In 2019, the New York state legislature passed extensive rent regulations that added many new protections for tenants. Also known as the 2019 rent laws, one of these regulations closed a major loophole around so-called “preferential rent” — a common practice among landlords of rent-stabilized NYC apartment buildings. Here’s an overview of what changed, and how the law affects tenants and landlords.

What is preferential rent?

According to the NYC Rent Guidelines Board, “A preferential rent is a rent which an owner agrees to charge that is lower than the legal regulated rent that the owner could lawfully collect.” In other words, instead of charging the maximum rent allowed, owners or landlords choose to offer amounts below the legal regulated rent — perhaps because they felt the market wouldn’t support charging the maximum rent. This discounted rent on a rent-stabilized unit is referred to as “preferential rent.”

The 2019 rent laws made “preferential rent” the legal base rent

Under the guidelines that took effect in 2019, preferential rents became permanent for existing tenants. This means landlords who offered preferential rent on a unit have to treat it as the new legal base rent for that unit, and cannot increase it to the old legal maximum at lease renewal. If the tenant moves out, the landlord is free to charge new tenants the full legal amount.

How does this change protect tenants?

The old preferential rent system could obviously be great for tenants who were getting a discount. But it also meant tenants could be in for sticker shock if the landlord decided to raise the rent to the legal limit at lease renewal time. If the legal limit was close to what the tenant was already paying, the increase might not be very large. However, the difference between the preferential rent and the legal rent could be hundreds of dollars, making a rent-stabilized apartment suddenly unaffordable for the tenant.

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In a 2017 investigation, ProPublica found that the documents conferring preferential rent didn’t always specify whether the lower rate was for one lease term or the entire tenancy, confusing tenants. The investigation also found that, while landlords were required to set maximum legal rents in line with city guidelines, those rates were rarely verified to ensure compliance. Unscrupulous landlords could thus put down any figure they wanted, report it to the state, and charge it to tenants.

In short, the changes to preferential rent in the 2019 rent laws give tenants greater rent stability and predictability, protecting them from sudden, potentially unaffordable increases to the legal rent. The law also closes a loophole that could leave tenants vulnerable to unclear lease terms and inflated legal rents.

How does this change affect landlords?

Under the new laws, tenants paying preferential rent no longer face the possibility of a drastic increase at lease renewal. For landlords, of course, that means a loss in potential revenue increases.

Where once landlords could hike the rate on preferential rent units substantially — and thus drastically increase their income from a particular building — they’re now limited to the traditionally smaller increases approved every year by the Rent Guidelines Board, at least until the apartment becomes vacant. As of June 25, 2026, as part of Mayor Zohran Mamdani’s NYC Rent Freeze Program, those increases are 0% for one- or two-year leases commencing on or after October 1, 2026 and on or before September 30, 2027. See the order per the Rent Guidelines Board for more information.

The elimination of the preferential rent loophole marks a meaningful step toward greater fairness in NYC’s rent-stabilized housing market. For tenants, the 2019 rent laws replaced uncertainty and vulnerability with predictability — no more surprise spikes at lease renewal, and no more inflated “legal rents” that could price them out of their own homes. Whether you’re a rent-stabilized tenant navigating the new law or a market-rate renter, knowing your rights is essential to making sense of the city’s evolving housing market. Visit our renters’ rights hub anytime for more information and resources from StreetEasy.