Categories
Housing THE FRONT ARCHIVES

If Your Rent Is Too Damn High, Blame Anthony Weiner

Twenty-five years ago, it was unthinkable that New Yorkers would routinely pay $3,000 a month for an apartment, except maybe for a penthouse on the Upper East Side. At the time, the city still had more than 200,000 rent-stabilized apartments that rented for less than $400 a month. But on March 21, 1994, the City Council cast a vote that would begin to bring that era to an end: By a 28-18 margin, it approved a bill that let landlords take vacant apartments out of rent stabilization if their monthly rents were at least $2,000.

The council debate, which lasted less than ninety minutes, was contentious. The bill’s supporters claimed it would affect only a few wealthy people in Manhattan who didn’t deserve such a “subsidy.” Opponents argued it would fatally erode rent regulations and the tenant protections that come with them.

“The real death knell of rent stabilization is going to be the decontrol of any rent that reaches $2,000 at any time, which is what this bill does,” said Lower Manhattan councilmember Kathryn Freed. Upper West Side councilmember Ronnie Eldridge said that while $2,000 might seem like a lot at the time, soon enough middle-class apartments renting in the $1,200 to $1,400 range — where “two working professional people live with children” — would reach that threshold as well. Upper Manhattan councilmember Stanley Michels warned that it would create “a great incentive for owners to encourage vacancy” and that the unscrupulous ones would do that “by engaging in harassment.”

But Antonio Pagán, a Democrat who memorably fought on behalf of developers in his East Village district, responded that regulation of high-rent apartments was “a subsidy for people making a quarter of a million dollars a year.” John Fusco of Staten Island, one of the six Republicans then on the council, said complaints that “this is the beginning of the destruction of rent control” were “an insult to this council.” Housing Committee chair Archie Spigner of Queens noted that the average apartment in the city was under $600, and “the likelihood that it will be raised to $2,000, I think, is rather remote.”

The result was, as the bill’s critics feared, a hemorrhaging of rent-regulated apartments. The city’s Rent Guidelines Board estimated last year that New York lost more than 152,000 rent-stabilized apartments to high-rent deregulation between 1994 and 2016, peaking in 2009. Adding in co-op conversions and other means of getting apartments off the rolls, more than 284,000 apartments were legally deregulated during those years, more than double the number of units that were added via new affordable housing programs.

Those numbers don’t include apartments that were illegally deregulated. As landlords are not required to report destabilizations, “the true rate of deregulation is certainly much higher,” the Community Service Society wrote in a 2011 report. It estimated that by 2008, the city had lost more than 450,000 affordable apartments primarily because of “vacancy destabilization and excessive rent increases.”

“People assume it was the Republicans in Albany who did it, but it was Peter Vallone and the Democrats in the City Council,” says Michael McKee, one of the tenant-organization leaders who lobbied against the 1994 bill.

***

The 1994 high-rent vacancy decontrol law was the first major crack in the rent-stabilization system set up in 1974. Rent stabilization had been superimposed on the city’s older rent-control system after another vacancy-decontrol law, passed by the state in 1971, led to almost 400,000 rent-controlled apartments being deregulated within three years, with their rents increasing by more than 50 percent on average. And those rent increases failed to stop owners from abandoning thousands of buildings.

The real estate lobby and the city’s political establishment began pressing to again weaken rent stabilization in the early Nineties. In 1993, the state had deregulated vacant apartments renting for $2,000 or more, but only if they were vacant during a window of less than three months that summer. The bill the council passed would apply at any point in the future.

In today’s political climate, it would be unimaginable for an overwhelmingly Democratic City Council to vote to drastically weaken rent regulations. In 1994, however, the speaker was Vallone, a machine Democrat from Astoria who had close ties to the real estate industry. Joseph Strasburg, Vallone’s former chief of staff, had just become head of the Rent Stabilization Association landlord-advocacy group. Spigner, who during the debate on the bill claimed that fifty years of rent control had caused “vacant lots, abandoned buildings, and foreclosures,” and that rent regulations were a disincentive for people to invest in or maintain buildings, represented a mostly black homeowner area in southeast Queens. In 2000, City Limits would call him one of the councilmembers who were “sure friends of landlords.”

