New York State’s rent stabilization and rent control laws expired midnight Wednesday night after the Democrat controlled Assembly and Republican controlled Senate failed to reach a compromise. Governor Cuomo is threatening to keep the legislators in Albany in special session until a new law is passed.

The rent control and rent stabilization regime cover over one million apartments in New York City. The regime applies primarily to apartments built prior to 1973 with rents below $2000 per month. 

The laws limit rent increases to levels set annually by the Rent Guidelines Board, a panel consisting of both landlord and tenant representatives and by members appointed by the Mayor. 

Public meetings before the Rent Guidelines Board are always contentious affairs interrupted by tenant activists. The landlord representatives always ask for 10% plus increases, citing rising taxes and operating costs, while the tenants usually ask for a rent freeze. The mayoral appointees split the difference, typically decreeing annual increases in the range of 3 to 6 percent. 

The legislature last amended the rent laws in 1997. The amendments allowed for vacancy increases of up to 20% along with a pass-through of 2.5% of all improvement costs. Most significantly, the amendments stipulated that, once vacant, any apartment whose legal rent reached $2,000 per month could be removed from rent stabilization. Moreover, any occupied apartment that reached $2,000 per month would be removed from rent stabilization should the occupants earn $175,000 per year for two consecutive years. 

The amendments established de facto vacancy decontrol. Any landlord with adequate resources can now easily raise the legal rent of a vacant apartment to reach the $2000 per month threshold. 

As a consequence, tensions between landlords and tenants have increased substantially. The prospect of decontrolling stabilized apartments incentivizes landlords to monitor, and sue, tenants who might be subleasing their apartments or not using them as their primary residence. Many unscrupulous landlords will neglect their properties or harass tenants with meritless lawsuits to hasten their tenants’ departure. In at least one instance, a landlord is believed to have murdered his rent regulated tenants.

While the system does protect low and middle income tenants, it also benefits wealthy renters. Most notoriously, Mia Farrow used to live in a rent stabilized 11 room penthouse on Central Park West, while now retired super broker Alice Mason held court for decades in her rent stabilized eight room apartment on East 72nd Street.

The Republican controlled Senate wants only to extend the existing regulations. Democrats hope to increase the destabilization threshold to $3,000 per month, limit the improvement pass-through and raise the luxury decontrol income threshold to $300,000 year.

I feel that price controls cause scarcity and that the housing market, in the long run, will be healthier if rent stabilization can be phased out.

However, I also believe that it would be neither fair nor feasible to strip low and middle income tenants of their protections.

Here is a proposed compromise that will hopefully curb the worst abuses of the current system while protecting those whom the laws were intended to benefit. 

1) Do not raise any luxury decontrol thresholds.

I do not think that wealthy people should be entitled to government subsidies totaling tens of thousands of dollars per year. In my own building, I know of several 2 and 3 bedroom apartments that are occupied by people who make a very good living. The apartments would rent for $5000 to $7000 per month but are occupied by high income empty nesters paying under $2000 per month. These low rents amount to a subsidy of over $60,000 per year! 

Therefore, I would support eliminating rent protections entirely for people making $175K per year. As a compromise these apartments could be kept in rent stabilization and offered in a lottery to properly vetted low or middle income tenants. 

2) Limit the inheritance rights of rent stabilized apartments to surviving spouses and partners. 

I do not think that a good deal on rental housing ought to be a commodity that should be passed down through generations.

3) Allow landlords -- or perhaps just small landlords -- to pass-through a fixed portion of real estate tax increases and other government-controlled costs to rent stabilized tenants. Such a provision might give legislators some pause before hitting up landlords for additional tax revenue and devaluing their investments. 

4) Increase penalties on landlords who abuse the system by harassing rent stabilized tenants

5) Index the decontrol threshold for low and middle income renters for inflation, using 1997 as your baseline year.