Rent Control in NYC: The Investor’s Guide to One of the City’s Rarest Property Types

If you're new to real estate investing in New York City, you’ve probably come across the term rent control—and maybe even confused it with rent stabilization. But rent control is an entirely different beast—and one that can dramatically affect your investment decisions.

Here, we’ll break down exactly what rent control is, how it works in NYC, and why buying a rent-controlled property may or may not be the right move for your portfolio.

What Is Rent Control?

Rent control in NYC refers to a specific set of laws that severely limit the rent amount a landlord can charge and how much it can be increased over time. The goal is to protect long-term tenants from being priced out of their homes, especially in older housing stock.

In contrast to rent-stabilized units (which are more common and have different rules), rent-controlled units are extremely rare and highly regulated.

How Rent Control Works in NYC

Rent-controlled apartments fall under a system called the Maximum Base Rent (MBR) system. This system governs how rents are calculated and raised—if at all.

Key Criteria for a Rent-Controlled Apartment:

• Located in a building built before February 1, 1947

• Tenant (or a qualifying family member) has lived in the unit continuously since before July 1, 1971

• Governed by New York State Division of Housing and Community Renewal (DHCR)

How Rent Increases Work:

• DHCR sets a Maximum Base Rent every two years, based on maintenance costs, property taxes, and inflation. Raise the rent by either the average of the last 5 Rent Guidelines Board increases or 7.5% per year, which ever is lower.

• Landlords must apply for rent increases; approval is not guaranteed

• Tenants can challenge increases based on building violations, improper paperwork, or unjustified increases.

What Property Owners Should Know:

To request a rent increase, the landlord needs to certify that:

• You're providing essential services

• All building violations have been corrected

• No More Fuel Surcharges: As of the 2019 law, fuel pass-along charges are no longer allowed for rent-controlled units. Tenants can't be billed extra for heating costs.

Tip: Just because MBR allows an increase doesn't mean you’ll get it—paperwork errors, tenant objections, or building violations can prevent it, so keep thorough records to avoid disputes.

Why Are Rent-Controlled Apartments So Rare?

According to a 2023 survey, there are only about 24,000 rent-controlled apartments left in NYC (and shrinking). That’s less than 1% of the city’s total rental housing.

Most of these apartments exist in older neighborhoods like:

• Upper West Side (Manhattan)

• Bay Ridge (Brooklyn)

• Forest Hills (Queens)

Pros and Cons of Investing in Rent-Controlled Properties

✅ Pros

• Below-market purchase prices: These units typically sell at a discount due to low rent rolls

• Long-term tenants: Lower turnover means fewer vacancies and lower marketing costs

• Appreciation upside: If a unit becomes deregulated, you could gain major value

❌ Cons

• Severely restricted rent growth

• Tenants have strong legal protections

• Can be very difficult to remove tenants

• Operating costs may outpace rent revenue

• Limited or no access to traditional value-add strategies (e.g., renovations for higher rent)

Warning: Many rent-controlled units operate at or near a loss. You must be prepared to carry them for years—or decades—before realizing any upside.

What Happens When a Rent-Controlled Apartment Becomes Vacant?

When a rent-controlled unit becomes vacant, it generally shifts to rent stabilization—but not always. The outcome depends on:

• Size of the building (6+ units usually convert to stabilization)

• Previous tax abatements

• Building condition and registration status with DHCR

If a unit does convert, the new rent is based on a formula rather than market conditions. And you still can’t charge just any rent you want.

Can You Ever Deregulate a Rent-Controlled Unit?

Almost never directly. Deregulation typically happens only when:

• The building undergoes substantial rehabilitation, although the passing of the 2019 Housing Stability & Tenant Protection Act complicates it.

• The unit is vacant, and the building qualifies for exemption (rare)

Key Legal Considerations

• Successor Rights: Family members who have lived with the tenant may legally inherit the unit and continue under rent control

• Lease Requirements: Most rent-controlled tenants don’t have formal leases; they are considered month-to-month under protection of the law

• Building Violations Matter: You must maintain the property per NYC Housing Maintenance Code or risk rent increase denials

How the 2019 HSTPA Changed the Game for Rent-Controlled Apartments

In June 2019, New York State passed the Housing Stability and Tenant Protection Act (HSTPA)—a sweeping overhaul of landlord-tenant laws. While most coverage focused on rent stabilization, rent-controlled apartments were also directly impacted in ways that significantly tightened landlord flexibility.