Antonio Pagán, the only Manhattan member to vote for deregulation, had been elected on a backlash against homeless people in the East Village, and was backed by landlords and developers in the fast-gentrifying neighborhood. The Republicans who argued for the bill were ideologically opposed to rent regulations.

Outer-borough councilmembers provided the margin of victory. Of the twenty-four Democrats who voted for the bill, eleven came from Brooklyn, seven from Queens, and five from the Bronx. The four Republicans from Queens and Staten Island voted “yes,” while the two from Manhattan voted “no.”

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“My interpretation was that it was not going to impact my district,” Martin Malavé Dilan, now a state senator, tells the Voice. Malavé Dilan at the time was a councilmember representing Bushwick and Cypress Hills, where rents averaged $400 to $500 a month; he says he saw the measure as solely affecting Manhattanites who were “taking advantage of rent-control laws that were intended to protect lower-income people.”

“I thought it would provide greater access,” adds former Brooklyn councilmember Una Clarke, who also voted for the bill. She did not elaborate.

Democratic councilmember Lucy Cruz of the Bronx said just before she voted “aye” in 1994 that she had “been assured, as my colleagues have been, that there are extensive protections.”

“Rent regulation is a complicated issue, and a lot of councilmembers didn’t bother to educate themselves about it,” says Jenny Laurie, former executive director of the Metropolitan Council on Housing, who lobbied against the bill. “They were easy votes for the leadership.”

One of the few who “totally got it,” says McKee, was Anthony Weiner of southern Brooklyn. “Unlike most councilmembers, who had no clue, he understood that this would erode tenant protections.” The future sext maniac, he adds, voted for the bill after twice promising tenant groups that he would vote “no.”

The landlord lobby was very effective at framing the issue as about rich people living in rent-stabilized apartments, says Laurie. The Wall Street Journal in 1994 singled out actress Mia Farrow, who was paying about $2,900 a month to rent the ten-room rent-controlled apartment on Central Park West she had grown up in; the paper also cited an investor paying $350 for a two-bedroom apartment with a solarium on Park Avenue.

The law contained a separate provision called “luxury decontrol,” which more directly affected affluent renters, by allowing landlords to deregulate occupied apartments if the tenant was paying more than $2,000 a month and earned more than $250,000 a year. Although the state lowered that income threshold to $175,000 in 1997, only about 6,200 apartments have been taken out of rent regulation since 1994 under it, according to the Rent Guidelines Board.

“It was a fake issue, but it was effective rhetoric,” says Laurie. In reality, according to the 1993 federal Housing and Vacancy Survey, half of the 212,000 rent-stabilized tenants who were paying less than $400 had incomes below $10,000 a year, and less than 0.1 percent made over $100,000.

***

The key to the passage of the 1994 law, some councilmembers at the time argue, was Strasburg, the council insider turned landlord lobbyist. “The guy who really made it happen was Joe Strasburg,” says former Bay Ridge councilmember Sal Albanese, who voted against the bill. “Strasburg was a visionary. He knew the city was beginning to gentrify, and apartments were going to reach that threshold.”

“Politics is about relationships,” says Tom Duane, who then represented the Chelsea–Greenwich Village district, and Strasburg had good relationships with councilmembers. Albanese adds that Strasburg was very good at finding people in black and Latino communities friendly to big real estate.

A few days before the vote, McKee recalls, the bill lacked the 26 “yes” votes it needed to pass. Speaker Vallone had a reputation for twisting arms. “If you voted against a bill that was considered a ‘leadership vote,’ you’d lose your committees,” says Albanese.

