In 1962, the state granted New York City control of rent regulation within its borders. Administration was shared with the state, but the city had the power to alter and strengthen its own laws. Some units were deregulated, but in 1969 the city, under Mayor John Lindsay, established the Rent Stabilization law to cover apartments built between 1947 and 1969. Rent stabilization was envisioned as a more flexible and market-friendly version of rent regulation than rent control. The key difference is that under rent control, the tenant’s right to stay in her apartment is not governed by a private contract between the tenant and landlord (a lease), but is a matter of state law. In other words, the tenant’s right to remain in her apartment was based on a state statute, not a lease which the landlord could choose not to renew. To increase the rent in a rent-controlled apartment, the landlord must apply to a state agency and justify the increase. The rent stabilization system, on the other hand, allows for automatic yearly increases, with the rate of increase determined by the Rent Guidelines Board.

Still, in the 1960s most rental units in the city were controlled or regulated, and most New York tenants could expect secure tenancy without worrying about skyrocketing rents. But in the 1970s, things began to change. 1971 was a devastating year for tenants. The legislature passed and Governor Rockefeller signed “vacancy decontrol,” which mandated that any stabilized or controlled unit that became vacant would automatically be deregulated. This was intended to be the slow death of rent regulation in New York State; while any individual tenant remaining in an apartment would not face deregulation, the city as a whole would steadily go market-rate as tenants moved out or died and their apartments left the regulatory system.

Also included in the bill was the Urstadt Law, which. prohibits cities and other local governments from enacting any rent regulation stricter than the state law. This law is still in effect and it’s why the New York City Council and Mayor are largely unable to protect tenants’ rights in the city.

Vacancy decontrol provided an enormous incentive for landlords to evict tenants, since once the current tenant leaves a landlord could charge a new tenant dramatically more. In the three years after 1971, with vacancy decontrol in effect, harassment of tenants and profiteering exploded. The effects were disastrous; tens of thousands of tenants of people risked losing their homes.

With vacancy decontrol causing massive displacement and harassment, the calls for the legislature to do something became impossible to ignore. In 1974 Nelson Rockefeller resigned to become Vice President and Malcolm Wilson (also a Republican) succeeded him. (Both houses of the legislature at this point were under Republican control.) In an unsuccessful attempt to stave off electoral defeat at the hands of angry city voters, Wilson signed the Emergency Tenant Protection Act of 1974. This is the basic framework law that we still have today.

The ETPA immediately ended vacanc decontrol and placed all units that had been deregulated between 1971 and 1974 (provided they were in buildings with 6 or more units) back under rent stabilization. Upon vacancy, rent controlled units would become rent stabilized units, thus slowly phasing out rent control. Units built after 1974would be unregulated. This began the basic structure we know today, where units in buildings with 6 or more apartments built before 1974 are generally rent stabilized. However, we will soon delve into all the exceptions to that rule.

From 1974 on, the Assembly has been controlled by Democrats and the Senate, with brief exceptions, by Republicans. In a state that regularly elects Democrats to all statewide offices, Republican control of the Senate has been possible only because the Assembly Democrats have allowed the GOP to consistently gerrymander the Senate districts from the 1980 census until today. (The Assembly districts are gerrymandered in favor of the Democrats, but they would control the house under any conditions.) Control of the state senate by upstate Republicans, whose constituents don’t use rent control and who are ideologically opposed to it, has been a barrier to strengthening rent laws.

Still, the rent laws have been tweaked a number of times, in some cases for the better. In 1984 the Omnibus Housing Act brought the whole system under state administration and significantly strengthened tenant protections through enforcement of rent registration. It’s important to remember that, at this time, basically every apartment in a building with 6 or more units built before 1974 was rent-regulated. The vast majority of tenants in New York City enjoyed the right to a lease renewal and rent increases that were capped by the rent guidelines board.

Everything began to fall apart in the 1990s. In 1993 the state legislature renewed rent regulation, but allowed landlords to deregulate vacant apartments that had a legal rent of over $2000 if the apartment became vacant between July 7th and October 1st of that year A small window, but the first crack in the system. As with every preceding sunset of the rent laws, the Assembly pushed for no weakening amendments and to make the laws permanent, but this time the Senate won concessions. And this was only the beginning.

In 1994 the New York City Council, at the behest of Speaker Peter Vallone, passed a bill extending decontrol to any apartment that became vacant with a rent over $2000 a month beyond the three month window the legislature had created the year before. The vote was contentious and close, but this established the precedent that would later be exploited by the legislature. Initially, decontrol was only supposed to affect apartments that were actually renting for $2000 or more at vacancy, but landlords used their ability to raise rents by making improvements to apartments to get the rent above the threshold after vacancy. In 1997 the Council clarified the rules in an attempt to close this loophole but, months later, a confrontation in the state legislature would culminate in a “compromise” that was actually the worst defeat for the tenant movement in decades.

The battle that determined the trajectory rent regulation would take for the next 20 years began in December of 1996. The Emergency Tenant Protection Act was set to sunset again in June of 1997 and the State Senate’s Majority Leader, Republican Joe Bruno, announced that the Senate simply would not allow a renewal to come up for a vote, that rent regulation would end the following June, unless the Democratic-controlled Assembly agreed to a phase-out over a few years that would still result in the end of rent regulation.

