A Decade of Defunding

How the Rent Guidelines Board Has Pushed Thousands of Buildings To The Brink

The New York City Rent Guidelines Board is scheduled to host several meetings in the next few months and review data on the financial health and physical condition of buildings. Much of the board is new, and while they are an independent body, they have been given a mandate by Mayor Mamdani to seek a rent freeze, which was one of his signature policies of his campaign. 
We can say with confidence that the data presented will show that a large section of rent-stabilized buildings are in dire fiscal distress, and each month things are getting worse for Pre-1974 buildings that receive no subsidy, and have average rents that are below $1350, according to the NYU Furman Center. 
The deterioration of this housing stock, roughly one-quarter of all stabilized housing, has been a long time coming. For a decade straight the Rent Guidelines Board has adjusted rents below inflation. And well below the commensurate adjustment that the RGB’s data says is necessary to prevent the deterioration of 100% stabilized buildings. 

A recent report by the Real Estate Board of New York found that Pre-1974 buildings with very-low averaging rents and high property taxes were responsible for the majority of violations filed last year. This is not surprising, since data from the Rent Guidelines Board found that net operating income in these buildings has been declining rapidly, dropping by 13% from 2021 to 2023 when adjusting for inflation. This drop in revenue has made it impossible for thousands of buildings to keep up with maintenance. 

The consistent and troubling defunding of these buildings has been highlighted in various academic reports. The NYU Furman Center published a comprehensive study that concluded this trend of declining operating income is “reducing owners’ capacity to absorb rising costs or invest in long-term maintenance.” In testimony before the Rent Guidelines Board last year, the Citizens Budget Commission called it a “death spiral” and urged the government to more closely track the decline of buildings. 

It is clear based on various sources of data and independent analysis that there is a crisis, and it has already begun. 

How The RGB Works

Under the Emergency Tenant Protection Act of 1974, rent-stabilization can be established after the City Council votes to declare a housing emergency. An emergency can only be declared if there is a vacancy rate below 5%, which means less than 5% of available apartments are empty. Under the law, the city is required to conduct a survey every three years, with some exceptions, and reauthorize the emergency. Ever since an emergency was first declared, the city has implemented policies to make sure housing production was limited, so the vacancy rate would never exceed 5%. This has allowed the city to maintain the temporary emergency, permanently.  

As part of the law, the city sets up a Rent Guidelines Board that consists of a chair, four additional public members, two owner members, and two tenant members. Among this group of nine, five members must agree on a rent adjustment annually, which takes effect on all leases from October 1, to September 30. 

Before the members vote on the adjustment, they are required by law to review a host of data so they can make an informed decision. Historically, the board has examined the financial health of buildings by looking at the Income & Expense Report, looked at the future cost of building operations in the Price Index of Operating Costs, reviewed the current wealth of tenants in the Income & Affordability study, and received feedback on the overall market conditions and access to loans in the Mortgage Survey. After reviewing these reports the board receives testimony from invited guests that include advocates for property owners and tenants, housing experts in academia and at think tanks, and banks or lending institutions that have real time data on the current state of rent-stabilized housing loans. This is followed by a discussion among the members that ends with a Preliminary Vote that sets a range for the rent adjustment. In 2025, this range was 1.75 percent to 4.75 percent for one-year leases. The final vote was a 3% increase on a one year lease, falling right in the middle of the Preliminary Vote range. Typically, this vote is taken near the end of April. 

Following this vote, the Rent Guidelines Board hosts a series of hearings that allow tenants and property owners to speak about the current state of housing. These hearings are attended by the members of the RGB and historically take place in at least four of the five boroughs from late May until the final vote in late June. 

The mayor, and his office, work closely with the chair of the Rent Guidelines Board and the other members of the RGB, but the board is independent. State law mandates that the final decision is made by the board after reviewing relevant data. 

The mayor can replace members of the board when their terms expire or seek their removal for cause, but he cannot simply remove them if they don’t follow the mayor’s wishes.

What To Look For In 2026

We have seen clear trends in rent-stabilized housing in the past three years. The three reports that RGB members focus closely on are the Income & Expense Report, the Price Index of Operating Costs (PIOC), and the Income and Affordability study. The I&E has shown increased distress in majority stabilized buildings. The PIOC has shown costs have increased faster than RGB projections each year. The Income and Affordability report has found that many renters are struggling to pay rent across the city. 

Income and Expense Report: 

The Income and Expense Report is primarily data analysis of every building with a rent regulated unit that is over 10 units tall. These buildings are required to file Real Property Income and Expense reports to the Department of Finance, which then analyzes the data for the RGB. For example, a primarily free market building with average rents of around $9,000 on Park Avenue is included in the analysis because it has two rent-stabilized units. 

The inclusion of this high-rent free market data has historically created a talking point for lawmakers and advocates that rent-stabilized buildings are performing well. Tucked in the back of the Income & Expense Report are breakout tables that show that buildings with more than 80% stabilized units that are located in the outer boroughs and in Northern Manhattan are rapidly declining in value. This is where the majority of rent-stabilized housing is located. 