Others disagree with that assessment. There was no “iron-thumb leadership,” says former Brooklyn councilmember Stephen DiBrienza, who voted “no.” You could go against the leadership, he explains, as long as you gave a good reason and didn’t surprise them.

In any event, the council’s 1994 vote would have been less momentous if not for what it inspired 150 miles to the north and three years later. In 1997, the state decontrolled vacant apartments renting for $2,000 or more, after a three-way wrestle among Albany’s “three men in a room.” With the state’s rent-stabilization laws expiring that June, Senate Majority Leader Joseph Bruno threatened to use his control of the chamber’s Republican majority to completely block renewing them. Governor George Pataki took the more “moderate” path of wanting to weaken them, such as through complete vacancy decontrol. A few days after the deadline, Assembly Speaker Sheldon Silver agreed to major concessions, including vacancy decontrol, allowing a 20 percent rent increase on vacant apartments, and creating what was effectively a four-year statute of limitations on tenants’ claims that their rents had been illegally increased.

“If the council had not passed this, it may not have passed in Albany,” says Albanese. Worse yet, the 1997 state law made it impossible for the city ever to repeal its own 1994 law: A provision in the 1971 vacancy-decontrol law, commonly called the “Urstadt law,” prohibits cities with over 1 million people from enacting rent regulations stronger than the state’s. “But they can pass weaker laws,” notes Duane.

All attempts to strengthen rent regulations since then have had to go through Albany. Tenant groups gradually moved toward a strategy of trying to defeat all senate Republicans, on the grounds that even the few moderates who supported rent regulations would still vote to put the GOP leadership in control of what bills got to the floor.

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In 2008, on Barack Obama’s coattails, Democrats won a majority in the state senate for the first time since 1964. The next year, the assembly passed a bill to repeal vacancy decontrol. But the day before the Senate Housing Committee was scheduled to send it to the floor, Democratic state senator Pedro Espada, from the Bronx, switched to the Republicans, ending the Democrats’ one-seat majority. Since then, whether at the ballot box (in 2010) or via the splitting off of the Independent Democratic Conference to caucus with Republicans (starting in 2012), the senate has remained in GOP control. In the years since, the assembly has regularly passed bills to repeal vacancy decontrol and otherwise strengthen rent regulations, but none have ever made it out of committee in the senate.

The renewal of rent stabilization in 2015 raised the decontrol threshold to $2,700, adjustable for inflation; it also clarified that for apartments to be decontrolled, the previous tenant had to be paying that much before they moved out, so landlords could no longer legally deregulate them solely via hikes in legal rents following renovations and vacancy increases. (On April 26, the state’s Court of Appeals ruled unanimously that that principle didn’t apply to apartments deregulated before 2015, reversing a lower-court decision that could have re-regulated up to 100,000 apartments.)

***

Today, the threshold for vacancy decontrol is $2,733.75 a month, and there are deregulated apartments far beyond Manhattan and the brownstones of Brooklyn Heights and Park Slope. One real estate site advertises more than eighty two-bedroom apartments that cost more than $2,740 in Bedford-Stuyvesant. Deregulated apartments can also be found in five-story walkups in Harlem and Washington Heights and 1950s-vintage buildings on Queens Boulevard. And as Duane points out, renters in deregulated apartments not only face higher rents, but they have no right to renew their leases — unlike rent-stabilized tenants, who can only be evicted for cause. That means they risk losing their homes if they complain to landlords about poor conditions.

Meanwhile, the 1994 law’s selling point that New Yorkers would never pay more than $2,000 a month to live in the outer boroughs has become ancient history. In Mott Haven — the city’s third-poorest neighborhood in 2016, with a median household income of $2,276 a month apartments in a new luxury building are now being offered for around $2,900 to $3,500. 

“Boy, were we right,” says Kathryn Freed, now a Civil Court judge.

