More than three years after New York lawmakers sharply restricted landlords’ ability to hike rents in regulated apartments, some property owners are using a gray area in the law to combine units and dramatically jack up the rents.

The state agency charged with overseeing roughly 1 million rent-regulated apartments in New York knew about the loophole as early as February 2020 and said it would be addressed that spring. But more than two years later, nothing has been done to stop the practice.

During that time, the East Village building Georgina Christ has called home since 1971 has seen some significant changes. Ten of the 22 units in the building have already been combined to create five larger apartments with steeper rents, Christ said, one of the very few ways landlords can still raise rents in a tightly regulated system.

Work is already underway to combine four additional units in the six-story walk-up.

“They already knocked out the hallway to make each individual apartment bigger,” Christ, 72, told Gothamist, pointing to apartments #9 and #10.

Christ tolerates the constant banging, screeches of power tools and the heavy coating of dust because it’s rent controlled, an increasingly rare status that only applies to about 16,400 NYC apartments.

“I love where I live. I love the neighborhood and it's affordable for me,” Christ said. “I can afford this apartment.”

Rent controlled apartments, which normally come with below market-rate rents, apply to certain residents who moved into their homes prior to July 1971 in buildings mostly constructed before World War II. The residence can also be passed down to certain heirs.

One of the combined units, #5 and #6, in Christ’s building, which residents dubbed a Frankenstein apartment, is listed on StreetEasy for $9,000 a month, nearly three times higher than what it would have cost to rent the regulated units separately. Before they were combined, the 2020 rents for apartments #5 and #6 were $1324.60 and $1778.54 a month, according to the rent roll obtained by Gothamist.

The monthly rents for units #9 and #10 currently under construction were listed as $1,086.72 and $1,772.16.

If other combined units available for rent this past spring are any indicator, the rent for the apartment once work is complete is about to skyrocket, reducing the number of affordable units available in the area.

A Legal Loophole

Residents and housing advocates told Gothamist that about 30 rent regulated apartments across many of the 15 buildings in the East Village owned by Madison Realty Capital Advisors and the previous landlord have been combined into “Frankenstein” apartments.

They said there are permits to combine an additional 20 rent regulated apartments.

Prior to the 2019 Housing Stability and Tenant Protection Act, landlords had an array of tools available to raise rents on regulated apartments, such as bumping the rent by 20% once the units became vacant or passing off the costs of building and apartment upgrades to tenants.

Once the rent surpassed $2,774.76, the apartments were removed from regulation, meaning landlords were then free to raise the rent as much as they pleased.

But the various ways to raise rents beyond what a city panel dictated each year quickly became subject to abuse and fraud.

But the new laws overhauling the system sharply curtailed how much rents could rise by curbing what sort of costs could be passed down to tenants and how long renters would have to shoulder the cost of upgrades, eliminating almost all of the ways landlords could get rent increases.

The new law, however, did not address how much rent landlords can charge after they combine two or more rent-regulated apartments, allowing property owners to use the loophole to set the rent to whatever amount they want.

“The law is, at best, unclear on this matter,” said state Sen. Brian Kavanagh, chairman of the housing committee, who introduced unsuccessful legislation in 2021 to close the loophole but the bill didn’t make it out of committee.

Shortly after the 2019 laws went into effect, the Division of Housing and Community Renewal, the state agency charged with implementing them, said it would issue regulations to combat the work-around landlords came up with.

Commissioner RuthAnne Visnauskas said the agency would issue the rules and regulations in the spring of 2020.

Then came the COVID-19 pandemic. But in the years since the start of the global outbreak, no regulations have been issued, allowing the practice to continue as rents in New York City reach record highs, averaging $5,113 a month for Manhattan apartments.

Charni Sochet, a spokesperson for DHCR, said the agency is still working on writing new rules to address the loophole. She did not say what was causing the delay.

“How rent is set when a rent regulated unit is combined is highly fact specific and depends on the regulated status of each apartment, and the nature and extent of the alterations or combination of apartments or other building space, and each unique case would be subject to administrative and/or legal review for determination,” Sochet said in an email.

Still Waiting

It's unclear how many landlords are combining two or more rent-regulated apartments to create a single unit and setting a one-time rent increase that is much higher than the rents collected for the units separately. But Kavanagh said residents living on the Lower East Side, a neighborhood in his district, have also raised concerns.

And it’s happening elsewhere.

Patricia Loftman, president of the Park West Village Tenants Association, which represents residents living on the Upper West Side, said the same is happening in her complex, where about half the units fall under the rent regulated system.

In one of the buildings in Loftman’s complex on Columbus Avenue, she said her landlord recently combined apartments 7O and 7P, one of which she said was a rent-stabilized unit, to create a three-bedroom, three-bathroom apartment. The apartment, with private terraces and a wet bar, was listed for $13,150 on StreetEasy. The average price for previous rentals in the building is $3,756, according to the real estate website.

It was rented this week.

“Once you have a combined rent-stabilized apartment with a market rate, that apartment is no longer affordable at a time when what families need, and what this city needs, is affordable housing,” Loftman said.

Park West Village Acquisition, which owns the three buildings in Loftman’s complex, and Madison Realty Capital Advisors declined to comment.

Jay Martin, executive director of the Community Housing Improvement Program, which represents about 4,000 owners of mostly rent-stabilized units, said property owners are navigating the laws as they were written and are awaiting for more clarity from the state.

“When two units are combined, when does it become a new unit of housing? How much of that original footprint becomes a new apartment? How much of that has to change before it can be deemed a completely different apartment?” Martin said.