A major capital improvement, or MCI, is a building-wide upgrade to a rent-regulated property that an owner can partially recover through an approved rent increase on the building’s rent-stabilized and rent-controlled units.
To qualify, the work has to benefit the entire building rather than individual apartments, count as a depreciable capital expense instead of an ordinary repair, and be essential to the preservation, energy efficiency, functionality, or infrastructure of the property. A new boiler, roof, set of windows, plumbing risers, or electrical wiring are common examples. The owner cannot simply add the cost to the rent: an MCI increase requires an application to and approval from New York State Homes and Community Renewal (HCR), and every regulated tenant receives notice and a chance to challenge it.
The economics changed sharply under the 2019 Housing Stability and Tenant Protection Act (HSTPA), which turned the MCI into a long game rather than a quick recovery. Approved costs are amortized over 144 months for buildings of 35 or fewer units, or 150 months for larger ones, and the resulting increase is capped at 2% of a tenant’s rent per year, with anything above that phased into later years.
The increase is no longer permanent; it has to be removed from the rent after 30 years. It is prospective only, with no retroactive collection, and it cannot be taken at all in a building where 35% or fewer of the units are rent-regulated. Open hazardous violations will stall an application until they are cured. The practical takeaway for an owner is that an MCI rarely returns the full cost of the work on a comfortable timeline, so the capital plan and the rent-roll math belong on the same page before the first invoice.
Planning a boiler or roof replacement and want to know what an MCI would actually return before you commit? MD Squared prepares and files MCI applications with HCR, assembles the cost documentation and proofs of payment the agency demands, checks your rent roll against the 35% threshold, and coordinates the contractors doing the work. That work lives in our Rent Stabilization Consulting service, alongside the capital project management that runs the job itself. Reach out to our team to map the numbers first.