“Looking back, it’s definitely had a negative effect on affordable rents,” says Malavé Dilan, who has co-sponsored unsuccessful attempts to repeal the state vacancy-decontrol law. “If I were clairvoyant, I would have perhaps voted ‘no.’ ”

Categories
Housing THE FRONT ARCHIVES

How to Catch Your Landlord Cheating on Rents

One stormy evening last summer, in a corner of a playground on Union Street in Flushing, a small crowd gathered. They were residents of 140-35 Franklin Avenue one block to the south, and they were there to hear Aaron Carr, a former state legislative aide who now runs the nonprofit Housing Rights Initiative, explain how their landlord had been swindling them out of hundreds of thousands of dollars in rent money.

Their building, a six-story apartment complex typical of this low-rise immigrant neighborhood, had turned up during a trawl by HRI staffers through city tax records, Carr explained. The building’s owner, Hewlett Associates, had filed with the state in July 2007 for a J-51 tax abatement, a rebate available to landlords who upgrade their buildings. By law, anyone getting J-51 money for a building must agree to keep it rent-regulated as long as it receives the tax break; Hewlett, however, had recently filed a property tax form with the New York City Department of Finance that casually listed its J-51 benefits while listing only 14 rent-stabilized units — in a building of 113 apartments.

“This is pretty heinous stuff,” explained Carr, who displays a perpetual air of good-natured exasperation. “They are not just cheating tenants. They are cheating on their taxes. I’ve never seen anything like this before.”

That’s saying something, because in New York City, tenants and their advocates have seen just about everything. Tales of landlords scamming tenants out of rent money they’re not entitled to are nothing new: As just one example, when investigators with the state’s Tenant Protection Unit performed audits of landlords who had raised rents on the grounds that they had conducted major renovations on their buildings or on individual apartments, they found that in 40 percent of cases, the building owners had no evidence that the work had actually been done. “When a tenant shows me a lease where there’s not fraud, that’s when I’m surprised,” Carr quipped to the playground crowd.

Carr and Legal Aid attorneys were in Flushing that day to collect evidence for a class-action suit on behalf of tenants, one of more than twenty such actions that HRI has organized since mid-2016. But once tenants started organizing, something not entirely expected happened: The building’s management company, Kaled Management — run by Ed Kalikow, one of the general partners of the family-owned Hewlett Associates, and the first cousin of real estate baron and former MTA chair and New York Post publisher Peter Kalikow — immediately offered to restabilize apartments and reimburse tenants for past overcharges.

It was a surprising, if welcome, outcome — even if Carr and tenants weren’t entirely convinced that Kaled was offering to make good on all that it had overcharged. (Tenants are still considering a class-action suit to seek additional rebates.) But it’s also a worrying sign that as New York State officials have shown little interest in enforcing rent laws, standard operating practice for many landlords is: Don’t obey the law until you get caught.

***

Flushing is best known these days as the home of Queens’s Chinatown, which has grown in recent years to compete with Sunset Park as the city’s largest Chinese enclave. But the neighborhood is actually among New York City’s more diverse, with Chinese, Spanish, Korean, Hindi, Urdu, and Russian all commonly heard on the streets; the tenants from 140-35 Franklin who turned out at the playground represented a United Nations of the pissed-off.

Tim McCarthy moved his family to a two-bedroom apartment at 140-35 Franklin — which, like many Queens addresses, bears an alias for its cross street, 42-52 Union Street, as well being dubbed the Trafalgar — from another nearby building in 2008. He says that when Carr first knocked on his door a few months ago and told him that his apartment was supposed to be rent-stabilized, “it completely threw me for a loop.” Shortly afterward, he and his neighbors were contacted by Legal Aid attorneys to work out a plan of action.

One of those neighbors was Sudesh Chohan, who has lived in the building since the mid-1980s. A year after he moved from one apartment to another in the building in 1989, he says, he started receiving leases with no rent stabilization included. (Other units at the building, Carr later discovered, were listed by Hewlett with the state as “exempt apartment — reg not required” as far back as 1987.)

