Combined Apartment Rules in New York Undergo Significant Changes

New York State is ushering in a new era for its housing market with the introduction of significant changes to what have come to be known as combined or Frankenstein apartments. 

What these types of residences are: These apartments, created by combining two or more units into one, have long been a point of contention in the state's real estate landscape. Now, the state's housing regulator has certified changes that drastically impact how rents for these combined apartments are determined, effectively rendering the practice of creating them far less lucrative for landlords.

What the new regulation means: Under the new rules, rents for vacant, stabilized apartments that have been combined will be calculated based on the combined rents of the individual units that existed before the merger. This marks a major departure from the previous practice, where landlords had the ability to set a new, often higher, first rent for these combined units. The ability to set a new first rent had been a rare opportunity for landlords to exceed the increases permitted by the Rent Guidelines Board while still keeping the apartments regulated.

Who fought for these new rules: These changes reflect a shift in favor of tenant advocates, who have long sought to curb the practice of creating "Frankenstein apartments." By eliminating the incentive for landlords to combine units, the new regulations aim to protect tenants and maintain affordable housing options.

The other side of the discussion: However, some landlords argue that these changes will place additional financial strain on rent-stabilized buildings. Owners have relied on the higher rents generated by combined and deregulated apartments to ensure the financial viability of their properties. The amendments certified by the state regulator also modify the rules for demolishing buildings or deregulating them through substantial rehabilitation, adding to the concerns raised by property owners.

While the new regulations represent a significant shift in New York's real estate landscape, it remains to be seen whether the industry will challenge these changes in court. Attorneys and industry experts have suggested that the state regulator may have overstepped its authority by introducing these changes, as it is traditionally responsible for providing guidance on existing laws rather than altering the rules themselves.

The amendments are set to take effect upon their publication in the New York State Register, which is expected to occur on November 8th.