🔧1. Major Capital Improvements (MCIs) and Rent Increases Were Limited

Before 2019: Landlords could permanently increase rent in rent-controlled units to recoup costs for major building improvements (e.g., boiler replacement, new roof, elevator upgrades). These MCIs were one of the few ways to gradually raise rents.

After HSTPA:

• MCI increases are now temporary, not permanent

• Limited to a 30-year duration, after which the rent increase is removed

• Rent increases from MCIs are capped at 2% annually, down from the previous 6% (in NYC)

• DHCR approval process became stricter and more time-consuming

📌 Investor Impact: Rent-controlled buildings that rely on MCI increases to stay solvent will see reduced cash flow potential and longer ROI timelines on capital upgrades.

🧱 2. Individual Apartment Improvements (IAIs) Curtailed

Before 2019: Landlords could apply permanent rent increases based on individual apartment improvements, such as kitchen or bathroom renovations, provided they followed DHCR procedures.

After HSTPA:

• Rent increases for IAIs in rent-controlled units are now temporary (30 years), not permanent

• There are tight caps on how much can be spent and claimed:

  • Maximum of $15,000 in improvements over 15 years

  • Maximum rent increase of $83.33/month for those improvements

• Owner documentation requirements were strengthened, including photos, itemized bills, and contractor agreements

Impact: The traditional "value-add" model of investing—spending on upgrades to drive higher rents—is now heavily restricted in rent-controlled apartments.

🧾 3. Tougher Tenant Protections & Enforcement

• Eviction protections were expanded, even in month-to-month rent-controlled tenancies

• Non-payment proceedings now require more notice and give tenants more time to respond

• Tenants have greater access to legal support, making evictions or legal action costlier and lengthier for landlords

• DHCR enforcement of violations (e.g., overcharging, unlawful deregulation) has increased, with more power to audit and penalize landlords

Impact: Landlords must be extremely careful with legal compliance, rent history records, and how they handle tenant issues. Mistakes can lead to rent freezes, penalties, or loss of rent increases.

🏛️ 4. Elimination of Vacancy Deregulation (Primarily for Stabilized, But Affects Flow from Controlled Units)

Rent-controlled units often convert to rent-stabilized after tenant vacancy. In the past, these stabilized units could be deregulated if the rent hit a legal threshold (previously around $2,774/month).

HSTPA eliminated high-rent vacancy deregulation, so units that leave rent control and enter rent stabilization stay regulated indefinitely.

Impact: The long-term path to market-rate rent via natural tenant turnover is now blocked. Even if a rent-controlled unit becomes vacant, you likely won’t be able to convert it to full market rent.

Summary of Key HSTPA Changes for Rent-Controlled Units

Before HSTPA	After HSTPA
Permanent rent increases from MCIs	MCI rent increases temporary (30 years)
IAIs added permanent rent bumps	IAIs limited to $15K over 15 years, increases temporary
Easier eviction of non-paying tenants	Stricter eviction process, longer timelines
Deregulation possible after rent threshold	No more deregulation of units due to high rent

The 2019 Law Made Rent-Controlled Investing Even More Long-Term

For investors eyeing rent-controlled units, the 2019 law closed many of the traditional "loopholes" that allowed for modest rent increases or strategic repositioning of units over time. Today, rent control is more rigid and long-term than ever before, with fewer tools available to increase profitability or convert units.

If you're going to invest in this niche, go in with a deep understanding of the law, realistic expectations, and a solid legal team. The opportunity is still there—but it’s a long game.

Is Buying a Rent-Controlled Property Right for You?

Ask yourself:

• Are you a long-term investor who values asset appreciation over short-term income?

• Can you afford to subsidize the unit for years?

• Are you willing to manage complex tenant relationships and regulations?

• Do you have the right legal team and property manager in place?

If your answer is yes to most of those, you may be able to find hidden value in rent-controlled properties. If not, it might be better to focus on unregulated or rent-stabilized units, where there’s more flexibility and predictability.

Additional Resources

• Rent Guidelines Board

• Home & Community Renewal - Rent Control

• Met Council on Housing - Rent Control

This blog post is provided for informational purposes only and should not be construed as financial, legal, or investment advice. While I am a licensed real estate professional in New York, I am not a financial advisor, attorney, or tax professional. Readers are strongly encouraged to consult with their own licensed attorney, CPA, or financial advisor before making any real estate investment decisions. All information is deemed reliable but not guaranteed and is subject to change based on market conditions, legal updates, or individual deal circumstances.