Good Cause Eviction NYC: The 8.38% Investor Math

Every year by August 1, the state Division of Housing and Community Renewal must publish the inflation figure that drives the law's "local rent standard." The 2026 DHCR Good Cause notice — posted July 16, 2026 and reposted August 17 — puts the annual change in the consumer price index for the New York-Newark-Jersey City area at 3.38%.

The statute's formula is simple. Under Real Property Law § 211, the inflation index is 5% plus that CPI change, and the local rent standard is the inflation index or 10%, whichever is lower. For covered NYC apartments, 5% plus 3.38% lands the 2026-27 standard at 8.38%.

That number is not a hard ceiling. It is the line where the burden of proof flips — and where a tenant's lawyer starts the conversation.

Good Cause became law on April 20, 2024 and applies automatically in New York City; other municipalities must opt in, per the state's Good Cause Eviction overview. For covered units, a landlord needs a recognized "good cause" to evict or decline a renewal — and an oversized rent increase is not one.

The rent mechanics live in Real Property Law § 216. An increase above the local rent standard is presumptively unreasonable, and a court can treat the increase itself as grounds to deny an eviction for nonpayment. The owner can rebut the presumption by showing the increase was justified by:

• Higher costs for fuel, utilities, insurance, and maintenance
• Property tax increases on the building
• Completed significant repairs — replacement or substantial modification of a structural, electrical, plumbing, or mechanical system requiring a permit, or hazardous-material abatement

Cosmetic work does not count. Painting, decorating, and minor repairs are excluded by the statute's own text, so a renovation file built on finishes will not carry an above-standard increase in housing court.

Coverage is decided unit by unit, and the exemptions in Real Property Law § 214 do most of the sorting. The big ones for a NYC buyer:

• Small landlords — owners of no more than 10 units statewide. Every unit you own counts toward the total, not just the building in front of you.
• New construction — buildings with a certificate of occupancy issued on or after January 1, 2009 are exempt for 30 years from issuance.
• High-rent units — monthly rent above 245% of HUD fair market rent is outside the law.
• Condo and co-op units, including buildings subject to an offering plan.
• Rent-stabilized and other regulated units — they answer to their own regime, not Good Cause.
• Owner-occupied buildings of 10 or fewer units, plus narrower carve-outs like sublets, employment-tied housing, and seasonal dwellings.

The 245% thresholds come straight from the DHCR notice and reset annually. For the five boroughs, the 2026 line sits here:

Unit type	HUD fair market rent	245% exemption threshold
Studio	$2,529	$6,196
1-bedroom	$2,655	$6,505
2-bedroom	$2,910	$7,130
3-bedroom	$3,644	$8,928
4-bedroom	$3,959	$9,700

Read that table against your rent roll before you model anything. A $6,300 one-bedroom sits under Good Cause; a $6,600 one-bedroom does not — two doors apart, two different revenue rules.

On today's averages, the standard is not binding. Corcoran's August 2026 rental report puts Manhattan's median rent at $5,285, up 7% year over year, with vacancy at 1.51% and active listings down 17% from a year ago.

Brooklyn hit a record $4,368 median with inventory down 20%. Even that kind of growth still fits inside 8.38%.

What the standard removes is the spike. NYC rent cycles have never moved in smooth 7% annual steps — they lurch, and owners who held rents flat through soft years historically recovered with one large catch-up renewal when the market turned. For covered units, that catch-up renewal is now the move the law presumes unreasonable.

Good Cause repriced the recovery scenario in NYC underwriting. A covered unit sitting 20% below market can only be walked back at 8.38% a year under the 2026-27 standard, which makes that owner roughly three renewal cycles from whole — so a buyer modeling a one-year mark-to-market on in-place leases is paying today for revenue the law presumes unreasonable.

That asymmetry is the whole investor story: market-rate downside stays uncapped, while the speed of upside capture on covered units is now administratively metered.

Treat Good Cause the way disciplined buyers already treat compliance capital in our 2026 operating-cost underwriting guide — as arithmetic, not vibes. The working rules:

• Classify every unit at diligence. Covered or exempt, with the reason documented: CO date, current rent versus the 245% table, regulatory status.
• Model covered renewals at the lesser of market growth or the standard. Use 8.38% for 2026-27 and assume the number moves each August with CPI.
• Count your own doors. The small-landlord exemption tests units owned statewide — an acquisition that takes you from 9 units to 14 changes the rules on the ones you already own.
• Build the rebuttal file as you operate. Tax bills, insurance and fuel costs, and permits for system-level work are the evidence § 216 respects if you ever need an above-standard increase.
• Price lost optionality, not just lost dollars. The cost usually shows up as extra quarters of below-market revenue during lease-up to true market, not as a haircut to stabilized income.

None of this belongs in the too-hard pile. It is one more column in the same model that already carries local law capital and insurance escalation.

NYC multifamily now runs on three revenue rulebooks. Rent-stabilized units enter a 0% renewal year on October 1 under Order #58 — the mechanics are in our owner's guide to the 2026 rent freeze. Covered market-rate units renew under the 8.38% presumption, while exempt units — post-2009 buildings, high-rent leases, small-landlord holdings — still price freely.

Capital has already noticed the difference. As our H1 2026 investment-sales breakdown showed, 65% of multifamily dollar volume went to free-market product — and within that free-market pool, the Good Cause line quietly splits assets again. Two buildings with identical rent rolls can carry different renewal ceilings because one got its CO in 2008 and the other in 2010.

Layer on the transaction-side rules like the FARE Act's broker-fee shift, and the pattern is clear: the regulatory perimeter around NYC free-market housing is tightening in increments. Each increment is priceable — but only if it is actually in the model.