Individual Apartment Improvements (IAI) Rent Increases: Tiers and Calculation

In New York, the Individual Apartment Improvement rent increase rules let a landlord raise the legal regulated rent on a rent-stabilized or rent-controlled unit after making qualifying upgrades, with recoverable costs capped at $30,000 for most apartments and $50,000 for certain long-vacant ones. The monthly increase is the improvement cost divided by an amortization factor between 144 and 180, depending on building size and tier. Those increases are now permanent additions to the legal rent. The current framework took effect October 17, 2024, replacing the much stricter caps the Housing Stability and Tenant Protection Act of 2019 had imposed.

What Counts as an Improvement

Not every renovation qualifies. Routine maintenance like fixing a leaky faucet, patching drywall, or repainting is a basic landlord obligation and cannot support an IAI increase. An IAI involves installing new equipment, adding features that did not exist before, or substantially upgrading the apartment beyond its prior condition.¹

Replacing worn linoleum with hardwood, installing a dishwasher where none existed, renovating a bathroom with new fixtures, upgrading a kitchen with stone countertops and new cabinetry, or rewiring a unit for modern appliances all qualify. The working test is whether the work created something new or meaningfully better, or just restored what was already there. Swapping a broken refrigerator for a comparable model is maintenance. Replacing it with a high-efficiency unit as part of a larger kitchen overhaul is an improvement.

One trap: before any IAI rent increase can take effect, the apartment must be free of all outstanding hazardous and immediately hazardous code violations. A landlord who finishes a $25,000 renovation but has an unresolved fire code violation cannot collect the increase until the violation is cleared.¹

The Two Cost Tiers

First Tier: Up to $30,000

The first tier applies to any rent-stabilized or rent-controlled apartment. A landlord can recover up to $30,000 in aggregate IAI costs within a 15-year window, spread across any number of separate improvements. The 15-year clock runs from the date of the first IAI performed on or after June 14, 2019.² If the apartment is occupied, the landlord must get written tenant consent before starting the work. Spending above $30,000 cannot be passed to the tenant.

Second Tier: Up to $50,000

The second tier is narrower. It allows up to $50,000 in recoverable costs, but only for vacant apartments meeting one of two criteria: the unit was timely registered as vacant in 2022, 2023, and 2024, or it became vacant after at least 25 years of continuous occupancy immediately before the IAI began.² A landlord can use the “registered as vacant” basis only once per apartment.

Before starting any second-tier work, the landlord must apply to the New York State Division of Housing and Community Renewal (DHCR) for a certification order confirming eligibility. That certification only establishes the right to file for an IAI. It does not pre-approve the increase. After completing the work, the landlord also owes DHCR a fee of 1% of the claimed costs, capped at $500. A $45,000 renovation carries a $450 fee.³

How the Monthly Increase Is Calculated

The monthly rent increase equals the total improvement cost divided by an amortization factor set by building size and tier.

First-tier amortization:

Buildings with 35 or fewer apartments: cost divided by 168. A $30,000 renovation yields a $178.57 monthly increase.
Buildings with more than 35 apartments: cost divided by 180. The same $30,000 renovation yields $166.67 per month.

Second-tier amortization periods are shorter, so the monthly increases are larger:

Buildings with 35 or fewer apartments: cost divided by 144. A $50,000 renovation yields $347.22 per month.
Buildings with more than 35 apartments: cost divided by 156. The same $50,000 renovation yields $320.51 per month.

Both first- and second-tier increases are permanent additions to the legal regulated rent. That reversed the 2019 HSTPA, which had made IAI increases temporary and removable after 30 years.⁴ Financing costs, insurance proceeds, and interest charges are excluded from the calculation.

Tenant Consent and Required Documentation

If the apartment is occupied, no IAI increase is recoverable without written informed consent obtained before the work begins. DHCR provides Form RN-19C for this purpose, and it must state the estimated total cost and the estimated monthly rent increase.³ The landlord files the completed consent form with DHCR within 90 days of finishing the work.⁵ For vacant apartments, consent is not required, but the DHCR filing still is.

