Given that New York City has the highest construction costs in the world, it should come as no surprise that affordable housing is scarce. High rental rates have increased traffic congestion as many people who work in New York are moving to neighboring cities with lower housing costs.
New York authorities use rent regulation to ensure a minimum supply of affordable housing. The owner of a regulated apartment can only increase the rent in small amounts approved annually by a local council, or after a large capital investment in the property. When the rent exceeds a certain amount, the apartment is deregulated and can be rented at market rates. The deregulation threshold is reviewed on January 1 of each year and was set at US$2,733.75 for 2018.
Because of the way rules are set for rent-regulated apartments, building improvements are likely to push rental rates above the threshold for deregulation. As a result, the city faces a fundamental challenge: How to improve aging rent-regulated apartments while keeping them affordable?
Identify the most cost-effective upgrades for your building.
Improving security and performance with building upgrades
Homeowners have a wide variety of building upgrades available and each project is unique. However, in most cases, the goal is to improve some aspect of the building's safety or performance:
- For example, a sprinkler system makes a building safer because fires can be extinguished automatically when they are still small.
- On the other hand, an HVAC equipment upgrade increases building performance. Modern HVAC systems have superior control over temperature and humidity while consuming less energy – comfort improves and operating costs decrease.
These projects improve buildings, but are often followed by a rent increase to recoup capital expenditure. In rent-regulated apartments, original tenants may lose the benefits of building improvements if the rent is too high for them to afford. To improve affordable housing units while keeping them affordable, priority must be given to low-cost improvements that maximize benefits per dollar invested.
New York local laws make some building upgrades mandatory. However, this approach is not viable in rent-regulated apartments:
- When modernization projects are forced on landlords without rent increases, their profit margins suffer and they may go out of business. Consider that profit margins are already low in affordable housing; If mandatory upgrades reduce these margins further, fewer investors will be attracted to low-cost housing projects.
- Unfortunately, building improvements with corresponding rent increases can only be used sparingly, or tenants can be displaced by unaffordable rent payments.
Rent-regulated apartments represent 40% of large multifamily spaces in New York, and widespread deregulation would exacerbate existing problems: displacement and traffic congestion.
Economic Upgrades for Rent Regulated Apartment Buildings
Boiler and air conditioning replacements are examples of energy efficiency measures that allow high savings, but with a significant initial cost. Its application in rent-regulated apartments is limited, as the resulting increase in rent often displaces tenants.
The New York Urban Green Council has identified many low-cost, high-impact building upgrades that can be successfully implemented in affordable housing projects without causing a significant increase in rent. Following are some examples:
|
Low-cost building improvements |
Description |
|
Checking and Adjusting Temperature Setpoints in Heating and Cooling Systems |
When a thermostat is set too low or too high, the HVAC equipment uses more energy than necessary. |
|
Adjust boilers and furnaces at regular intervals |
This reduces operating costs and increases service life, saving on gas bills and component replacement. |
|
Improving the Building Envelope with Caulking and Weatherstripping |
These are low-cost measures that improve the building's airtightness, reducing unwanted heat gains (summer) and heat losses (winter). |
|
LED lighting upgrades |
LED upgrades have some of the shortest payback periods of all possible building improvements, sometimes under a year. Depending on the building's location in New York, tenants may even receive free LED bulbs through incentive programs managed by Con Edison. |
|
Isolation |
It can be applied to many HVAC components such as hydronic piping, hot water tanks and condensed steam tanks. |
|
Leak inspection and repair |
In HVAC installations, leaks of all types cause energy losses because they represent unwanted heat transfer. Fixing leaks improves efficiency. |
|
Construction Controls |
Just like LED lighting upgrades, building controls increase energy efficiency and have a quick payback period. |
|
Steam System Updates |
Buildings that still use steam can save money with thermostatic radiator valves (TRV) and temperature controls. Steam traps and main vents can be inspected, repaired or upgraded as needed. |
Improvements in affordable housing construction have a greater chance of success if they benefit both homeowners and renters.
- Energy efficiency measures for common building systems are the most attractive for owners, as they provide a return on investment without the need to increase rent.
- Tenants are more likely to support measures where savings are shared with them and where rent payments are not affected.
A professional assessment of your property is strongly recommended prior to any building upgrades. Engineering consultants can identify building conditions that go against local codes and safety issues that need urgent attention. They can also propose cost-effective energy efficiency measures depending on the conditions of your building.
