Provides for decontrol of rent regulated housing accommodations when total average annual income over two calendar years exceeds $175,000 and rent exceeds $1,500

Summary of provisions

This bill would lower the rent threshold used as part of the high income/high rent deregulation laws that apply to rent regulated tenants. The rent threshold would be lowered from a legal regulated rent of $2,000 per month to $1,500 per month. In addition, currently, the law requires that a tenant have a federal adjusted gross income of $175,000 for each of the prior two years. This bill would require that the determination be based upon gross income, not adjusted gross income, and that it be based upon an average of $175,000 for the prior two years, not $175,000 for each of the prior two years. Lastly, where the State Department of Taxation and Finance is unable to locate a tenant's State tax records, the burden of proof will be upon the tenant to establish that their income for the period of review was less than $175.

Justification

In 1993, the State Legislature enacted two forms of rent deregulation. That law, as amended by subsequent legislation in 1997, provides currently that (1) for in-place tenants, an apartment can be deregulated where the legal regulated rent for the apartment exceeds $2,000 per month and the income for the tenant exceeds $175,000 and (2) for apartments after vacancy, an apartment can be deregulated where the legal regulated rent for the apartment exceeds $2,000 per month. This legislation addresses only the first form of deregulation, known as high-income/high rent deregulation; the second form, the so-called high rent/vacancy deregulation, is the much more commonly used deregulation mechanism and is unaffected by this legislation.

One of the fundamental failings of rent regulation is that there is no correlation between a tenant's rent regulated status and their financial status. The rent regulatory system is, for all practical purposes, a lottery, premised not upon need but upon the mere fortuitousness of being in the right place at the right time. Nowhere is this failing truer than in the context of high-income/high-rent deregulation.

High-rent/high-income deregulation occurs when the legal regulated rent of an in-place tenant exceeds $2,000. Briefly stated, when a tenant's rent pierces that threshold, a property owner can commence a process whereby the State Department of Taxation and Finance examines

its records to determine whether the tenant's income exceeded $175,000 for each of the prior two years. If the income exceeds that threshold, the tenant's apartment becomes deregulated; if their income does not exceed the threshold, the apartment remains regulated, at least until the process is used again in the future.

The problem with the existing structure of the law is that it only applies to high-income tenants whose legal regulated rent exceeds $2,000. Those fortunate, high-income tenants whose rents are below $2,000 remain insulated from deregulation. The irony is that these high-income tenants, the ones who pay less than $2,000 per month, are even less-deserving of rent regulatory protection than high-income tenants who pay more than $2,000. The law should not act to protect these tenants. The law should ensure that as many high-income tenants as possible do not receive the benefits of rent regulation.

An irrational system is made even more irrational when the least deserving high-income tenants are enriched while property owners bear the burdens of receiving reduced rental income and while the City and State receive less tax revenue as a result. The arbitrary threshold of $2,000 per month should be reduced to $1500 to expand the universe of high-income tenants who are subject to high-income/high rent deregulation. The other provisions of this bill are intended to ensure that high-income tenants do not circumvent the deregulation provisions of the rent laws.

Legislative history

New Bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately.