When the Housing Stability and Tenant Protection Act of 2019 (HSTPA) was enacted, it amended major capital improvement (MCI) rent increase provisions of the rent stabilization and rent control laws to greatly limit rent increases owners could get for MCIs. The amended law also increased oversight by the DHCR. 

Before the HSTPA, MCI rent increases were permanent and were added to an apartment’s base rent upon approval of an owner’s application to collect these increases. Now, MCI increases are temporary and must be removed from the rent 30 years after the date an increase becomes 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.
• MCI increases for buildings with 35 or fewer units are amortized over 12 years; increases for buildings with more than 35 units are amortized over 12.5 years.
• MCI increases are capped at 2 percent per year.

The HSTPA directed the DHCR to create a schedule of reasonable costs associated with MCIs, resulting in the issuance of Operational Bulletin 2021-1, which is updated annually to respond to market changes of various capital improvement costs. On Jan. 9, 2026, the DHCR issued its fifth update of Op Bull 2021-1. 

MCI Basics

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.

In general, to qualify as an MCI, the improvement or installation (such as boiler, windows, electrical rewiring, plumbing, and roofs) 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.

Schedule survives tenants’ legal challenge. The Reasonable Cost Schedule withstood a legal challenge in a case where an appeals court denied portions of a tenants’ association’s lawsuit challenging the DHCR’s post-HSTPA MCI regulations as well as Op Bull 2021-1. The Appeals Court upheld the provisions allowing the DHCR to include in its Reasonable Cost Schedule “additional costs” associated with MCI work in the Schedule itself, finding them to be consistent with the DHCR’s authority to establish eligibility criteria. 

The appeals court also found no violation of the procedural rules of the State Administrative Procedure Act (SAPA) that would warrant annulment of the regulation or operational bulletins. And the Court found that the DHCR’s annual updates to the Reasonable Cost Schedule are not rules, but instead set “parameters for calculation” of MCI rent increases, as expressly permitted by the Rent Stabilization Code [Stuyvesant Town-Peter Cooper Vil. Tenants Assn. v. DHCR: 222 N.Y.S.3d 12, 2024 NY Slip Op 5655 (App. Div. 1 Dept. 2024), (LVT #33484)].

Fifth Update Highlights

This year, the DHCR has further 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 in the DHCR’s Reasonable Cost Update show a cost increase from 2025 to 2026. And, in some instances of low-cost items, no change was made this year.

For a list of highlights of items that are newly listed in this year’s update or that have experienced a price freeze or decrease from last year’s cost schedule, see the table below. You can find the complete list of improvements and installations with the updated prices per unit at https://hcr.ny.gov/system/files/documents/2026/01/operational-bulletin-2021-1-update-5_0.pdf.

This year’s updated cost schedule will apply to eligible improvements or installations that began on or after Jan. 1, 2026.

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. Or, you may find that your planned MCI, or a portion of it, is not listed in the original Reasonable Cost Schedule or any of the issued updates. For these instances, Op Bull 2021-1 outlined the circumstances in which an owner may apply for a waiver of the application of the Reasonable Cost Schedule. According to Op Bull 2021-1, the waiver application must show either that:

• 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.

As set forth in Op Bull 2021-1, the owner must request a waiver of the use of the Reasonable Cost Schedule in writing, which must accompany the 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.

Tenant challenges to waiver applications. The DHCR’s Update Number 4 (2025) and current Update Number 5 to the Reasonable Cost Schedule say nothing further about waiver applications, even though the waiver provisions of the Reasonable Cost Schedule were challenged by a tenants’ association in one case where the First Department appeals court annulled in late 2024 a portion of the Reasonable Cost Schedule’s ceiling provision. 

In Stuyvesant Town-Peter Cooper Vil. Tenants Assn. v. DHCR, the appeals court found that the waiver provisions allowing rent increases beyond the cost ceilings in the Schedule violated the statutory requirements to set a ceiling on recoverable MCI costs [222 N.Y.S.3d 12, 2024 NY Slip Op 5655 (App. Div. 1 Dept. 2024)(LVT #33484)]. 