All IAIs are reported to DHCR on Form RN-19N. The agency expects a full documentation package covering five items:

Cancelled checks or electronic payment proof contemporaneous with the work
Invoice receipts marked “paid in full,” also contemporaneous
A signed contract between the landlord and the contractor
A contractor’s affidavit confirming the installation was completed and paid for
Before and after photographs, which become permanent records and must be produced on request at any point in the future

Lump-sum invoices covering multiple items generally will not do. DHCR expects itemized proof showing individual costs for each component. A single bill without line items invites added scrutiny or outright denial, unless the landlord can show the work was a coordinated project where each item was either a genuine improvement or a necessary repair tied to an allowable IAI.³

Who Can Perform the Work

Where state or local law requires licensing, the contractor must be licensed. The contractor also cannot share common ownership or any identity of interest with the building’s owner or managing agent. If that connection exists, the costs are disallowed entirely.¹

Landlords or their employees can handle demolition and removal, but those labor costs cannot be included in the IAI calculation. The same rule applies to any work performed by the owner’s regular employees during their normal duties. If an employee did perform IAI work outside those duties, the landlord must prove through payroll records that the employee was paid separately for it.³

Vacancy Lease Disclosure

When a new tenant moves into an apartment where IAI increases have been applied, the vacancy lease rider must spell out the calculations and inform the tenant of the right to request supporting documentation. The tenant can make that request at lease signing or within 60 days afterward.⁶

Transition for IAIs Done Before October 2024

Landlords who spent up to $15,000 on IAIs between June 14, 2019, and October 17, 2024, under the old cap are not shut out of the new tiers. They can recover the difference between the new applicable cap ($30,000 or $50,000) and whatever they already collected in IAI increases since June 14, 2019. Any IAIs completed before June 14, 2019, do not count toward the new limits at all.⁴

Challenging an IAI Increase

A tenant who thinks an IAI-based increase is improper can file a rent overcharge complaint with DHCR using Form RA-89. The complaint must include supporting documentation at the time of filing: copies of leases, cancelled checks, rent receipts, any signed IAI consent forms, and relevant court decisions. Incomplete complaints are returned.⁷ DHCR can examine the apartment’s rent history at least six years back from the filing date.⁸

This is where landlord record-keeping decides outcomes. If DHCR asks for documentation and the landlord cannot produce itemized invoices, proof of payment, or the before-and-after photos, the agency can order a rent reduction and impose overcharge penalties.⁵

A landlord found to have collected rent above the legal regulated amount faces a penalty of three times the overcharge. The burden is on the landlord to show the overcharge was not willful. If the landlord proves by a preponderance of the evidence that the violation was unintentional, the penalty drops to the overcharge amount plus interest. Failing to meet that burden triggers full treble damages. Treble damages cannot be assessed based solely on a failure to file a timely or proper rent registration statement.⁹

Federal Tax Treatment

IAI expenditures are capital improvements for federal income tax purposes, not deductible repairs. Under IRS rules, improvements to residential rental property are depreciated over 27.5 years using the General Depreciation System, with each improvement treated as a separate property item and its own 27.5-year recovery period starting when the work is placed in service.¹⁰

A landlord who spends $30,000 on a first-tier IAI deducts roughly $1,091 per year in depreciation, not the full outlay in the year of the spend. The rent increase, by contrast, begins immediately. That timing mismatch between the tax benefit and the cash cost belongs in any renovation budget before the first invoice is signed.

1
Legal Information Institute. New York Comp. Codes R. and Regs. Tit. 9 2522.4
2
NYC Administrative Code. NYC Admin Code 26-511
3
New York State Homes and Community Renewal. Operational Bulletin 2024-2 – Individual Apartment Improvements
4
New York State Homes and Community Renewal. Operational Bulletin 2024-2 (Revised)
5
Legal Information Institute. New York Comp. Codes R. and Regs. Tit. 9 2102.3 – Grounds for Increase of Maximum Rent
6
New York State Homes and Community Renewal. Fact Sheet 5 – Vacancy Leases in Rent Stabilized Apartments
7
New York State Homes and Community Renewal. Tenant’s Complaint of Rent and/or Other Specific Overcharges in a Rent Stabilized Apartment (Form RA-89)
8
Rent Guidelines Board. Rent Increases FAQs
9
New York Codes, Rules and Regulations. 9 CRR-NY 2526.1 – Determination of Legal Regulated Rents, Penalties, Fines, Assessment of Costs, Attorney’s Fees, Rent Credits
10
Internal Revenue Service. Publication 527 – Residential Rental Property