DHCR Updates Reasonable Cost Schedule for MCIs

On Jan. 8, the DHCR issued its fourth update to Operational Bulletin 2021-1. When the Housing Stability and Tenant Protection Act (HSTPA) was enacted, it directed the DHCR to create a schedule of reasonable costs associated with major capital improvements (MCIs). The document is updated annually to respond to market changes of various capital improvement costs.

When owners make improvements or installations to a rent-regulated building, they can apply to the DHCR for approval to raise the rents of the regulated apartments. An MCI allows an owner to receive a rent increase for completing a major building-wide improvement. It provides a financial incentive for owners to continue investing in their buildings. As part of the application process, owners must submit an itemized list of work performed with a description or explanation of the reason or purpose of such work. Only costs that are actual, reasonable, verifiable, and eligible may be approved for a temporary MCI rent increase.

When the improvement or installation meets certain requirements, it will be considered an MCI. Some examples of MCI items include boilers, windows, electrical rewiring, plumbing, and roofs. To qualify as an MCI, the improvement or installation must:

• Be depreciable pursuant to the Internal Revenue Code, other than for ordinary repairs;
• Be essential for the preservation, energy efficiency, functionality, or infrastructure of the entire building;
• Directly or indirectly benefit all tenants; and
• Meet the requirements set forth in the useful life schedule contained in the applicable rent regulations.

The passage of the HSTPA greatly limited rent increases owners could get for MCIs and increased oversight by the DHCR. Before the HSTPA, MCI rent increases were permanent and were added to an apartment’s base rent. Now, MCI increases are temporary and must be removed from the rent 30 years after the date the increase became effective, inclusive of any increases granted by the local rent guidelines board. In addition, the HSTPA made the following changes with regard to MCI rent increases:

• MCI increases may be granted based upon reasonable costs.
• MCI increases are prohibited for buildings with 35 percent or fewer rent-regulated units.
• MCI increases are prohibited if there are hazardous violations on file with the local municipality in addition to immediately hazardous violations.
• Buildings with 35 or fewer units are amortized over 12 years; buildings with more than 35 units are amortized over 12.5 years.
• MCI increases are capped at 2 percent per year.

To help owners understand what reasonable costs are for MCI work, the DHCR has released this update to the reasonable cost schedule for MCI-eligible items. The reasonable cost schedule provides a maximum cost that can be approved for eligible MCIs. The costs reflected on the schedule include installations that are MCI eligible and such related costs that are necessary and required to complete the installation of the eligible MCI item.

Maintenance costs or cosmetic costs that aren’t necessary for the eligible MCI item or costs unrelated to the eligible MCI item are not included in the schedule. And not every item on the schedule is considered an eligible MCI item in and of itself; some are for items considered necessary and related expenses to eligible MCI items. Only items that are either MCI eligible or necessary related expenses are included in the approved costs for an MCI rent increase.

Applying for a Waiver

It may be the case that the MCI work you plan to undertake will exceed the costs listed in the DHCR’s reasonable cost schedule. For these instances, the DHCR has outlined the circumstances in which an owner may apply for a waiver of the application of the reasonable cost schedule when applying for a temporary MCI rent increase. According to the DHCR, the waiver application must show either:

• Improvements are not identified in the reasonable cost schedule, or are necessarily and appropriately priced higher than those costs listed in the reasonable cost schedule; and such costs are accurate and reasonable under the circumstances; or
• Use of the schedule will cause an undue hardship, and the use of alternative procedures are appropriate to the interests of the owner, the tenants, and the public; and the costs of the improvement are accurate and reasonable under the circumstances.

The owner must request a waiver of the use of the reasonable cost schedule in writing, which must accompany the temporary MCI rent increase application with the requisite information and documentation. If an owner’s application for a waiver is denied, the owner’s recoupment will be limited to that required by the reasonable cost schedule, or the actual verified costs, whichever is lower, together with such other relief as may be appropriate.

Fourth Update Highlights

This year, the DHCR has expanded the list of improvements and installations that may qualify as an MCI. The DHCR notes that this list is not inclusive of all eligible improvements or installations. In addition, the majority of the items listed show a cost increase from 2024 to 2025.

This year’s updated cost schedule will apply to eligible improvements or installations that began on or after Jan. 1, 2025, for items that appeared in the previous cost schedule. And you can find the complete list of improvements and installations with the updated prices per unit at https://hcr.ny.gov/system/files/documents/2025/01/operational-bulletin-2021-1-update-4.pdf.

TABLE OF HIGHLIGHTS

Here are a few types of improvements or installations that may qualify as an MCI that are newly listed for this update (designated with a *) or have experienced price freeze or slight decrease from last year’s cost schedule.

Chimney

• Counter Flashing at Chimney*                           $31 per linear foot
• Chimney Cap*                                                   $1,647 per cap