In a later decision involving the same building, the tenants argued that in setting MCI rent increases the DHCR erroneously considered ineligible costs not expressly included in the DHCR’s Reasonable Cost Schedule. Stuyvesant Town Peter Cooper Vill. Tenants Ass'n v. DHCR. The court, citing the First Department ruling, pointed out in 2025 that related expenses that are not specified in the Reasonable Cost Schedule but which the landlord claims are necessary for the claimed improvement were “out of harmony with the statute,” and therefore unauthorized because the DHCR's schedule sets the ceiling for what can be recovered. Therefore, since expenses for related millwork allegedly related to gas re-piping didn’t appear on the reasonable Cost Schedule as an MCI, the case was sent back to the DHCR for recalculation of the MCI increases [2025 NY Slip Op 31240(U)(Sup. Ct. NY Co. 2025)(LVT # 33679)]. 

There may remain some question as to how the DHCR views these court decisions. To date, the First Department decision in the Stuyvesant Town case has not resulted in any further ruling by a higher court, and the disputed RSC provisions—RSC §2522.11(g)(1)(ii) and §2522.11(f)(1)—have not been amended by the DHCR. This year’s Reasonable Cost Schedule adds millwork, among a number of other items, to the Schedule. And in two 2025 decisions, the DHCR denied applications for a waiver of the Reasonable Cost Schedule only because the landlords had failed to submit an architect or engineer certification stating that the claimed costs were accurate and reasonable [Villar/Elmwood Arms LLC: DHCR Adm. Rev. Docket Nos. JV110008RT, JV110020RO (6/12/25)(LVT #33761); 325/93 Associates LLC: DHCR Adm. Rev. Docket No. KP410017RO (1/16/25)(LVT #33663)].

The Insider will keep readers informed of any updates on this question.

Useful Life Schedule for Major Capital Improvements

When applying for an MCI rent increase, the item being replaced also 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 in the DHCR’s Useful Life Schedule, the owner must submit evidence with the application that the useful life of the item or equipment being replaced has expired. A copy of DHCR’s Useful Life Schedule can be found at https://hcr.ny.gov/system/files/documents/2020/11/fact-sheet-33-09-2019.pdf.

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.

TABLE OF FIFTH UPDATE HIGHLIGHTS

Highlighted here are the types of qualifying improvements or installations that are newly listed in this year’s Reasonable Cost Schedule update (designated with *) or that have experienced price freeze or decrease from last year’s cost schedule.

Chimney

●          Counter Flashing at Chimney                             $28 per linear foot

Doors

●          Apartment Entry – Full Frame Steel Door            $4,327 per door to the dwelling unit

            with Hardware

●          Door Saddles*                                                   $13 per linear foot

Elevator

●          Elevator – Door Lock Monitoring System             $27,325 per system

            (Buildings up to 10 stories)*

●          Elevator – Door Lock Monitoring System            $3,142 per additional floor

            for Buildings over 10 Stories*

●          Elevator – Emergency Braking System                 $21,662 per system

            (Buildings up to 10 stories)*

●          Elevator Emergency Braking System for              $2,185 per additional floor

            Buildings over 10 stories*

Exterior Restoration/Façade

●          Air Conditioner                                                 $1,838 per A/C unit

●          Balcony Coating Underside                                $15 per square foot

●          Rail Post Installation/Repair at Balcony               $366 per rail post

●          Brick Stitching                                                   $53 per linear foot

●          Courses of Brick*                                              $49 per linear foot

●          Brick Replacement with Kemper*                       $108 per square foot

●          C Channels*                                                      $275 per linear foot

●          Concrete Patching on Façade*                           $7 per square foot

●          Cornice Restoration Includes Galvanized             $117 per linear foot

            Metal and Copper

●          Cornice Restoration includes Galvanized             $1,262 per linear foot

            Metal, Copper, and Fiberglass

●          Expansion Joints                                                $32 per linear foot

●          Grout/Cement Filing/Sealant                             $12 per linear foot

●          In-Kind Parging Replacement                             $13 per square foot

●          Limestone Patching (Dutchman Restore)            $226 per square foot

●          Limestone Replacement                                    $334     per square foot

●          Masonry Pointing                                              $22 per square foot

●          Masonry Pin Epoxy*                                          $48 per pin

●          Masonry Probes*                                              $121 per probe

●          Metal Louvers*                                                 $883 per louver

