DHCR Increases Air-Conditioner Rent Surcharge for 2023–24

But a recent law eliminates the $5 surcharge for tenant-installed A/C units.

The Division of Housing and Community Renewal (DHCR) recently announced an increase in this year’s air-conditioner rent surcharge for owners who pay for electricity. In rent-controlled or rent-stabilized buildings where the rent includes the use of electricity, an owner may charge a surcharge for the use of electricity for each air conditioner that has been installed. The charge is to be reviewed on a yearly basis regardless of the length of the lease.

On Oct. 1 of each year after the air conditioner has been installed the surcharge will be adjusted upward or downward for rent-stabilized and rent-controlled apartments with electricity included in the rent. Each annual adjustment of this electrical surcharge will be based on the increase or decrease in electrical cost stated in the Price Index of Operating Costs for Rent Stabilized Apartment Houses in New York City. The Price Index is prepared by the NYC Rent Guidelines Board, and this annual adjustment applies to air conditioners installed after Oct. 1, 1985.

With the latest update, the DHCR has set the monthly surcharge at $37.09, up $5.26 from $31.83 last year. According to the Rent Guidelines Board’s 2023 Price Index of Operating Costs issued earlier this year, the cost of electricity for electrical inclusion buildings rose 16.52 percent and this surcharge update reflects this increase.

The latest surcharge appears in the DHCR’s 38th annual update of Section B of Supplement No. 1 to Operational Bulletin 84-4. You can pick up a copy of the updated bulletin at your local borough rent office or download it from the DHCR’s website, www.nyshcr.org. This year’s update tells you what you can collect in the period beginning on or after Oct. 1, 2023, through Sept. 30, 2024, for an air conditioner installed in a tenant’s apartment during this period. It also tells you how to adjust the rent surcharges you’re already collecting from a rent-stabilized tenant for an air conditioner installed on or after Oct. 1, 1985, through Sept. 30, 2023.

What’s New

There’s been a change to the $5 monthly surcharge you can collect when a rent-controlled or rent-stabilized tenant who pays for electricity installs an air conditioner that extends beyond the window line. New York State now bans owners from imposing a $5 per air conditioner per month surcharge for the use of a tenant-installed air-conditioning unit if the tenant pays for electricity.

Prior to Nov. 21, 2022, owners were allowed to impose a $5 per month per surcharge to rent-stabilized or rent-controlled tenants who installed their own air conditioners beyond the building’s window line. This charge applied even if the tenant were also paying for their own electricity. The rationale for the surcharge was to account for the increased wear on a building’s plumbing and electrical systems. However, tenant advocates opposed the surcharge as a way for landlords to increase the cost of housing by imposing a non-rent fee on rent-regulated tenants.

Now, in rent-stabilized and rent-controlled apartments, owners are prohibited from the continued collection and from the prospective imposition of this $5 per month surcharge. And for rent-controlled apartments, the $5 per month surcharge previously collected can no longer be included in the Maximum Collectible Rent (MCR).

Implementing Allowed A/C Surcharge

For rent-stabilized apartments, the allowed surcharges don’t become part of the legal rent for the purpose of computing any guidelines or other increases under the Rent Stabilization Law or Code. Owners can collect the charges from rent-stabilized tenants without an order from the DHCR. These monthly charges remain collectible throughout the year even if the air conditioner is removed, such as during the winter months.

And for rent-controlled apartments, these surcharges become part of the Maximum Collectible Rent (MCR), but don’t become part of the Maximum Base Rent (MBR). Before collecting the monthly electrical inclusion surcharge from rent-controlled tenants, the owner must apply to the DHCR for permission to collect the surcharge by filing the DHCR Form RN-79b. The surcharge may not be collected until the DHCR issues an order authorizing the surcharge. These monthly charges remain collectible throughout the year even if the air conditioner is removed during the winter months.

Key cutoff: Oct. 1, 1985. The update doesn’t apply to air conditioners installed before Oct. 1, 1985. If you’ve been collecting an authorized rent hike for an air conditioner installed before that date, you may continue to do so.

Use chart to calculate rent changes. We’ve prepared two charts (see below) to help you figure rent surcharges and increases you’re entitled to and when you can start collecting them: Rent-Stabilized Apartments: Air-Conditioner Rent Surcharge Chart, and Rent-Controlled Apartments: Air-Conditioner Rent Surcharge Chart.

Note that the amount you’re entitled to collect from a tenant and when you can start collecting it depend on a variety of factors, including who pays for electricity, who installed the air conditioner, and when it was installed.

Notify rent-stabilized tenants about change in surcharge. An owner must collect the surcharge from a tenant for an air conditioner at the time the unit is initially installed, or within a reasonable period of time after its installation. If the owner fails to charge the tenant within a reasonable period of time after the installation, the owner waives the right to collect the surcharge. It remains permanently non-collectible whether there is a transfer of ownership or the tenant replaces the air conditioner in the same location.

When you send rent-stabilized tenants their first rent bill that includes the new $37.09 surcharge, it’s smart to include a brief letter telling them that the surcharge has been increased based on the DHCR’s most recent operational bulletin. This way, tenants won’t be confused about why the surcharge has changed. You can use the following language in your letter:

Model Language

As of Oct. 1, 2023, your air-conditioner surcharge has been increased from $31.83 per month to $37.09 per month. This increase was made in accordance with the 38th annual update of Section B of Supplement No. 1 to the Division of Housing and Community Renewal (DHCR) Operational Bulletin 84-4. The air-conditioner surcharge on your rent bill is adjusted annually by the DHCR, depending on the cost of electricity.

Rent Increases for Owner-Installed Air Conditioners

When the owner purchases and installs a new air conditioner in an occupied rent-controlled or rent-stabilized apartment with the rent-controlled or rent-stabilized tenant’s written consent, the owner may be allowed to collect an Individual Apartment Improvement (IAI) rent increase. However, the recoverable costs incurred by the owner are subject to the limits imposed by the Housing Stability and Tenant Protection Act (HSTPA) of 2019 on rent increases for IAIs. The rent increase due to an IAI is equal to 1/180th of the cost in buildings containing more than 35 apartments or 1/168th of the cost in buildings containing 35 apartments or fewer, including the installation cost, but excluding the finance charges. This rent increase becomes part of the MCR and the MBR of a rent-controlled apartment or the legal regulated rent of a rent-stabilized apartment.

When the owner purchases and installs a new air conditioner in an occupied rent-controlled or rent-stabilized apartment, the owner is required by the HSTPA to file the IAI Notification Form, the related before-and-after photographs, and the Tenant’s Informed Consent Form with the DHCR. For rent-stabilized apartments, the owner is then lawfully allowed to collect the IAI rent increase from the tenant without a DHCR Order. For rent-controlled apartments, the owner may not collect the IAI rent increase from the tenant until the DHCR issues an order authorizing the rent increase.

When the owner purchases and installs a new air conditioner in a vacant apartment, the HSTPA requires that the owner file the IAI Notification Form and the related before-and-after photographs with the DHCR. Here, tenant consent isn’t required for the owner to collect the rent increase from the next tenant and a DHCR order of approval isn’t needed.