Vacancy Decontrol:
The Devil in the Details

By Tim Collins

One of the biggest fears among tenants faced with the landlord offensive against the rent laws was the loss of tenure protections or lease renewal rights. Under the vacancy-decontrol plan offered by Governor Pataki, once an apartment was vacated, any new tenant would be totally at the landlord’s mercy in terms of lease provisions and renewals. The "saving" of the rent laws basically prevented that, but the victory came at a substantial price.

Many units will still be lost to decontrol because of five factors. First, the new law allows substantial increases upon vacancy, which will drive many apartments above the $2,000 a month threshold where full decontrol is permitted. Second, the state Division of Housing and Community Renewal’s interpretation of the law lets landlords add the vacancy increases set by the city Rent Guidelines Board to the 20 percent allowed by the state. Third, while current city law only allows vacancy decontrol if the previous tenant was already paying $2,000 or more, the state law decontrols apartments if the landlord can legally ask $2,000--effectively lowering the threshold to $1,667 or less. Fourth, inflation and normal renewal increases will gradually bring more apartments to the $2,000 threshold. Finally, by raising rents to the point where the vast majority of tenants can’t afford them, the new law may produce an artificially high vacancy rate of over 5 percent. Once reached (and verified by a triennial Census Bureau study) this would cause complete decontrol of the entire system. There is some indication that this Trojan-horse strategy to undermine the system was intended all along.

Sending rents soaring in the regulated housing stock is unlikely to encourage construction of new apartments. As demand for high-rent units is exceeded, vacancy rates in that submarket are likely to rise dramatically, and developers won’t build if there is an oversupply. These vacancies will not reflect new units being added to the market, but overpriced old units that were formerly regulated. Thus, Governor Pataki’s position that the new law will spur new construction is totally wrong-headed.

For rent-stabilized apartments, the vacancy increases are outlined in the chart above.

These increases were explicitly in lieu of the one and two-year lease-renewal guidelines set by the RGB, but were allowed to be added to "any other increases -- under the law. Consequently, the DHCR has taken the position that since the RGB allowed a 9 percent vacancy allowance for leases expiring between Oct. 1, 1996 and Sept. 30, 1997, that vacancy allowance may be added to the 20 percent vacancy increase allowed by the new state law--a total of 29%. This was clearly not the intent of Senate and Assembly negotiators, and so legal challenges to DHCR’s interpretation should be expected.

As the RGB did not allow an additional vacancy allowance for leases expiing between Oct. 1, 1997 and Sept. 30, 1998, the state law’s formula will be the only basis for an increase in that time frame.

In addition, the city’s 71,000 rent-controlled apartments will go to market upon vacancy, subject to the new tenant’s right to make a fair-market rent appeal. We have already seen huge jumps in these rents upon vacancy. If anyone who moves into a formerly controlled apart- ment is informed of the right to file a fair-market rent appeal--and succeeds in bringing the rent below $2,000--that apartment should remain under rent stabilization.

Although outright vacancy decontrol was defeated, the Rent Regulation Reform Act of 1997 is essentially a formula for the gradual demise of rent and eviction protections.

Tim Collins is tenant attorney in the law firm of Collins & Dobkins. Mr. Collins was for many years, until 1994, counsel and executive director of the New York City Rent Guidelines Board. He is considered an expert in economic issues relating to rent regulation.