●          Microcotta Stone Replacement – Ornamental*   $2,550 per square foot

●          Ornamental Patching*                                       $88 per square foot

●          Pop Rivet Replacement*                                    $34 per rivet

●          Replace Single Wythe Masonry Brickwork          $64 per square foot

●          Shelf Angles*                                                    $225 per linear foot

●          Sidewalk Shed (3 Months’ Rental)                      $184 per linear foot

            8’ Wide x 8’ High (these costs apply to any

            job requiring a sidewalk shed)

●          Siding – Aluminum                                            $10 per square foot

●          Siding – Vinyl                                                    $9 per square foot

●          Site Safety Manager/QSP                                   $12,164 monthly

●          Site Safety: Planning and Filing                           4% of full cost of job

●          Stainless Steel Threaded Rod with Epoxy*          $176 per rod

●          Stainless Steel Eye Bolts*                                   $158 per bolt

●          Steel Replacement*                                          $9 per pound

●          Stone Replacement                                           $52 per square foot

●          Termination Bars and Counter Flashing*             $37 per linear foot

●          Counter and Through Wall Flashing*                  $73 per linear foot

●          Steel Window Lintels*                                       $134 per linear foot

●          Weep Tubes for Waterproofing*                        $65 per tube

●          Window Caulking                                              $15 per linear foot

●          Stone Windowsills*                                           $105 per linear foot

●          Metal Windowsill Capping                                 $12 per linear foot

●          Wire Mesh over Brownstone*                            $6 per square foot

●          Ground Floor Wire Mesh*                                 $5 per square foot

Heating System

●          Caulking HVAC Vents*                                       $262 per caulking vent

●          Solder Copper Seam Joints*                               $13 per linear foot

Parapet

●          Metal Cladding                                                  $37 per square foot

●          Parapet Replacement*                                      $473 per linear foot

Plumbing/Repiping

●          Pipe Insulation                                                  $19 per linear foot

Roof

●          2 Ply Modified Bitumen Roof*                           $21 per square foot

●          Asphalt Roof – Shingle                                       $7 per square foot

●          Asbestos Abatement: Roof                                 $10 per square foot of asbestos

                                                                                    Roofing material abated

●          Dormer (Flashing, Steel Repair, Coping               $4,538 per dormer

            Reinforcement)*

●          Fascia Replacement                                           $17 per linear foot

●          Flashing                                                            $11 per linear foot

●          Termination Bars and Counter Flashing*             $37 per linear foot

●          Counter and Through Wall Flashing*                  $73 per linear foot

●          Full Rip-off Roof                                                $3 per square foot

●          Gable (Parapet, Coping Stones)*                        $14,376 per gable

●          Metal Cladding at Roof*                                    $37 per square foot

●          Metal Copings at Roof*                                     $27 per linear foot

●          Modified Bitumen Roof-Recovery (Restore)        $43 per square foot

●          New Modified Bitumen Roof                              $89 per square foot

●          Pull Test                                                            $8,664 per visit

●          PVC Roofing*                                                    $21 per square foot

●          Ruberoid Torch Roof*                                        $21 per square foot

●          Roof Vents*                                                      $182 per vent

●          Silicone Liquid Coating                                       $2 per square foot

●          Slate Roof*                                                       $47 per square foot

●          TPO Roofing System*                                        $19 per square foot

Walkways, Ramps, Stairs

●          Courtyards, Driveways, Walkways – Asphalt        $16 per square foot

●          Flooring – Bamboo                                            $12 per square foot

●          Flooring – Ceramic Tile*                                    $27 per square foot

●          Flooring – Granite                                             $41 per square foot

●          Flooring – Vinyl Tile                                           $7 per square foot

●          Handrails*                                                        $273 per linear foot

Windows

●          Windows – Aluminum                                       $1,665 per window

●          Metal Window Capping                                     $11 per linear foot

Miscellaneous

●          Millwork (Base Cabinets)*                                 $888 per cabinet

●          Wall Mounted Cabinets*                                   $655 per cabinet

●          Counter – PLAM*                                              $168 per linear foot

●          Sprinkler System – Water                                   $13 per gross square foot

●          Wheelchair Lift                                                  $67,228 per wheelchair lift