At first, says Chohan, his landlord didn’t raise rents much; Flushing remained a largely low-rent neighborhood, and the market wouldn’t bear much more anyway. But in recent years, his rent started to creep up, ultimately to $1,475 a month for his one-bedroom junior four. He assumes that his landlords had spotted the area’s growing gentrification and grown dollars signs in their eyes: “The rents in the Flushing area are crazy,” he says.

Sudden jumps in rents as the result of increased demand are precisely what rent stabilization was meant to prevent when it was first established by the federal government in 1943, in response to wartime inflation. (The program was taken over by New York State in 1950, and has been revised several times since.) And though the city inserted some major loopholes under Rudy Giuliani in 1994 that would allow landlords to start charging market rents, particularly “vacancy decontrol,” which deregulated apartments that became vacant once their rents were $2,000 a month or more, none of the units at 140-35 Franklin are known to have ever approached that threshold.

And in any case, the building’s J-51 abatements should have doubly secured its rent-regulated status. J-51, first passed by the state legislature in 1955 to encourage landlords to install hot water in their buildings, has expanded to cost the city more than $250 million a year, as landlords can apply for rebates for up to 100 percent of the costs of certain approved renovation projects; in exchange, landlords must keep a building’s apartments rent-stabilized as long as they receive the tax break. And as a landmark 2009 case determined when Tishman Speyer tried to hike rents at Stuyvesant Town–Peter Cooper Village after getting $24.5 million in tax breaks, even vacancy decontrol couldn’t be used to get around this requirement: Once J-51 benefits kick in, the only way out of rent stabilization is to wait for the tax breaks to expire.

McCarthy, Chohan, and their neighbors should have all been protected several times over from sudden rent hikes. Instead, for nearly thirty years, the building’s residents received leases saying that they were not bound by any rent regulations at all.

“You’re thinking good will, that people are stating what it is, and they’re not willfully trying to deceive you,” says McCarthy. In a reasonable world, he says, “it’s not up to the tenants to find out whether they’re being cheated.”

***

The obvious question, then, is why the overcharges went unnoticed for almost three full decades. The apparent answer is that no one was looking, at least not at the state agency that is tasked with overseeing rent laws.

The ever-changing byzantine rules of city rent regulation are overseen by the state’s Division of Housing and Community Renewal (DHCR) — a consequence of the same dependence on state action for city rent laws that sees New York renters holding their breaths every few years to see if Albany will renew them. (The current law, last revised in 2015, is set to expire in 2019.)

While DHCR requires landlords to file documentation of which apartments remain rent-regulated each year, it has been widely criticized for doing little to actually check their work, leaving it up to building owners to report their buildings’ status honestly. As Carr likes to point out, the official DHCR rent histories that tenants can receive on request include a glaring disclaimer at the bottom: “DHCR does not attest to the truthfulness of the owner’s statements or the legality of the rents reported in this document.”

“The largest affordable housing program in New York City is based on an honor system,” he says.

As a result, while the Stuy Town ruling made headlines, it did not immediately change landlords’ treatment of tenants in J-51 buildings. Even when Governor Andrew Cuomo announced a crackdown in January 2016 on landlords who’d illegally deregulated J-51 buildings, this amounted to DHCR sending out letters to every building owner in the program (but, significantly, not their tenants) to remind them of the law’s requirements — and there was no penalty for ignoring the letter. As a result, a ProPublica investigation later that year revealed, only about 22,500 apartments in J-51 buildings were returned to the rolls, far short of the 50,000 units that Cuomo had promised. (DHCR says that an additional 1,580 units were returned to the rolls earlier this year.)

