Owning a rent-stabilized building in Brooklyn, whether it's in Williamsburg, Bed-Stuy, Crown Heights, or Bay Ridge, comes with a unique set of challenges. You can't simply raise rents to match market rates. You can't deregulate units when they hit a certain threshold. And with the Housing Stability and Tenant Protection Act (HSTPA) of 2019 still shaping the landscape, the old playbook no longer applies.
But here's the reality: Brooklyn property owners are still finding ways to maintain healthy Net Operating Income (NOI) on rent-stabilized assets. The key isn't chasing loopholes, it's mastering compliance while running a tight, efficient operation.
This guide breaks down exactly how to do that.
What Are the Current Rent Increase Rules Under the RGB?
The NYC Rent Guidelines Board (RGB) sets the maximum rent increases you can apply to stabilized leases each year. For lease renewals in 2024, the board approved:
- 2.75% for one-year leases
- 5.25% for two-year leases
These percentages apply to lease renewals only. You cannot charge vacancy bonuses or longevity surcharges, those were eliminated under HSTPA. And high-rent deregulation? That ended on June 14, 2019. Units that were previously deregulated stay that way, but you cannot deregulate new apartments regardless of rent level.
What this means for your NOI: revenue growth on the rent side is modest and predictable. Planning your budget around RGB-approved increases (rather than hoping for larger gains) keeps your projections realistic.
How Do MCI and IAI Rent Increases Actually Work?
Major Capital Improvements (MCIs) and Individual Apartment Improvements (IAIs) remain two legal pathways to increase rents beyond the annual RGB adjustment, but they come with strict caps and requirements.
Major Capital Improvements (MCI)
MCIs are building-wide upgrades that benefit all tenants, think new boilers, roof replacements, window installations, or elevator modernization. If approved by DHCR, you can increase rents across all stabilized units, but:
- Increases are capped at 2% per year until the full amount is recovered
- The improvement must be building-wide and necessary
- Documentation requirements are extensive
Individual Apartment Improvements (IAI)
IAIs apply to specific apartment renovations done during vacancy, new kitchens, bathrooms, or flooring. Under current rules:
- You can increase rent based on 1/168th of the documented cost (for buildings with 35 or fewer units) or 1/180th (for larger buildings)
- There's a lifetime cap of approximately $30,000 in IAI increases per apartment over 15 years
- Improvements must be verifiable with receipts and photos
The bottom line: both MCI and IAI programs can meaningfully impact your rent roll, but only if you maintain meticulous records and follow DHCR procedures precisely.
What DHCR Registration Requirements Should You Know?
Every rent-stabilized unit must be registered annually with the Division of Housing and Community Renewal (DHCR). Missing or incorrect registrations can freeze your ability to collect legal rent increases, and create serious complications during building sales or refinancing.
Key registration requirements include:
- Filing the annual apartment registration by the deadline (typically mid-year)
- Accurately reporting the legal regulated rent for each unit
- Documenting any rent increases from RGB adjustments, MCIs, or IAIs
- Keeping copies of all lease renewals and rent history documentation
For Brooklyn property owners managing buildings in neighborhoods like Park Slope, Flatbush, or Downtown Brooklyn, staying current on DHCR filings isn't optional, it's foundational to protecting your asset's value.
How Can You Reduce Operating Expenses Without Cutting Corners?
Since rent growth is capped, expense management becomes the primary lever for improving NOI. Here's where smart rental property management in Brooklyn makes the difference.
Vendor Bid Comparisons
Are you getting competitive pricing on contracts for cleaning, landscaping, elevator maintenance, and trash removal? Many Brooklyn landlords stick with the same vendors for years without ever testing the market. Getting three bids on every major contract can reduce costs by 10-20%.
Combined Buying Power
Working with a property management company that handles multiple buildings means better pricing on supplies, insurance, and contractor rates. At Landlord Management (LLM), our portfolio-wide relationships translate to savings individual owners can't access on their own.
