Individual Apartment Improvements (IAIs) have not been eliminated by the Housing Stability and Tenant Protection Act of 2019. However, as a practical matter, building owners get very little value for investing in IAIs.
For rent-stabilized apartments prior to the recent June amendments, building owners were able to do improvements in an apartment during the vacancy or during the term of the tenancy with written consent by the tenant. Those improvements were able to be used to increase the legal rent for the apartment by 1/40th or 1/60th of the value of the improvements made, and that increase would have been a permanent increase to the legal rent for the apartment.
However, the Housing Stability and Tenant Protection Act of 2019 dramatically changed that, effectively killing building owners’ incentive to do any individual apartment improvements at all. Individual Apartment Improvements (IAIs) are now considered temporary. Any increase in the legal rent will be removed after 30 years.
The amount of the increase to the legal rent that was permitted is now greatly reduced, as well. Instead of 1/40th of the amount of the improvement for buildings under 36 units, the new formula only permits 1/168 of the amount of the improvements to be added to the legal rent. In buildings with 36 units or more that were previously allowed to add 1/60 of the amount of improvements to the legal rent, the new formula only permits 1/180th of the value of the improvements to be added to the legal rent.
Even given the reduced fraction of the costs that can be passed along to the legal rent, the legislature went even further and limited building owners to a maximum aggregate amount of $15,000 every 15 years with no more than three increases.
All of these changes dramatically reduce the incentive for building owners to make Individual Apartment Improvements (IAIs).
Jordi Fernandez Law, P.C.
420 Lexington Avenue, Suite 2920
New York, NY 10170