Kaled was apparently one landlord that ignored the Cuomo letter. A company press spokesperson did not answer a direct query as to why the building remained unregulated even after January 2016, forwarding only this statement from Ed Kalikow: “After spending several months reviewing court challenges to the law and thoroughly reviewing and analyzing tenant rental histories at the Trafalgar, we acted quickly to refund the residents who were inadvertently overcharged for their rent, plus statutory interest. Making residents financially whole was not only legally compliant, but it was the right thing to do. We continue to monitor the frequent changes to the rent stabilization laws to protect the rights of residents who make the buildings we manage their home.”*

Judith Goldiner, a longtime Legal Aid lawyer who serves as supervising attorney for the organization’s Law Reform Unit, says, “There’s just been absolutely zero oversight by the city or the state for a very long time, and so I’m not surprised we’re seeing this kind of case. This is a particularly blatant one, but we see so many of these kinds of cases that it’s pretty appalling — but not shocking.”

Carr left State Assembly Member Michael Blake’s office, where he had served as chief of staff, in early 2016 in part because he was tired of hearing so many stories from Bronx tenants who were facing unwarranted overcharges, and wanted to do something about it. After launching HRI, he set out to scour public records to find evidence of buildings where landlords looked to be bilking the system, even if tenants weren’t yet aware of it. In the case of the Flushing building, all it took was flipping through city tax records and looking for filings that revealed tax abatements for rent-regulated housing in buildings where the number of rent-stabilized units didn’t match the total number of apartments. “That’s the sad thing,” says Carr. “You can train junior high students to do this.”

140-35 Franklin Avenue is just one of hundreds of buildings in New York that have received J-51 tax breaks while charging illegally high rents.

Housing experts have long complained that DHCR is a do-nothing agency, something they attribute to both bureaucratic mismanagement and a lack of sufficient funding for enforcement. (Landlords learn to “just fill out anything as dishonestly or honestly as you choose, because no one’s ever going to look at it to cross-check you unless there’s a tenant complaint,” State Senator Liz Krueger told the Voice in 2016.) In response to such complaints, Governor Cuomo had the agency set up a Tenant Protection Unit in 2012 — only to have it beset by similar problems with funding that have left it with only about 25 staffers to cover all of New York City.

Asked about its enforcement of rent laws, a DHCR spokesperson responded via email: “Our goal is always to ensure that all rental apartments are correctly registered and that tenants enjoy the rights and privileges that rent regulation laws confer. New York State has zero tolerance for landlords who benefit from this city-administered tax abatement program and flaunt [sic] the law by denying tenants their right to rent regulated housing.”

Landlords who don’t comply, DHCR said, “will be subject to the full range of measures available to the Office of Rent Administration.” The agency says it opened formal proceedings to restore about 2,150 units to rent regulation last year — ultimately assessing a total of about $4,000 in penalties.

“I think that the TPU does everything they can do,” says Goldiner. “They are people of good faith, and they are trying the best they can with a very, very limited staff. I think there is a lot of resistance outside the TPU at the agency to forcing landlords to comply. I asked them on numerous occasions for the list of landlords who agreed to come into compliance with the rent laws so we can reach out to the tenants in those buildings, and they won’t give us that information.”

Carr minces fewer words about DHCR’s inaction. “I think there’s an important distinction to be made between a failure to notice something and a failure to care about something,” he says. “DHCR knows exactly which landlords are receiving tax benefits, and which are cheating. They’re just using a hands-off enforcement approach.”

“The attorney general’s office is really remiss in not going after these bad actors,” adds Goldiner. The problem ultimately comes down to political will, she says — and the money that sways it. “Look where the landlords’ money is going,” she says. “Follow campaign donations and you’ll see why we don’t have better enforcement.”

***

The good news from the tale of 140-35 Franklin is that it shows when tenants push back against egregious violations of rent laws, landlords will often back down. “After the second or third meeting, I got an immediate check with a ‘no hard feelings’ kind of letter,” says McCarthy. “I was surprised, because generally they’re so stingy with money.”

