How an MCI rent increase works
A Major Capital Improvement (MCI) is building-wide work, such as a new boiler, roof, windows, plumbing or electrical rewiring, that lets the owner of a rent-stabilized or rent-controlled building ask the state for a rent increase. The state agency, NYS Homes and Community Renewal (DHCR), has to approve it in a written order first. Repairs to old equipment and cosmetic work do not qualify.
At a glance
- Amortization, 35 or fewer units
- 144 months
- 12 years
- Amortization, more than 35 units
- 150 months
- 12.5 years
- Yearly collection cap
- 2%
- of the rent on the rent roll date
- Removed from the rent after
- 30 years
- HSTPA 2019
The formula, step by step
- 1
Start with the approved cost
DHCR audits the owner’s claimed cost and removes anything that isn’t an MCI, can’t be proven, or was paid by insurance or a government grant. - 2
Remove the commercial share
If the work also benefits stores or offices in the building, the cost is cut by the commercial space’s share of the building’s area. - 3
Spread it over 144 or 150 months
The net cost is divided by 144 months for buildings with 35 or fewer apartments, or 150 months for larger buildings. - 4
Divide by rooms in the building
That monthly figure is divided by the total number of rooms in all apartments. The result is the per-room monthly increase. - 5
Multiply by your rooms
Your full MCI increase is the per-room amount times the rooms in your apartment.
Worked example (DHCR’s own numbers)
DHCR Fact Sheet #24 walks through this case: an owner claims $227,000 of work. The audit removes $35,000 of ineligible costs, leaving $192,000. Commercial space is 10% of the building, so another $19,200 comes off, leaving $172,800. The building has 30 apartments, so the cost is spread over 144 months: $1,200 a month. It has 120 rooms, so the increase is $10 per room per month.
For a 4-room apartment, the full increase is $40 a month. If that tenant’s rent on the rent roll date was $1,500, the 2% cap allows $30 a month to be added in the first 12 months and the remaining $10 in the second.
| 12-month period | Added | MCI in rent |
|---|---|---|
| Year 1 | $30.00 | $30.00 |
| Year 2 | $10.00 | $40.00 |
The 2% cap and the 30-year limit
Since the Housing Stability and Tenant Protection Act of 2019 (HSTPA), the amount collected in any 12-month period is limited to 2% of the rent in effect when the owner filed the application. The 12-month periods run from the collectible date on the order, which is the first day of the first month following 60 days from the date the order was mailed. DHCR Fact Sheet #26 says the 2% cap also applies to uncollected MCI increases approved on or after June 14, 2012.
MCI increases are temporary. They must come off the rent 30 years after they took effect, and the legal rent is then adjusted for the guideline increases that were compounded on top of the MCI. If you move out before the increase is fully phased in, the remaining balance can be added to the legal rent for the next tenant.
Edge cases
- SCRIE and DRIE: tenants with the rent freeze don’t pay the MCI. Call 311 and send the order to your SCRIE/DRIE office.
- Individual rent reduction order: if your apartment has one for decreased services, you are exempt from the MCI until DHCR restores the rent.
- Vacancy lease while an MCI is pending: the lease must say an MCI application is pending. If it doesn’t, no MCI increase is allowed for that apartment until the lease is renewed.
- J-51 R: if the owner got a J-51 R tax break for the same work (work completed on or after June 30, 2022), no MCI can be granted for it, then or later.
What to do next
If you got a DHCR notice, you have 60 days to answer. If the order has been issued, you have 35 days from the date on the order to appeal on form RAR-2. An appeal does not stop the owner from collecting the increase. Compare the order with your rent history from DHCR, read MCI and IAI rent increases after the 2019 law, and see how your renewal works with the rent-stabilized renewal calculator. If you think you’re paying more than the order allows, try the rent overcharge estimator.