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Developing Your NYC Rent Increase Strategy

Dec 26, 2023

Strategizing a rent increase can be a complex process, especially in a city like New York with its unique market dynamics, laws, and tenant considerations. This article provides a comprehensive guide for property managers and owners to successfully navigate various factors involved in developing an effective NYC rent increase strategy. We will explore an understanding of NYC rental market dynamics, how to identify good times to increase the rent, the legal considerations to follow and, importantly, how to communicate the rent increase to your tenants effectively and responsibly.


Understanding NYC Rental Market Dynamics

The New York City rental market is complex and constantly evolving. Rents are primarily driven by the basic economic principles of supply and demand. When demand is high and supply is low, rents increase. When supply exceeds demand, rents tend to decrease or grow at a slower pace. However, unique aspects of NYC’s rental laws, demographics, and housing stock also influence rent prices.

Rent Stabilization Laws in NYC

New York has strict rent stabilization laws that limit rent increases on certain apartments. Rent stabilized units make up around 45% of NYC’s rental stock. For these units, rents can only be increased by a percentage set yearly by the Rent Guidelines Board. Landlords cannot raise rents beyond that amount even if the market may allow for higher rents.

This “rent freeze” limits how much landlords can increase rents on stabilized units when demand is high. It helps stabilize rents for tenants renewing leases. But it also leads landlords to charge higher “preferential rents” for new tenants to maximize rents on unit turnovers.

Supply and Demand Factors

Changes in rental supply and demand significantly impact NYC rents. More rental units becoming available cools rents. High tenant demand due to a growing population or economy boosts rents. Here are some factors that affect the balance between rental supply and demand in NYC:

  • High costs and regulations limit new housing construction, restricting rental supply.
  • NYC’s strong economy and job growth attract new renters every year.
  • Rising home prices prevent first-time buyers from leaving the rental market.
  • Older rental units gain protection and cannot easily be converted to higher-rent apartments.


Identifying Good Times to Increase the Rent

The Best Seasons for Rental Increasement

Landlords should consider seasonality when planning a NYC rent increase. In New York City, late spring through summer tends to be the peak rental season with the highest demand from new renters. Renters looking to move tend to search most actively at this time.

Increasing rents to take advantage of peak demand in summer, even if just for new tenants, can maximize rental revenue. Renewing tenants signing winter leases can potentially get better deals.

Tracking Local Market Trends

Rents and demand fluctuate across NYC neighborhoods and property types. Monitoring hyperlocal trends by checking competitor rents and vacancy rates can identify good opportunities for increases.

For example, rents near new transit hubs or hot neighborhoods may rise faster than the NYC average. Area improvements and changing demographics can also boost demand. Identifying where the rental market is strengthening before competitors do allows well-timed rent hikes.

Evaluating Property Improvements and Their Possible Impact

Major apartment upgrades allow landlords to legally increase rents – sometimes significantly for stabilized units. Improvements like renovated kitchens, bathrooms, floors, and amenities can attract higher rents if positioned appropriately.


Legal Aspects of Rent Increase in NYC

In New York City, there are strict laws and regulations around how much a landlord can increase rent each year. The primary agencies involved are the Rent Guidelines Board, which determines the allowable percentage increases each year, and the Division of Housing and Community Renewal (DHCR), which oversees rent stabilization. Landlords are required to properly notify tenants in writing of any rent increase and the justification behind it. There are different rules for rent stabilized apartments versus market-rate apartments.

For rent stabilized apartments, landlords can only increase the rent by a percentage determined each year by the RGB. This percentage is based on data like cost increases, market conditions, tenant affordability and more. For example, in 2022 the allowable increase was 3.25% for 1-year leases and 5% for 2-year leases.

Additionally, landlords can make adjustments for major capital improvements (MCIs) or individual apartment improvements (IAIs), but this involves a formal approval process. Tenants are protected from exorbitant increases.