In addition to his rent rebate check, McCarthy received a $260-a-month rent reduction off his $1,700-a-month rent, though he thinks he could be entitled to more, if the landlord was already charging an illegally high rent when he moved in. Chohan, who had been on the verge of going on a hunt for a new apartment he could afford, will instead stay put after receiving a $217 rent decrease and $6,000 in a lump-sum check.

“He was afraid,” Goldiner concludes of Kalikow. “Once he saw the tenants were getting lawyers and getting organized, he realized he didn’t have a leg to stand on.”

The less-good news is that, in a system where it’s left entirely up to tenants to discover they’re being screwed over and then figure out how to report them, it requires a handful of nonprofit staff to page through tax filings in order to find which buildings are flouting the law — and then overworked legal aid attorneys to file court cases to bring landlords to the table.

Carr says that when sued, landlords typically restabilize the units — and then “litigate over what the rent refunds and rent reductions should be.” He notes that the J-51 program prohibits setting an apartment’s legal rent at more than what its tenants are actually paying — so-called preferential rents. If landlords can duck out of enforcement of this provision via a quick settlement with tenants, they can quickly jack up rents once residents move out, even if the building is back on the rent regulation rolls.

“There’s a lot of landlords that are probably taking advantage of this J-51 tax abatement,” says McCarthy. Step one for concerned tenants, he advises, is to order your rental history from DHCR to begin to track the building’s record of legally registered rents. “Beyond that, contact Aaron or people like Aaron” to get help with researching possible violations. (HRI holds neighborhood meetings to train tenants in how to investigate landlords’ rental histories.)

“This is egregious, and I really hate the fact that you have to fight so hard to battle something that seems so plainly an example of injustice,” McCarthy adds. “They’re going to continue doing it until they’re caught — and then if they’re caught, they just get a slap on the wrist. People in my building have been cheated for forty years. And it’s going to take thirty years to find out that you’ve been doing something wrong?”

It’s an exasperation shared by Carr, but he also shares the hope that tenants can begin to take advantage of publicly available data — and public-interest lawyers — to start reversing that trend. As he instructed in his parting words to the assembled tenants in the playground last summer: “Talk to your neighbors. Turn this into a beautiful thing.”

*UPDATE: A Kaled spokesperson wrote in after publication of this article to say that the building owner did not ignore the DHCR letter to landlords who received J-51 benefits, but that it took a year and a half to conduct a review of the company’s properties. 

Ed Kalikow wrote in an accompanying email, “As we stated in our comment in the story, Kaled had already been engaged in a complex accounting of all buildings we manage after receiving notification from the state in January 2016. Once that review was complete, we moved quickly to refund overpaid rent plus statutory interest and adjusted the rents in every applicable case.” He concluded: “We work continually with our tenants to make sure the rents are charged accurately and within the letter of the law.”

 

Categories
Housing THE FRONT ARCHIVES

Jared Kushner Sued for Allegedly Overcharging Tenants (Again)

Six tenants in a Brooklyn Heights building owned by Trump son-in-law Jared Kushner are alleging that he illegally deregulated their apartments and charged them “far in excess of the legal rent,” according to a class-action lawsuit filed in Kings County Supreme Court November 14.

The Kushner Companies, according to the lawsuit, failed to register sixteen of the eighteen apartments in the six-story brownstone at 18 Sidney Place as rent-stabilized when it acquired the building from Brooklyn Law School in 2014. “When they purchased the building, they were supposed to return all the units to rent stabilization,” says Aaron Carr, executive director of the Housing Rights Initiative, which developed the lawsuit. “They never did.”

The lawsuit “is without merit,” a Kushner Companies spokesperson told the Voice. “The previously empty apartments at 18 Sidney Place were fully renovated to bring them to fair market value in accordance with applicable New York State rent regulations. The only predatory conduct here is that of Aaron Carr, who seems bent on attacking responsible owners in the press for the sake of sensational headlines.”

“That’s not what the law says,” responds Roger Sachar of Newman Ferrara, the law firm representing the tenants. “The statute says nothing about renovations.”