The 2026 I&E Report will show continued distress for the majority of rent-stabilized housing. It will likely also show increased rents and income for primarily free market buildings, due to the city’s lack of supply. It is important to note that this is data from the 2025 RPIE filings, which is a complete look at the year 2024. This is a massive lag, which makes viewing the trend over the years more important. 

Assuming the format of the report does not change, the most important piece of data in this report will be the tables in the Appendices, which break up building health based on geographic location and building age (Pre-1974 or Post-1973). Half of all rent-stabilized housing is located in Pre-1974 buildings outside the Core of Manhattan that are more than 80% stabilized. In each of the tables, a sub category of “City w/o Core” exists. These are the buildings in the most financial distress and should be the primary focus of the RGB. 

From 2021 to 2023, data presented by the RGB has shown that net operating income in Pre-1974 buildings has declined significantly. Net Operating Income or NOI is the amount of revenue left over after all day-to-day expenses have been paid to run the building. Adjusting for inflation, the average Pre-1974 rent-stabilized building outside the Core of Manhattan, the NOI dropped from $441 to $384, per unit, per month. 

It is important to note that all mandatory upgrades to buildings that are eligible for depreciation are not included in the day-to-day expenses. For example, the law requires inspection and remediation of the building’s facade. This can cost hundreds of thousands of dollars and must be paid out of the building’s NOI. Historically, buildings do not have ample reserves to pay for this work, so they are required to take out loans, which are paid off through the NOI. Banks and lenders will not loan a building more than 80% of the NOI. When a building’s NOI declines, their value declines, and the building’s access to capital for mandatory upgrades disappears. 

The 2026 I&E will add data from 2024 to this trend. We expect the NOI decline will continue. We also anticipate that another troubling trend will continue: a decline in expenses on repairs and maintenance. In 2023, NOI for Pre-1974 buildings outside the core of Manhattan leveled off. The cause of this was an 11% decline in spending on repairs and maintenance, showing a clear trend of disinvestment in this housing as the building values declined. 

Price Index of Operating Costs 

The Price Index of Operating Costs (PIOC) focuses on the cost of running an apartment building. This is different from the I&E, which focuses on how much income a building has and how much of that income is spent on operating the building. In an ideal world, as prices increase the building income will increase enough to pay for those increases and the quality of housing will be maintained. In the past three years, unfortunately, we have seen prices increase faster than income in most rent-stabilized properties, which has led to a disinvestment in many buildings that has resulted in higher violation counts and worse living conditions for renters. 

The PIOC tracks seven major costs: Taxes, Labor, Fuel, Utilities, Maintenance, Administration, and Insurance. Each cost has a “weight” assigned to it, which is essentially a proportion of what the overall costs should be in an ideal world. 

Taxes: 

The 2025 PIOC assigns 28.8% of the cost to taxes. If a building is spending more than that on taxes, which many are, then they would be, in theory, spending too much. Taxes are obviously completely controlled by the city government and from April 2024 to March 2025, they were increased by 3.9% by the city government. This was more than inflation and more than the rent adjustment that was advanced by the RGB last year, as it has been every year for the past decade. 

Labor: 

This generally rises in line with inflation. It is calculated by looking at both unionized labor and non-union labor. Wages make up the majority of this cost, but health care and benefits are also calculated into this equation. In the past year, labor costs have continued to increase for most buildings in line with inflation.  

Fuel: 

This is by far the most difficult metric for the RGB to project and track. They admit this in their report. For example, in 2016 fuel costs declined by 45.5% when factoring in price and cold weather. This was one of the main arguments for freezing rents at the time. In 2023, the costs rose by 23.3%, requiring larger rent adjustments to cover this expense and other growing costs. In last year’s report, the RGB made it clear that cost projections have become “more challenging” due to the fact that “Energy prices have become increasingly volatile.” They estimated that prices would decline by 4.4%, but we have been hit with the coldest winter in a decade and early estimations are that prices are up by 10% to 15% from last year, when costs increased 10.3%. 

Utilities: 

Utility costs include gas for stoves, electricity for the building, and water and sewer charges levied by the city. Last year they increased by 8.2%, mostly due to the city’s decision to rapidly increase charges for water and sewer. Electricity costs also increased by 7.6%, which was in part due to the state authorizing higher rates. Rent-stabilized buildings, especially Pre-1974 buildings, have no option but to absorb these government-driven cost hikes when rent adjustments are below inflation. 

Maintenance: 

In last year’s report, maintenance prices rose by 4.3%, which was slightly more than inflation. The RGB calculates this metric by looking at 29 items. Plumbing and electrical maintenance are the main drivers of cost.

Administration: 

Running rent-regulated housing has a lot of additional costs for administration and compliance, compared to operating free market housing. New York has the most complicated and legally complex rent-stabilization system in the country, which means a large portion of each rent check must go to administrative or legal services. Last year, the cost of administration went up 5.1%. This is primarily driven by the continued growth of state and city laws. 