Preventive Maintenance
Deferred maintenance creates expensive emergencies. Scheduled inspections, seasonal HVAC servicing, and proactive plumbing work cost less than emergency repairs, and keep tenants satisfied (which reduces turnover and vacancy loss).
Energy Efficiency Upgrades
LED lighting, smart thermostats, and efficient boilers reduce utility costs. These upgrades may also qualify as MCIs, creating a path to recover costs through rent increases while lowering your operating expenses long-term.
What About HPD Violations and Building Compliance?
The NYC Department of Housing Preservation and Development (HPD) enforces the Housing Maintenance Code. Open violations, especially Class B (hazardous) and Class C (immediately hazardous), can result in fines, tenant rent reductions, and complications with financing.
Best practices for staying compliant:
- Respond to tenant complaints promptly and document all repairs
- Schedule regular inspections to catch issues before they become violations
- Clear violations quickly and file certifications of correction with HPD
- Maintain records of all repair work, including invoices and photos
For owners in older Brooklyn neighborhoods, Bushwick, Crown Heights, Sunset Park, buildings often have aging systems that require proactive attention. A single ignored complaint can snowball into multiple violations and significant expense.
How Does Local Law 97 Affect Rent-Stabilized Buildings?
Local Law 97 sets carbon emission limits for buildings over 25,000 square feet, with penalties beginning in 2024 for non-compliance. Many rent-stabilized buildings in Brooklyn fall into this category.
The challenge: you need to invest in energy upgrades (new windows, boiler replacements, building envelope improvements) to reduce emissions, but your ability to recoup those costs through rent increases is limited.
Strategies to consider:
- Pursue MCI approval for qualifying energy improvements
- Explore PACE financing or utility incentive programs
- Plan capital expenditures strategically over multiple years
- Work with a management company that understands Local Law 97 compliance
The buildings that adapt early will avoid penalties and potentially reduce operating costs, those that wait face compounding expenses.
What's the Best Approach to Collections and Arrears?
Rent collection in stabilized buildings requires a balance of firmness and legal precision. You cannot simply evict for non-payment without following proper procedures, and the eviction process in NYC remains lengthy.
Effective collection practices include:
- Clear communication of rent due dates and accepted payment methods
- Prompt follow-up on late payments (within days, not weeks)
- Offering payment plans when appropriate to avoid costly court proceedings
- Documenting all communications and payment agreements
- Working with legal counsel experienced in landlord-tenant matters when necessary
A 24/7 owner and tenant portal, like what LLM provides, makes rent payments easier and creates a clear record of all transactions. Transparency reduces disputes and keeps cash flow predictable.
Frequently Asked Questions
Can I still deregulate rent-stabilized apartments in Brooklyn?
No. High-rent deregulation was eliminated under HSTPA effective June 14, 2019. Units previously deregulated remain so, but no new deregulation is permitted.
How much can I raise rent on a stabilized unit?
Only by the amount approved by the RGB for lease renewals (currently 2.75% for one-year, 5.25% for two-year), plus any approved MCI or IAI increases.
What happens if I miss my DHCR registration?
You may be barred from collecting rent increases until registration is corrected, and it can create title issues during a sale or refinance.
Do I need a property management company for a rent-stabilized building?
Not legally, but experienced Brooklyn property management companies help you navigate compliance requirements, reduce expenses, and avoid costly mistakes.
Ready to Maximize Your Building's Performance?
Managing rent-stabilized buildings in Brooklyn requires specialized knowledge: DHCR filings, RGB guidelines, MCI applications, HPD compliance, and more. At Landlord Management (LLM), we handle all of it with full transparency, simple pricing, and no hidden fees.
Our 24/7 portal gives you real-time visibility into your property's performance. Our combined buying power reduces your operating costs. And our rent stabilization expertise keeps you compliant while maximizing NOI.
Request a proposal today and see what professional property management in Brooklyn NY can do for your bottom line.