Legal Notification Requirements and Process

For rent stabilized apartments, landlords must notify tenants in writing of the specific dollar amount increase and reason at least 90 days before the lease expires. This is done through the Offer of Lease Renewal form. Landlords must provide the rent history and use the proper RGB percentages.

If rent is not stabilized, 30 days written notice is still required prior to lease expiration, but there are no limits on the increased amount. Many landlords will indicate the increase in a renewal notice or new lease agreement. However, large increases 150% or more above the previous rent can be investigated.

Regardless, tenants should review the notices carefully. Mathematical errors, lack of proper documentation, or confusing language may provide grounds for tenants to contest the increase.

Navigating Rent Guidelines Board Recommendations

Each year, the Rent Guidelines Board meets to determine the allowable rent increase percentages for lease renewals in rent stabilized apartments. They analyze factors like landlord costs, building improvements, market conditions, and tenant affordability.

While the RGB percentages provide guidance, landlords do not have to increase rents the maximum amount. Tenants may try negotiating a lower increase by highlighting financial hardship or other valid reasons.

Landlords cannot increase rents above the RGB percentages. Doing so would be deemed an unlawful overcharge. Tenants can file overcharge complaints with DHCR for investigation and may be awarded refunds.

How Much Can Rent Be Increased Annually?

For rent stabilized apartments, landlords can increase rents each year by the current RGB percentages—in 2022, 3.25% for 1-year lease renewals and 5% for 2-year renewals. They can also make adjustments for major capital and individual apartment improvements.

However, there are additional factors to consider:

  • Preferential Rents – If currently paying below the legal regulated rent, increases are limited to the amount needed to reach the legal rent.
  • Discounted Rents – If the owner provided a rent discount, they can take back the discount with proper notice.
  • Vacancy Bonus – When a unit becomes vacant, the landlord can add a 20% bonus before the RGB increases.

For market-rate units, there are no limits on annual increases, besides the required 30-day notice. Tenants may try negotiating if the proposed increase is excessive.


Want to make sure that your rent increase is within the bounds of the law?

Work with the legal professionals at Belkin Burden Goldman. We can help you plan and execute NYC rent increases that maximize your profit margins while keeping tenants happy and staying within the bounds of the law.

Reach Out Today


Effectively Communicating NYC Rent Increase to Tenants

Proper Rent Increase Notification Practices

When notifying tenants of a rent increase, landlords should use the proper forms like the “Notice of Renewal Lease” or “Notice of Lease Termination” provided by state agencies. The notice should include specific details like the previous and updated rent amount and justification for the increase.

Provide advance notice—90 days for rent stabilized units and 30 days for market-rate. Be sure the documentation and math is accurate throughout. Make multiple copies and have tenants sign acknowledging receipt.

If increasing due to an MCI or IAI, include government agency approval forms. Use clear business language and a respectful, level tone when communicating with tenants.

Emphasizing the Justification for NYC Rent Increase

When explaining the need for a rent increase, provide context on rising operational costs – taxes, insurance, maintenance and capital improvements. Highlight specific upgrades done to improve the property and justify the rent change.

Note if the increase is simply based on the RGB approved percentage for that year. Explain that as landlords’ costs rise, the allowable legal rent rises predictably too. Reinforce that all increases comply fully with NYC housing laws and stabilization rules.

If below market, explain the increase brings the rent closer to similar units in the area. However, emphasize the value offered even at the higher rate.

Excellent Customer Service Practices

Rent increase notifications can lead to tenant frustration or complaints. Maintain excellent customer service when communicating changes.

Have in-person conversations in addition to formal notices to explain the rationale and answer questions. Be transparent about the basis for the updated pricing. Ensure all on-site staff is trained to address tenant concerns accurately and with empathy.

If tenants push back, hear them out calmly. See if there is room to negotiate smaller increases or payment plans for hardships. Provide contact information for follow up questions.

By proactively addressing concerns, landlords can mitigate negative reactions and maintain good tenant relations despite necessary rent increases.

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