MCI and IAI rent increases after the 2019 law

If you live in a rent-stabilized apartment, your landlord can raise your rent beyond the yearly Rent Guidelines Board increase in two ways: a Major Capital Improvement (MCI) for building-wide work like a new boiler or roof, and an Individual Apartment Improvement (IAI) for work inside your unit. Since the 2019 Housing Stability and Tenant Protection Act (HSTPA), MCI increases are capped at 2% a year and expire after 30 years, while IAIs were later reshaped by a 2024 law into two tiers worth up to $30,000 or $50,000 of work.

This guide explains how each increase is calculated, what limits apply today, and how to fight an MCI application before it lands on your rent bill.

What counts as a Major Capital Improvement

An MCI is building-wide work that the owner asks New York State Homes and Community Renewal (HCR, also called DHCR) to pass on to rent-regulated tenants. HCR lists boilers, windows, electrical rewiring, plumbing and roofs as typical examples. To qualify, the work must:

• be depreciable under the Internal Revenue Code, and not an ordinary repair;
• be essential for the preservation, energy efficiency, functionality or infrastructure of the entire building;
• directly or indirectly benefit all tenants; and
• meet HCR's Useful Life Schedule (Fact Sheet #33). HCR gives the example that a package or steel boiler can only qualify if it is replaced after 25 years, not every five.

Cosmetic upgrades and work done in a few apartments do not count. The item must be a new installation, not a repair to old equipment. Owners must file the MCI application (form RA-79) within two years of finishing the work.

The 2019 limits on MCIs

The HSTPA rewrote the MCI rules for New York City and the other places with rent stabilization. According to HCR:

• The yearly cap dropped to 2%. It used to be 6% or 15%, depending on the case.
• MCI increases are banned in buildings where 35% or fewer of the apartments are rent regulated.
• An MCI can't be granted if the building has outstanding hazardous or immediately hazardous violations on file with the city (in NYC, under the Housing Maintenance, Building or Fire Codes; for HPD these are Class B and Class C). HCR can also deny an MCI if the owner isn't maintaining required services, if there is an outstanding HCR harassment finding, or if a building-wide rent reduction order is in effect.
• Only reasonable costs are recoverable, and every claimed cost must be documented.
• The increase is temporary: it must come out of the rent 30 years after it took effect, along with the guideline increases that were compounded on top of it.
• The 2% cap also applies to the uncollected part of MCIs approved on or after June 14, 2012.

One more protection: if your apartment has its own HCR rent reduction order for decreased services, you are exempt from the MCI increase until HCR restores your rent.

How an MCI increase is calculated

HCR starts with the owner's claimed cost and removes anything ineligible, unproven, or paid by insurance or government grants. It then removes the share that benefits commercial space, spreads the rest over 144 months (35 or fewer units) or 150 months (more than 35 units), and divides by the number of rooms in the building. Your increase is that per-room figure times your room count. Here is HCR's own worked example from Fact Sheet #24:

So a four-room apartment in that building would get a $40 monthly MCI increase. If the tenant pays $1,600, the 2% cap limits what the owner can collect in the first 12 months to $32, measured against the rent in effect when the owner filed (HCR calls this the rent roll date). The other $8 is phased in over later 12-month periods. To run your own numbers, use the MCI rent increase calculator.

How to challenge an MCI application

When an owner files, HCR mails every rent-regulated tenant a notice with the docket number, the work, the dates, the claimed cost and your room count. At that point nothing has been approved. This is your best chance to stop or shrink the increase.

1. 1

   Note the 60-day deadline

   You have 60 days from the date on the HCR notice to answer. You can ask for one 30-day extension for good cause; write to the HCR MCI Unit, give your reason and include the docket number.
2. 2

   Get the owner’s application

   Request the full file with HCR’s Records Access form (REC-1). The owner may also keep a copy at the building for tenants to review.
3. 3

   Check the building’s violations

   An MCI is barred if hazardous or immediately hazardous violations were on file when the owner applied. Look up your address on Roofy and HPD Online, and save screenshots with dates.
4. 4

   Organize with neighbors

   Tenants can answer individually or through a tenant association. A group answer with photos and signatures carries weight. See tenant association rights.
5. 5

   Answer in writing, with evidence

   Be specific: which item is defective, which floors were skipped, which costs look wrong. You can keep sending evidence after your first answer until HCR issues its order; always include the docket number.
6. 6

   Appeal if you disagree with the order

   File a Petition for Administrative Review (PAR, form RAR-2) within 35 days of the order date. Filing a PAR does not stop the owner from collecting the increase while it is decided.

Grounds HCR lists for opposing an MCI

• The work doesn't benefit the whole building (HCR's example: windows replaced only on the third floor of a six-floor building).
• The work is cosmetic, or it is an ordinary repair such as patching parts of a roof.
• The old system hadn't outlived its useful life, or the owner already got an MCI for it.
• The installation is defective, incomplete or done in an unworkmanlike manner.
• Costs are undocumented or miscalculated, or insurance or a government grant paid for part of it.
• Hazardous violations were on file when the owner applied, or the owner is not providing heat, hot water or gas.
• The owner has harassed tenants, or failed to allocate costs to commercial space.
• The application came more than two years after the work, lacked required permits, or lacked contractor affidavits.
• Some of the work was done by the super or someone related to the owner, or your room count is wrong.

If the work needed approval from another agency (for example, the Department of Buildings for a boiler or rewiring), HCR will consider tenant complaints but may refer defects to that agency instead of denying the MCI. If no approval was needed, the owner can answer complaints with an engineer's or architect's affidavit, and tenants can rebut it with a statement from at least 51% of the original complainants or their own professional affidavit.

Individual Apartment Improvements (IAIs)

An IAI is an upgrade inside one apartment, such as a new kitchen, bathroom or appliance. Unlike an MCI, HCR doesn't approve a Tier 1 IAI in advance: the owner files an online IAI notification (form RN-19N) with before-and-after photos and keeps the receipts. Tier 2 is different, because the owner needs HCR certification before the work starts. The rules have changed twice:

Under the current rules, the largest possible monthly increases are:

Key IAI protections

• Your written consent. If you live in the apartment when the work is done, the owner gets no increase without your signed informed consent on HCR form RN-19C.
• Tier 2 is for certain vacant units only. The apartment must have been registered vacant for 2022, 2023 and 2024 (an owner can use this route only once), or be vacant after at least 25 years of continuous occupancy. The owner must get HCR certification first, show the work is needed because of a substandard condition or an item past its useful life, affirm no harassment or willful overcharge findings in five years, and pay HCR a 1% fee.
• Proof. Owners must file before-and-after photos and keep invoices, proof of payment, a signed contract and a contractor affidavit. Outside contractors must be licensed and have no identity of interest with the owner. Finance charges and costs above reasonable costs don't count.
• Violations. The owner must resolve outstanding hazardous and immediately hazardous violations that pertain to the apartment.
• Your right to the paperwork. A new tenant can ask the owner by certified mail for IAI documentation when the lease is offered or within 60 days of signing. The owner has 30 days to provide it; if they don't, you can file HCR form RA-90.

To see what a claimed renovation could legally add to your rent, try the IAI rent increase calculator. If the numbers don't add up, get your registered rent history (requested at rent.hcr.ny.gov or a Borough Rent Office) and read how to request your rent history, then consider an overcharge complaint. HCR generally looks back six years.