Starting October 1, 2026, owners of rent-stabilized apartments won't be able to raise rent through a one- or two-year lease renewal — the Rent Guidelines Board's historic freeze locks both options at 0%. That makes Individual Apartment Improvement and Major Capital Improvement increases one of the only lawful mechanisms left for owners to recover rising operating costs on stabilized units. As housing economist Arpit Gupta noted in a recent Vital City analysis, IAI and MCI tools were already the main lever available to owners after the 2019 rent law overhaul restricted vacancy bonuses, and the freeze makes them more consequential than ever. Here's exactly how each one works under the current rules.

Individual Apartment Improvements (IAI): The Current Rules

According to the state Division of Housing and Community Renewal's Fact Sheet #26, updated this July, IAI rent increases now operate on two tiers. The increase became permanent as of October 17, 2024, and owners must file DHCR's IAI Notification Form electronically along with before-and-after photos to claim it.

Tier 1 caps eligible costs at $30,000. In buildings with 35 or fewer apartments, the monthly rent increase is 1/168th of the total improvement cost, up to a maximum of $178.57. In buildings with more than 35 units, it's 1/180th, up to $166.67. If a tenant is in occupancy when the work is done, the owner must obtain written consent using DHCR's Tenant's Informed Consent Form.

Tier 2 allows up to $50,000 in eligible costs, but only for work done in vacant apartments, and only after the owner secures prior certification of eligibility from DHCR. In buildings with 35 or fewer units, the increase is 1/144th of cost, up to $347.22 a month; in larger buildings, it's 1/156th, up to $320.51.

One compliance detail worth flagging: tenants have the right to request IAI supporting documentation by certified mail, and owners must provide it within 30 days. Missing that window can trigger a DHCR order and an overcharge dispute, so keeping contemporaneous records — contracts, paid invoices, and photos — isn't optional.

Major Capital Improvements (MCI): The Current Rules

MCIs cover building-wide work like a new boiler, roof, or plumbing system, and the process runs through a formal DHCR application rather than a notification form. Increases are capped at 2% of rent per year until the full amount is recovered, the cost is amortized over 12 years in smaller buildings and 12.5 years in larger ones, and the increase is temporary — it must come off the rent after 30 years. MCI applications are prohibited in buildings where 35% or fewer of the units are rent-regulated, and the building must be free of hazardous or immediately hazardous violations before DHCR will approve an increase.

What the Freeze Changes About the Calculus

Under a normal year, the annual guideline vote and IAI or MCI work together to cover rising costs. With the guideline locked at zero for the 2026–27 lease year, that first lever is gone entirely, at least for now. That shifts more weight onto documented, code-compliant capital and unit-level investment as the primary way to align rent with rising insurance, labor, and maintenance costs — and it raises the compliance stakes, since an owner who files an improvement claim without complete documentation is now more exposed to an overcharge complaint with no guideline increase to offset the risk.

For owners weighing renovation timing, there's no rule tying IAI or MCI eligibility to the freeze's October 1 start date, but the freeze is a good forcing function to review your building's rent registration history and confirm any pending or planned improvement claims are properly documented before that date arrives.

Dover Property Group helps owners track IAI and MCI eligibility, documentation, and filing requirements so improvement-based rent increases hold up to scrutiny — an increasingly important discipline with the annual guideline off the table. If you're planning capital work or unit renovations on a stabilized building, reach out to our team before you start.

Sources: NYS Homes and Community Renewal · Vital City

About the Author
Dover Property Group is a New York City property management firm working with building owners and tenants across all five boroughs. Our team tracks market conditions, compliance requirements, and neighborhood-level trends to help owners protect their assets and tenants navigate one of the most complex rental markets in the country.

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