Insurance: 

The cost of insurance grew by an eye-popping 18.7% last year. This was even more than the projection from the previous year of 15.1%. It is clear that affordable housing, including Pre-1974 rent-stabilized housing that provides the majority of affordable housing in New York City, are in the midst of an insurance crisis. We believe the RGB data will show another massive increase on this cost in this year’s report. 

The Commensurate

Each year, the RGB calculates a necessary rent adjustment to make sure that 100% stabilized buildings are funded at the same level. This is called the commensurate and the idea is that if rents were adjusted in line with this number, the building would receive enough income to cover rising costs. This often gets a lot of media attention as a “suggested” rent increase by the board. It is not a suggestion, it is simple math. If you adjust rents below this number, you are choosing to defund these buildings and the result is predictable: declining maintenance and more violations. 

Last year, the PIOC recommended a rent increase of 4% on a one-year lease and a 7% increase on a two-year lease. The final rent adjustment of 3% on a one-year lease and 4.5% on a two-year lease was a decision to slightly defund 100% stabilized buildings. Since 2017, the PIOC has found that cumulative increases of 40% were necessary to maintain building health. The RGB has adjusted rents up only 17%, a gap of 23%, which is the primary reason for the massive fiscal distress in 80%+ stabilized buildings and the growing number of violations.

There is currently a bill in the state legislature that calls for the elimination of the PIOC and the commensurate adjustment calculation. It has three sponsors in the state Senate and one in the Assembly. 

Income and Affordability

The Income and Affordability report looks at a host of available data on current household income, labor trends, and the overall economic conditions. Most of this data is focused on citywide trends and very little of it looks specifically at the financial health of rent-stabilized tenants. The primary document for household income in rent regulated buildings is the Housing and Vacancy survey conducted every three years. The last time the survey was conducted was 2023. The data from that survey was very valuable in 2024, but it is less valuable in 2026 as we get further away from the date it was conducted. The 2026 Housing and Vacancy Survey is currently underway, but data from this survey will not be available until next year. 

The main takeaway from the I&A last year was that average inflation-adjusted wages were down slightly between 2023 and 2024. The report also found that nonpayment filings and nonpayment court cases declined in that same time period, which could signal that renters are not struggling as much to pay rent. Though, some would argue that housing court is still backlogged from COVID-19 delay so all the data on nonpayment and evictions is still difficult to fully analyze. 

For example, many nonprofits that operate rent-stabilized housing are facing significant rent arrears and they account for about one-third of all nonpayment filings last year according to a recent report by the New York Housing Conference. They are asking for direct subsidy from the government to cover these losses. 

The data in the Income and Affordability study is important for the RGB members to consider as they look at rent adjustments, but it continues to lack a focus on the specific conditions of rent-stabilized tenants.

Nonprofits in Distress

The defunding of rent-stabilized buildings has had a significant impact on nonprofit housing providers and mission-driven lenders. The goal of these organizations has always been to keep rents as low as possible, while still providing quality housing. But that balance is now out of whack. 

The Community Preservation Corporation outlined this problem in detail when they testified before the RGB last year. In their portfolio, they saw operating costs grow by 22% from 2020 to 2024, while rents only increased by 11%. As the CPC pointed out in their testimony, 11% increases would be sufficient if the average rents were higher. For example, a building with average rents of $4,500 would see their operating income increase, even if costs grew by 22%. The adjustment would be sustainable. 

The problem is that the majority of rent-stabilized apartments are in buildings with rents below $1,500. For their model, the CPC used $1,145, average rent in the Bronx as a starting point. Their model showed how this rent was sufficient to pay operating costs in 2024 and make a conservative debt service payment. Over the next four years, if the increase in costs continues to far exceed rent growth, the buildings will be plunged into severe fiscal distress. They also ran the model on a building with the citywide average rent of $1,599, which found that after four years a building with conservative debt service in 2024 would also be functionally bankrupt by 2028.

The reality is that non-profit rent-stabilized buildings will eventually fail if rent increases don’t keep up with operating costs, just like privately-owned rent-stabilized buildings.  

Conclusion

Mayor Zohran Mamdani pledged four years of rent freezes as a candidate last year. Since taking office, he has not publicly stated that the RGB should freeze rents. He has instead said it is an independent board, but has said he expects his appointees to the RGB to take a “clear-eyed” look at the “realities facing our city’s two million rent-stabilized tenants.”

For the past decades, Rent Guidelines Board’s under both Mayor de Blasio and Mayor Adams have prioritized tenant’s ability to pay in their deliberations and made the decision to defund the majority of rent-stabilized buildings each year. The result has been severe fiscal distress and declining building quality for many renters. 

If the board does go ahead with four years of rent freezes, the result is predictable. Thousands of regulated buildings, both privately-owned and nonprofit run, will be plunged into unlivable conditions.