Relates to alternative hardship applications for properties subject to the rent stabilization code

Title of bill

An act to amend the administrative code of the city of New York and the emergency tenant protection act of nineteen seventy-four, in relation to hardship applications

Purpose

To extend the number of ownership years from three years to six years in respect to eligibility for an alternative hardship rent adjustment

Summary of provisions

Section 1 of the bill amends paragraph 6-a of subdivision c of section 26-51 of the administrative code of the city of New York to revise the number of ownership years required to apply for an alternative hardship rent adjustment through the New York State Division of Housing and Community Renewal (DHCR) from three years to six years.

Section 2 of the bill amends paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974, constituting the emergency tenant protection act, to revise the number of ownership years required to apply for an alternative hardship rent adjustment through DHCR from three years to six years for building owners outside a city of one million or more.

Justification

Both subdivision c of section 26-511 of the administrative code of New York City and paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the emergency tenant protection act are designed to provide an alternative means by which building owners can apply to the DHCR commissioner for rent increases greater than those allowed by the applicable guideline increases prescribed. In order to be granted the hardship exemption, DHCR must find that the set rent increases will be insufficient for the owner to accrue a profit of at least five percent when considering the annual gross rent income collectible minus the annual operating expenses. Currently, building owners must have acquired the property at least three years prior to the application to file for the alternative hardship exemption. This proposed change will adjust paragraph 6-a of subdivision c of the administrative code to replicate the years of ownership required in paragraph 6 of the same subdivision in regards to applications for comparative hardship exemption. Paragraph 6 mandates that hardship be determined by comparing the annual net income of the past three years with that of either the three years prior, under the same ownership, or 1968 to 1970. Since many applicants are therefore required to have owned a property for the three base years plus the three years of comparison, the standard time of ownership required for many building owners is six years. This change would align the ownership years required in paragraph 6a with those in paragraph 6. Similarly, the alternative to the hardship application described in the emergency tenant protection act also requires only three years of ownership whereas this bill would extend that to six.

Moreover, since three years is a short amount of time to judge an owner's equity portfolio, this extension will encourage potential building purchasers to consider their assets more comprehensively and to avoid over leveraging since the prospect of hardship relief will be contingent an an initial six-year ownership period. The bill will further provide the DHCR with a reasonable timeframe from which to understand the owner's capacity to make a sufficient profit relative to the profit anticipated when the property was first purchased.

Legislative history

New bill.

Fiscal impact on the state

None.

Effective date

Immediately.