Preferential rent, defined

Preferential rent is a rent that a landlord charges a rent-stabilized tenant that is lower than the apartment's legal regulated rent — the maximum, DHCR-registered amount the landlord is legally allowed to collect. In other words, the owner voluntarily offers a discount off the "on-paper" legal rent, and the tenant pays the lower, preferential figure.

You'll see two numbers on a stabilized lease: the legal regulated rent (the registered ceiling) and the preferential rent (what the tenant actually pays). Both are disclosed on the lease and in the apartment's rent history filed with New York State DHCR.

Why owners offer a preferential rent

Landlords set a preferential rent for practical reasons:

  • To match the market. If the legal rent sits above what tenants in the neighborhood will pay, a preferential rent keeps the unit leased and occupancy high.
  • To fill a vacancy quickly. Offering below the legal max can win a strong applicant fast — the kind of edge our leasing and tenant-placement teams use to lease Brooklyn apartments in under a week.
  • To preserve the legal rent. The higher legal regulated rent stays on record even while the tenant pays less, which matters for future increases and vacancies.

How preferential rent works in NYC after 2019

This is where New York City is different from most of the country. Before June 2019, many owners could raise a preferential rent all the way up to the full legal rent at the next lease renewal. That changed with the Housing Stability and Tenant Protection Act (HSTPA) of 2019.

Under the current rules, if a rent-stabilized tenant had a preferential rent in place on or after June 14, 2019, the landlord generally must maintain that preferential rent for the length of the tenancy. At renewal, only the Rent Guidelines Board percentage increases apply to the preferential rent — the owner cannot leap to the higher legal regulated rent.

The legal regulated rent doesn't disappear, though. It stays registered with DHCR, continues to grow with annual guidelines and adjustments like an IAI or MCI, and generally becomes chargeable again when the tenant vacates and the apartment resets for a new renter.

A simple example

Suppose a stabilized apartment has a legal regulated rent of $2,400 but the owner leases it at a preferential rent of $2,000 to secure a good tenant. Under HSTPA, that tenant can't be bumped to $2,400 at renewal. Instead, the $2,000 is raised only by the applicable Rent Guidelines Board increase each year. If that tenant later moves out, the owner may then re-rent the unit up to the legal regulated rent, adjusted for any allowable increases.

Note: figures above are illustrative only. Preferential and legal rents vary by building, and current guideline percentages change annually — this page is educational, not legal advice. Consult a qualified attorney for your specific situation.

Related terms

Get the rent right on your stabilized building

Preferential vs. legal rent is exactly the kind of detail that quietly costs owners money — or triggers overcharge exposure — when it's handled wrong. Rent-stabilized and subsidized housing is our specialty. Start with a property consultation or get in touch to talk through your building with a principal.