If 18 Sidney Place had been a regular apartment building when Kushner acquired it, he could have legally deregulated vacant apartments by doing renovations that cost enough to get the rent over $2,500. But because it was being used as student housing, Sachar explains, it was temporarily exempt from rent regulations — and “when that temporary exemption ended, rent stabilization was supposed to snap back into place.”

When that happens, Sachar says, a new legal rent is supposed to be set based on a formula ordained by the state Division of Housing and Community Renewal (DHCR): the last legal rent, adjusted for rent increases allowed by the city Rent Guidelines Board, plus a 20 percent vacancy bonus. The last legal rents were $1,000 a month or less, Carr says. By that formula, an apartment that cost $1,000 when Brooklyn Law School acquired the building in 1991 would be around $2,200 now.

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“But instead, Mr. Kushner cheated,” says Lucas Ferrara of Newman Ferrara. “He decided to sidestep rent stabilization.” With Kushner touting 18 Sidney Place as “uniquely Brooklyn,” apartments there have been advertised at $2,600 for a studio and $3,800 for a one-bedroom.

The suit is demanding that the legal rent be calculated and the overcharges refunded to tenants, says Sachar. Because it’s a class-action suit, the tenants can’t claim penalties or punitive damages.

The building’s recent history represents a classic predatory landlord pattern: Buy a rent-stabilized building, empty it out, renovate the apartments and rent them at luxury prices, and then flip the building for a rapid and massive profit. Kushner acquired 18 Sidney Place in February 2014 as part of a six-building portfolio he bought from Brooklyn Law School for $36.5 million, according to the Real Deal. As they were 90 percent vacant, he didn’t have to empty them. Last July, also according to the Real Deal, he put 18 Sidney Place and a smaller building at 144 Willow Street on the market for $20 million. He’d paid $7.6 million for them.

Fraudulently high rents have become increasingly common since the state forced New York City to allow the deregulation of vacant apartments above a certain rent in 1997. Once apartments are deregulated, their rents are no longer required to be registered with DHCR, so it is much harder for tenants to detect fraud. The most common method is inflating the cost of improvements on vacant apartments, as legal increases are pegged to the amount spent on renovations. In 2014, the state Tenant Protection Unit (TPU) said “landlords did not have proof of apartment improvements used to justify rent increases” in 40 percent of the 1,100 such cases it had audited in its first two years.

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“To tell that Kushner Companies is engaging in potential illegal misconduct, all you need is Google,” says Carr. Housing Rights Initiative, which the former state assembly staffer founded about two years ago, analyzes publicly available data to look for indicators of illegal rent increases and identify specific buildings where rent fraud is likely.

The 18 Sidney Place lawsuit grew out of an investigation of 89 Hicks Street, another building Kushner bought from Brooklyn Law School. After getting tenants there to obtain their apartments’ rent histories from DHCR, Housing Rights Initiative helped them file a similar class-action suit in August.

The problem with the state’s approach to enforcing the laws against rent fraud, says Carr, is that it is “reactive,” depending largely on complaints from tenants. But that requires tenants to know their rights and the law, and to be willing to get into a prolonged bureaucratic and legal battle with their landlord. In apartments that have been deregulated, tenants have no legal right to renew their lease, and it is likely that their lease will expire long before their case is resolved.

“Most landlords get away with this,” Carr says. “There is no consequence or penalty.” The TPU has taken small steps toward broader investigations, but tenant advocates say the understaffed agency doesn’t do things like investigate other properties owned by a landlord found to have charged illegally high rents in one building.

With rent fraud so widespread, Carr says, the reactive model “is not going to capture the systemicness of the problem.” DHCR, he adds, should view landlords who have not registered rents as “low-hanging fruit” and audit them.

Housing Rights Initiative is also urging the state to investigate all the fifty-plus buildings the Kushner Companies own in the city.