Provides for high income decontrol of housing accommodations based upon the average annual income of the tenants for the previous 2 years

BILL NUMBER:S6473

Title of bill

An act to amend the emergency housing rent control law, the emergency tenant protection act of nineteen seventy-four and the administrative code of the city of New York, in relation to high income decontrol of rent regulated housing accommodations

Purpose

This bill would provide for a two year averaging of a tenant's annual income in determining whether the tenant is eligible for a rent regulated apartment.

Summary of provisions

Changes made to rent regulation last year increased the amount of annual income which a tenant may earn in order to qualify for a rent regulated apartment. Currently, the law requires that a tenant have a federal adjusted gross income of $200,000 for each of the prior two years. This bill would require that the determination be based upon adjusted gross income for the prior two years, not $200,000 for each of the prior two years.

Justification

In 1993, the State Legislature enacted two forms of rent deregulation. That law, as amended by subsequent legislation in 1997 and 2011, provides that (1) for in-place tenants, an apartment can be deregulated where the legal regulated rent for the apartment exceeds $2,500 per month and the income for the tenant exceeds $200,000 and (2) for apartments after vacancy, an apartment can be deregulated where the legal regulated rent for the apartment exceeds $2,500 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.

The high-rent/high-income deregulation process occurs when the legal regulated rent of an in-place tenant exceeds $2,500. 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 exceeds $200,000 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.

Some high wage earners have been able to take advantage of rent regulation by averting income on their tax return in one year and purposely accumulating more income which is well above the high income limit in the succeeding year, or vice versa. This bill will stem this practice. It will ensure that high-income tenants do not circumvent the intent of the deregulation provisions of the rent laws by providing a more realistic snapshot of income over a 2 year period.

Legislative history

New Bill

Fiscal implications

None.

Effective date

This act shall take effect immediately, with provisions.