New York’s First Good Cause Eviction Rent Increase

Cab drivers initially opposed accepting credit cards.

They liked cash and didn’t want to pay card issuers a surcharge of 2 percent or more. But when forced to take plastic, they were pleasantly surprised because their tips went up. Why?

The customary cash tip was 15 percent. Credit-card payment screens, however, gave riders a choice of, say, 15, 20 or 25 percent, and most people picked the middle number. If the choices were 20, 25, and 30 percent, people chose 25. In behavioral economics it’s called “anchoring,” and it applies to landlords, too.

Which brings us to “good cause eviction.”

The official inflation numbers for 2024 are out, which is important if you’re a landlord or tenant in New York state. The good cause eviction law of 2023 set a soft cap on rents (with some exceptions) using the Consumer Price Index.

What makes it a soft cap? If a landlord raises the rent by more than a certain percentage, tenants can stop paying and force the landlord to prove in court that the increase is justified.

Legislators who enacted the law figured that landlords would avoid the hassle and risk of making that case in housing court, and instead would offer lease renewals without raising the rent more than inflation plus 5 percentage points.

More on that — and the connection to taxi drivers’ tips — in a moment. But first, the latest soft cap numbers:

The average monthly CPI for the New York/New Jersey/Pennsylvania area in 2022 was 310.141. The next year it was 321.998, an increase of 3.82 percent. Add 5 points to that and you get 8.82 percent. That was good cause’s first soft rent cap. It remains in effect.

The newly calculated average monthly CPI for last year was 334.209, an increase of 3.79 percent. Add 5 points and the new soft cap will be 8.79 percent.

It will take effect when the state’s Division of Homes and Community Renewal publishes it in a fact sheet, like this one from last summer. The law gives the agency until Aug. 1.

Whether HCR takes its time won’t matter much this year because inflation was virtually unchanged. That might not always be the case.

The cap number is significant, however, because of anchoring.

Some landlords might use 8.8 percent as a guide for annual rent increases, which is not necessarily good for tenants. Like cab riders, housing providers might pick a “middle” number, such as 7 percent. Before good cause and its rent cap, they might have picked 5 percent, 3 percent or even zero.

There will always be anecdotal examples of good cause sparing tenants from evictions or big rent hikes. The main point of the law was to compel landlords to offer lease renewals. The benefits, drawbacks and unintended consequences of that are all worthy topics. This piece just focuses on rents.

A clever economist might eventually come up with a way to isolate the impact of good cause by comparing rent increases in New York to those in states without a rent cap.

But taxi drivers’ experience, and countless other real world examples of anchoring, suggest that most New York renters covered by good cause will end up paying more than if the law had not passed.