By Sabina Mollot
In October of 2015, a grinning Mayor Bill de Blasio stood alongside other elected officials to declare that the sale of Stuyvesant Town and Peter Cooper Village to The Blackstone Group and partner Ivanhoe Cambridge was the “mother of all preservations deals.”
However, the Independent Budget Office of the City of New York (IBO) is now suggesting, in a report released Friday, that the amount of affordability preserved was inflated.
The IBO estimated that while the deal was supposed to preserve 100,000 “apartment years” (the equivalent of 5,000 apartments for 20 years), 64,000 of those apartment years would have remained affordable anyway through rent stabilization. This would mean the deal really only saved 36,000 apartment years, not 100,000. The report also noted that when the sale took place, just over 5,000 apartments were already renting at below-market rates due to rent stabilization.
While there has been plenty of debate over just how “affordable” the 5,000 apartments that are preserved and leased through a lottery system actually are, according to the IBO, only three percent of those 100,000 apartment years are reserved for low-income households. Twenty-seven percent are intended for middle income households while the remaining six percent of apartment years are units that will remain rent-stabilized longer than they would have without the deal. For its report, the IBO said it considered all of the newly created lottery apartments as well as ones that remain stabilized to be benefits to the city.
Additionally, the report indicated that the city used some misleading numbers at the time of the property sale.
The IBO estimated that without the deal, just under 1,800 apartments would have remained rent-regulated through 2035. The mayor’s office’s information wasn’t too different, saying at the time that without the deal, about 1,500 apartments would have remained stabilized through 2035, anyway.
But, the IBO argued, the mayor’s office “still counted the full 5,000 units of housing preserved through the deal towards its affordable housing goal.”
The report does however note that under the deal, “Roberts,” tenants in 1,400 apartments will have some protections they wouldn’t have had otherwise. Those tenants will get rent five percent rent increases for five years once the tax break that re-regulated those units expires in 2020 and those tenants lose their stabilized status.
The city gave $220 million in tax breaks and a loan that didn’t have to be paid back, along with transferable air rights, towards the owners’ $5.45 billion purchase. The air rights, still unused, the IBO said, may prove to be the “most lucrative part of the deal.”
Meanwhile, the report has already been slammed by the mayor, the Department of Housing, Preservation and Development and Stuy Town tenant leaders. The HPD cited the IBO’s own numbers to point out how many apartments would have been churned without the deal even if they remained in rent-stabilization. Based on the predicted loss, HPD Commissioner Maria Torres-Springer said not having any guarantees of continued affordability was a gamble the city couldn’t make.
“Rent regulation is not the shield the IBO is purporting it to be,” said Torres-Springer. “By IBO’s own analysis, Stuy Town had lost 50 percent of its units to the market in the decade before our agreement. Given that trajectory and not knowing for certain what the future will bring, we were not prepared to leave a single below-market unit on the table when we had an opportunity to protect all 5,000 below-market units. Our intervention offers far greater protections to the tenants in those units and guarantees that those units will remain affordable and serve low-and middle-income residents upon turnover. And we secured the affordability for less than half the cost, in a neighborhood with some of the highest market rents in the city, making this an incredibly valuable deal for taxpayers.”
Melissa Grace, a spokesperson for the mayor, also defended the deal.
“We stand by our actions at Stuy Town,” she said. “The last time this complex sold without protections, thousands of affordable apartments were lost. Anyone who thinks sitting this one out was an option is ignoring what tenants went through.”
Former Council Member Dan Garodnick, who was heavily involved in the negotiations, also disagreed with the IBO’s findings.
“The IBO really missed the boat on this one,” said Garodnick. “The number crunchers obviously just don’t understand how critical it was to have an ironclad commitment to preserve 5,000 units, after prior owners systematically attacked rent-stabilized tenants using every trick in the book. Rather, the IBO states the obvious – that there would have been some number of units protected under rent stabilization without the deal. That is surely true for a small group – but after the tumultuous recent history, nobody in Stuy Town or the city was going to sit back, relax, and wait to see how that played out.”
ST-PCV Tenants Association President Susan Steinberg agreed, pointing out the need to de-incentivize harassing rent-stabilized tenants in an effort to replace them with those willing to pay higher rents.
“The IBO analysis brazenly overlooks a key fact: without the agreement’s guarantees, a new landlord would have had massive market incentives to keep deregulating affordable units,” Steinberg said. “And we could have expected more aggressive and unscrupulous ways to get people out of their rent-stabilized units.”
Steinberg also said the IBO report doesn’t take into account how what happens in the state legislature affects tenants on the ground.
“IBO has based its report on a projection of stability – of the willingness in Albany and in the real estate industry to do the right thing by rent regulations,” Steinberg said. “Without the intervention of the city and of Blackstone’s commitments, we might still be in a situation of wholesale mid-term rent increases and Golub (nonrenewal) notices. I don’t know anyone here who wants to turn back the clock.”
City Council Member Keith Powers, a lifelong resident, also said it would be a mistake to leave tenants at the mercy of Albany.
“Residents of Stuyvesant Town and Peter Cooper Village know the importance of safeguarding rent regulation to avoid another period of high turnover,” said Powers. “Most importantly, the report identifies the need to modernize our housing laws in the city and state to protect affordable housing.”
Under the deal, 4,500 apartments must be rented to middle-class households earning no more than $141,735 for a family of three (165 percent of the area median income), with the remaining 500 rented to moderate-income families earning no more than $68,720 for a family of three (80 percent of the area median income). Maximum household incomes vary for other family sizes and rents are to be be no higher than 30 percent of the residents’ household incomes. As apartments turn over, half become lottery apartments, the other half market.
Other interesting tidbits from the IBO report:
While originally built for families, currently only 12 percent of households in ST/PCV have a child under 18 living in them, which is significantly lower than the citywide average of 30 percent.
Despite frequent jokes about the place having turned into a dorm, the reality is that the community is still aging. At this time, 28 percent of apartments have a resident who is 65 or older, compared with a citywide average of 25 percent. “While not an official designation, the development may be considered an example of a naturally occurring retirement community, colloquially referred to as NORCs,” the IBO said.
Analysis of Census data shows that the average household in the complex has two occupants, and the median income of residents in Stuyvesant Town is $93,010 and Peter Cooper Village is $106,310. Under the preservation regulatory agreement, middle-income units are reserved for a household of two making up to $119,625 in 2016.