This, of course, resulted in mass panic in New York City. Millions of tenants faced the prospect of losing their homes. Tenants groups mobilized and Assembly Speaker Sheldon Silver vowed to protect tenants. Republican Governor George Pataki then sought to stake out a middle ground, calling for vacancy decontrol. This would mean that all apartments that became vacant would immediately become unregulated. This of course would have amounted to a gradual phase-out of the system as a whole, but it would at least have left current tenants protected–although any form of vacancy decontrol also incentivizes tenant harassment by effectively paying landlords to kick people out of their homes.

Silver refused to pass a budget without a deal on the rent laws, and the standoff with Bruno continued right up to the wire. At the last moment, Pataki, Bruno and Silver agreed to a compromise that appeared to be a victory for tenants but actually created the conditions for the housing crisis we are dealing with today.

The $2000 vacancy decontrol threshold set by the city council in 1994 was codified into state law, making it impossible for the city to revisit this. Worse yet, the compromise clarified that if a landlord could raise the legal rent via improvements after a vacancy, the unit would still be deregulated. The new law made this even easier by raising the “vacancy bonus” (the amount a landlord is allowed to raise rent on a vacant apartment) to 20%. This means that if a tenant paying $1000 vacates her apartment, the maximum rent automatically becomes $1200, and the landlord just needs to do enough renovations to raise the rent to $2000 to deregulate the apartment. The apartment doesn’t even need to actually rent for over $2000 to qualify for deregulation. There were several other weakening amendments attached to the renewal, including a provision that prevents tenants from challenging an overcharge after four years.

At the time, this was presented as a win for tenants. In reality, Silver had sold out tenants and given in to the demands of Bruno. Bruno and Pataki didn’t get the full vacancy decontrol they sought, but what they got was not much better from the tenants’ perspective. In the following years, hundreds of thousands of affordable apartments would be lost to deregulation and whole communities would be displaced as predatory real estate interests began to invest in rent-regulated properties for the sole purpose of harassing tenants so they could reap the financial gains upon vacancy.

The 1997 renewal was for 6 years. The next time the laws would come up would be in 2003, the first legislature elected after the next redrawing of state legislative lines in 2002. After the 2000 election, Democrats retained their overwhelming advantage in the State Assembly while Republicans clung to their narrow majority in the state senate. But yet again, the Assembly approved the Republican gerrymander of the State Senate, allowing the GOP to retain control and continue to threaten rent regulation.

The 2003 renewal ended up being an unmitigated disaster. The Senate simply passed a bill extending the laws until 2011 while weakening them even further. The dreaded “preferential rent” loophole was created in this renewal. Until 2003, if a landlord rented an apartment to a tenant at a lower rent than the legal rent, that in effect became the legal rent for the duration for the tenancy and the tenant was protected from the landlord raising the rent to the higher legal rent at lease renewals. This is no longer the case; now, if you’re renting a rent-stabilized apartment for $900 but the legal rent is $1800, you may see your rent double overnight even though your apartment is stabilized. The bill also further restricted New York City’s ability to make any local laws benefiting tenants.

The Senate didn’t even give the Assembly an opportunity to negotiate. They passed the renewal and left Albany for the year, daring the Assembly to let the laws expire and threaten millions of tenants if they didn’t pass the Senate’s version of renewal.

Over the next several years, the affordability crisis accelerated, with Mayor Bloomberg’s Rent Guidelines Board approving of the highest rent increases for stabilized tenants in decades. In 2008 the board approved increases of 4.5% for one-year leases and 8.5% for two-year leases, despite an outcry from tenants that literally drowned out the members of the board as they voted.

In 2008, Democrats finally gained a one-seat majority in the state senate, and hopes were high that the losses of the last two decades could be reversed. The Assembly passed a bill repealing vacancy decontrol and putting all deregulated apartments back into rent stabilization. The bill also ended the preferential rent loophole and made several other pro-tenant reforms. Right before the Senate Housing committee was to vote on this bill, Democratic Senators Pedro Espada and Hiram Monserrate (both of whom would later end up in prison) defected from the Democratic majority and threw control of the chamber to the GOP. Democrats eventually regained control but the price was making the corrupt and conservative Espada majority leader of the Senate, effectively killing any chance for strengthening tenant rights.

Republicans regained control of the Senate in the 2010 elections, but through pressure on Democratic Governor Cuomo, tenants did end up securing some minor pro-tenant amendments to the 2011 renewal.

Blowing their chance to permanently consign the GOP to minority status in a state that has voted Democratic in every statewide election in since 2002, the Democratic majority in the Assembly and Governor Cuomo again allowed the Senate GOP to aggressively gerrymander the Senate lines to stay competitive in a state where they would otherwise be almost irrelevant.

All this and we haven’t even touched on the Independent Democratic Conference. These are the breakaway Democrats, led by real estate industry darling Jeff Klein who threw control of the Senate to Republicans after the 2012 election when Democrats regained the majority, which they lost again in 2014.

Where we stand today is that the Emergency Tenant Protection Act expires again in June of 2019. The results of the 2018 election for State Senate will determine whether we can expand and strengthen tenant protections or whether vacancy decontrol will continue to erode the number of stabilized units and the constituency for tenant solidarity.

Most tenant groups advocate these and other important reforms.

  1. A full repeal of vacancy decontrol and bringing apartments deregulated in the last 20 years back under regulation.
  2. Repeal of the Urstadt Law, which prohibits New York City from making or strengthening its own tenant protections.
  3. Re-instating protections for tenants with a “preferential rent” so landlords can’t arbitrary raise rents to the legal rent at lease renewals.
  4. Making Major Capital Improvement rent increases (increases to stabilized rent permitted when landlords invest in renovating buildings) temporary instead of permanently increasing the legal rent.
  5. Restricting landlords from claiming more than one apartment in a building for personal use.