rent stabilization

Subject: Re: rent stabilization$

sam'sbbq&vegetarian wrote: My rent stabilized lease is up for renewal, and I have the option of signing a 2-year lease at a 5.5% increase or a 1-year renewal at 2.75%. My question: what advantage is there to taking the bigger increase with a longer commitment? I feel like there's got to be some sort of catch.

What's the maximum allowable/possible increase in 12 months' time?

If e.g. you currently pay $1000, allowing just over 3% p.a. inflation (0.25%/month) and you take the 5.5% (i.e. $1055) then the net present value of two years' rent is approximately $24610. To exceed that, they would need to raise the rent by 2.75 now ($1027.50) and an extra 5.5% in 1 year's time ($1084). You should therefore only take the 5.5% now if you're sure you're staying 2 years, and if you think it's likely that they'll change the rules and hike the rent by more than 5.5% this time next year. If you're disciplined, and put the spare $27.50/month in an inflation-beating savings account (currently 4.5% is on offer) then they would need to hike the rent even more in a year's time before you'd take the 5.5% now. However if inflation rises more sharply than expected, and the terms of rent stabilisation allow for larger increases depending on CPI, and your income is likely to increase too with CPI, then the 5.5% now might start to look slightly less like a bad deal.

Carnivore wrote: An excellent analysis. Mrs. C and I had a rent-stabilized apartment for 6 years, and as far as I can see, the only reason to take the 2-year lease is to not have to deal with the paperwork for 2 years. The 2.75% almost has to be cheaper. I don't think they've raised rent-stabilized rents by more than 4% in many years.

Possibly will be close to that this year.... If it's the same proportion of increased costs to rent increase, it will be 3.69%.
(but I have no particular reason to believe the proportion will be the same, so don't get mad at me, I'm just guessing...).

Costs for the owners of rent-stabilized apartment buildings rose by 7.8 percent in the last year, according to a report released yesterday by the New York City Rent Guidelines Board. The board will use that data in the next two months to help set allowable rent increases for a million apartments in the city.<p></p>
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The rise in costs was steeper than the 5.8 percent increase in the previous year. That figure formed the basis for a 2.75 percent rent increase for one-year leases and a 5.5 percent rise for two-year leases. The 7.8 percent jump in costs was largely driven by a 22.8 percent advance in fuel costs and a rise in real estate taxes, the board's staff said.

Source:http://www.nytimes.com/2006/04/27/nyregion/27rent.html/partner/rssnyt

Wow. Looks like the rents will be going up more than I thought possible:

http://www.nydailynews.com//front/story/416169p-351558c.html