Doors

• Apartment Entry – Full Frame Steel Door           $4,409 per door to unit

Exterior Restoration/Façade

• A/C Sleeve – Replacement                                 $1,049 per replacement
• Balcony Coating Top Side                                  $14 per square foot
• Balcony Drains*                                                  $547 per drain
• Balcony Replacement – Concrete & Rebar          $269 per square foot
• Rail Post Installation/Repair@Balcony*              $383 per rail post
• Beam Reinforcement – Steel*                            $131 per linear foot
• Beam Reinforcement – Wood*                          $31 per linear foot
• Brick Stitching*                                                 $54 per linear foot
• EIFS (Exterior Insulation Finishing System)*        $29 per square foot
• Expansion Joints*                                              $32 per linear foot
• Flange Reinforcement*                                     $399 per linear foot
• Grout/Cement Filing/Sealant*                           $12 per linear foot
• In-Kind Parging Replacement*                           $13 per square foot
• Limestone Replacement                                     $355 per square foot
• Masonry Pointing                                              $22 per square foot
• Masonry Spandrel Replacement *                      $355 per linear foot
• Helix Masonry Pins*                                          $24 per pin
• Masonry Anchor Friction Pins*                          $65 per pin
• Pipe Scaffold*                                                   $16 per square foot
• Precast Stone on Window Lintel *                      $124 per linear foot
• Pressure Washing                                             $3 per square foot
• Siding – Aluminum                                            $10 per square foot
• Siding – Vinyl                                                    $9 per square foot
• Spandrel Reconstruction*                                  $990 per linear foot
• Stone Replacement*                                         $55 per square foot
• Tar of Coping Stone*                                         $7 per square foot
• Waterproofing                                                  $11 per square foot
• Metal Window Sill Capping*                              $12 per linear foot

Parapet

• Metal Cladding                                                 $37 per square foot
• Parapet Coping and Flashing*                            $39 per linear foot
• Parapet Flashing*                                             $13 per linear foot
• Parapet Piers*                                                  $1,252 per linear foot
• Drip Line (Roofing/Parapet)*                             $6 per linear foot
• Tar of Parapet*                                                 $6 per square foot

Plumbing/Repiping

• Backflow Prevention Device w/ Booster Pump    $86,033 per device
• Pipe Insulation                                                  $19 per linear foot

Rewiring/Electrical Upgrading

• New GFI outlet (where none existed before)*    $506 per new GFI outlet

Roof

• Drip Line (Roofing/Parapet)*                             $6 per square foot
• Fascia Replacement*                                         $17 per linear foot
• Flashing                                                            $11 per linear foot
• Full Rip-off Roof                                                  $3 per square foot
• Liquid Applied Membrane Roofing System         $18 per square foot
• New (extensive) Green Roof Shallow                  $58 per square foot
• Pull Test*                                                          $8,664 per visit
• Skylights 3’x5’ with Screens                               $3,387 per skylight
• Attic/Roof Vent Louvers *                                  $235 per vent louver
• Cockloft Vents and Hoods*                                $867 per vent and hood

Security System/Intercom

• Video Intercom                                                 $1,911 per unit

Walkways, Ramps, Stairs

• Courtyards, Driveways, Walkways – Concrete     $16 per square foot
• Flooring – Bamboo                                            $12 per square foot
• Flooring – Granite                                             $41 per square foot
• Flooring – Marble                                              $59 per square foot
• Flooring – Hardwood                                         $18 per square foot
• Flooring – Vinyl Tile                                           $8 per linear foot
• Stairs – Exterior                                                $24,451 per set of stairs

Windows

• Child Guard (with qualifying MCI)                      $93 per child guard
• Window Beam*                                                $125 per linear foot      
• Metal Window Capping*                                   $11 per linear foot

Miscellaneous

• Asbestos Monitoring*                                       $960 per day
• Chute Door*                                                     $705 per chute door
• Fence Rental*                                                   $15 per linear foot
• Wheelchair Lift*                                               $74,158 per wheelchair lift

USEFUL LIFE SCHEDULE FOR MAJOR CAPITAL IMPROVEMENTS

When applying for an MCI rent increase, the item being replaced must comply with the Useful Life Schedule outlined by the DHCR. This schedule specifies the expected lifespan of various building components, ensuring replacements are justified and necessary. For major capital improvements not listed below, the owner must submit evidence with the application that the useful life of the item or equipment being replaced has expired. If you need to replace an item before the end of its useful life due to emergencies or other extraordinary circumstances, you may need to apply for a waiver of the useful life requirement.

Replacement Item of Equipment           Years—Estimated Life

1. Boilers and Burners

a. Cast Iron Boiler                      35

b. Package Boiler                       25

c. Steel Boiler                            25

d. Burners                                 20

2. Windows

a. Aluminum                             20

b. Wood                                   25

c. Steel                                     25

d. Storm                                   20

e. Vinyl                                     15

3. Roofs

a. 2-Ply (asphalt)                       10

b. 3-4 Ply (asphalt)                    15

c. 5-Ply (asphalt)                       20

d. Shingle                                  20

e. Single-ply Rubber                  20

f. Single-ply Modified Bitumen   10

g. Quarry Tile                            20

4. Pointing                                 15

5. Rewiring                                 25

6. Intercom System                    15

7. Mailboxes                                25

8. Plumbing/Repiping

a. Galvanized Steel                    25

b. TP Copper                             30

c. Brass Cold Water                   15

d. Fixtures                                 25

9. Elevators

a. Major Upgrade                      25

b. Controllers and Selector        25

10. Doors

a. Apartment Entrance              25

b. Lobby/Vestibule                    15

11. Water Tanks

a. Metal                                    25

b. Wood                                   20

12. Waste Compactors            10

13. Air Conditioners

a. Individual Units/Sleeves         10

b. Central System                      15

c. Branch Circuitry Fixtures        15

14. Siding

a. Aluminum Siding                   25

b. Vinyl Siding                           15

15. Catwalk                              25

16. Chimney

a. Steel                                     25

b. Brick                                     25

17. Courtyards/Walkways/Driveways

a. Cement                                 15

b. Asphalt                                 10

18. Fire Escapes                     25

19. Fuel Oil Tanks

a. In Vaults                                25

b. Undergrounds                       20

20. Water Heating Units

a. Hot Water/Central Heating    20

b. Hot Water Heater (Domestic) 10

21. Parapets

a. Brick                                     25

22. Resurfacing Exterior Walls               25

23. Solar Heating System                      25

24. Structural Steel                               25

25. Television Security                          10