Owners sue over new rent regulations

This story originally appeared in Real Estate Weekly.

By Sabina Mollot

Seven New York landlords have joined the Rent Stabilization Association (RSA) and Community Home Improvement Program (CHIP) to sue over new rent regulations they claim are ‟unconstitutional.”

The 125-page complaint, filed in the U.S. District Court, Eastern District of New York, names the city, the Rent Guidelines Board along with each of its members, and the state Homes and Community Renewal Commissioner RuthAnne Visnauskas as defendants.

“The main complaint is that, after 50 years of rent stabilization, it is clear that the system doesn’t work,” said the RSA’s general counsel, Mitch Posilkin.

“If the supposed housing emergency continues to exist, maybe there’s something wrong with the system, and we believe the system violates the United States Constitution.”

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Could a lawsuit really undo the rent regs?

Blaine Schwadel

By Sabina Mollot

Ever since the new rent regulations — all 74 pages of them — were signed into law by Governor Andrew Cuomo on Friday, real estate attorneys have been scrambling to determine what this means for the city’s property owners.

There has been at least one published report in the Commercial Observer suggesting there could be an industry-backed lawsuit, and Blaine Schwadel of Rosenberg & Estis, a law firm representing owners and lenders, said he’s pretty sure there will be some kind of legal action taken.

This reporter was unable to determine what group, if any, was behind the rumor of a planned suit, but Schwadel said there’s at least been talk.

“I have heard that various real estate groups, RSA (Rent Stabilization Association), REBNY (Real Estate Board of New York) and CHIP (Community Housing Improvement Program) are having discussions about how to challenge it,” said Schwadel.

But, he warned, “There have been very few successful challenges to rent regulations in the past.”

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Albany poised to pass much stronger rent regulations

Tenants rally outside the governor’s midtown office in support of the proposed rent laws on Wednesday. (Photo by Anne Greenberg)

By Sabina Mollot

Although nothing is yet a done deal, on Tuesday night the State Assembly and Senate announced that the package of bills aimed at repealing vacancy decontrol, among other tenant protections, is being pushed forward by both chambers. A vote is expected to take place on Friday, and Governor Andrew Cuomo has said he would sign such a bill if it passes in both chambers.

The package’s protections for tenants, if signed into law, would:

  • Make the rent regulations permanent, instead of sunsetting every four years
  • Repeal vacancy deregulation and high-income deregulation, which has applied to residents whose household incomes were at least $200,000 for two years
  • Repeal the vacancy bonus, which allows owners to raise the rents by 20 percent every time an apartment turns over
  • Repeal the longevity bonus, which allows owners to raise rents on an apartment for new tenants based on the length of the previous tenancy
  • Prohibit Rent Guidelines Boards from setting additional increases based on the current rental cost of a unit or the amount of time since the owner was authorized to take additional rent increases, such as a vacancy bonus

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IAIs were inflated at hundreds of NY apts. suit says

Attorney General Letitia James

By Sabina Mollot

A property manager is being accused of lying about the costs of hundreds of apartment renovations in order to have the rents reach the threshold where they could be converted to market rate.

The property manager, David Drumheller and his company, JBD Realty Services, were both named as defendants in a lawsuit that was filed by Attorney General Letitia James last Thursday.

The suit accuses Drumheller of fraud and repeatedly violating the Rent Stabilization Law for the individual apartment improvement (IAI) scheme, which was allegedly perpetrated at hundreds of apartments in Manhattan and Brooklyn. At that time, he was working for Newcastle Realty Services, a firm that manages roughly 2,500 units in the city. He also, along with an unnamed associate, allegedly collected $1.2 million in kickbacks from contractors who did renovation work at Newcastle-managed apartments. Some contractors were said to have paid the pair directly, while others paid for their expenses such as country club dues, Porsche payments and home improvement projects. Most of the contractors made most of their money from the Newcastle jobs, including a landscape design firm that had no apartment renovation experience when hired by Newcastle.

According to the attorney general, the scheme went on for years between 2012-2016, with Drumheller manipulating the IAI system that allows property owners to charge permanent rent increases to tenants based on the cost of the renovations that were done in their apartments. An owner can charge 1/60th of the cost in buildings with over 35 units, and 1/40th of the cost in buildings with 35 or fewer units. The goal was to get the rents to reach the threshold where they could be deregulated.

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RGB proposes increases of 0.5-2.75%, 1.5-3.75%

Tenants wave signs while calling for a rent freeze or rollback. (Photos by Maria Rocha-Buschel)

By Maria Rocha-Buschel

The Rent Guidelines Board shot down the possibility of a rent freeze or rollback during the preliminary vote in a lively meeting at Cooper Union’s Great Hall on Tuesday, approving a range of 0.5 to 2.75 percent for one-year leases and 1.5 to 3.75 percent for two-year leases.

Tenant representatives Sheila Garcia and Leah Goodridge had proposed a possible rent rollback for tenants signing one-year leases, with a range of -0.5 to 0 percent, and the possibility of a freeze for residents signing two-year leases, suggesting a range of 0 to 1 percent, but the motion didn’t pass.

Tenant reps for the RGB have proposed rollbacks and freezes in previous years, although last year Garcia said that the data didn’t necessarily merit a rollback, so she and Goodridge had proposed a freeze during the preliminary vote. But this year, she said that a rollback made more sense.

“We saw the impact of the rent freeze (in the data we looked at this year),” Garcia said following the vote, referring to the freeze on one-year leases that the board had approved in 2016, noting that the board bases their analysis on data that is at least one year old and in some cases, even older. “There was an increase in Net Operating Income (in that year for landlords), most tenants are signing two-year leases and there are all these other sources of income.”

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Landlords grilled at hearing on proposed rent regulations

Linda Rosenthal

Assembly Member Linda Rosenthal discusses the package of bills at a pre-hearing rally. (Photos by Sabina Mollot)

 

By Sabina Mollot

Politicians left no doubt that the balance of power in Albany has unquestionably shifted during a hearing of the New York State Assembly last week.

At the heart of the debate was the understanding that a package of tenant-friendly legislation stands a good chance of being passed in June, following last November’s elections that turned the previously industry-friendly State Senate blue.

At one point, Assembly Member Linda Rosenthal, who represents the Upper West Side, turned her attention to a panel of real estate professionals who were there to give testimony. 

“How much money have you used to influence our laws?”, she asked.

When none answered, Rosenthal told them, “You’ve had a lot of friends in Albany over the years. Now you have fewer friends.”

Earlier in the hearing, Paimaan Lodhi, senior vice president of policy and planning for the Real Estate Board of New York, cautioned that the city’s housing stock would deteriorate as a result of the bills’ passage. 

However, he said the industry is in favor of passing rent regulations that “increase transparency that protects the public from a few bad actors.”

But Rosenthal told the room, “We have many good bills and we are going to pass them. There is no reason why tenants shouldn’t be protected. You guys get tax breaks. In return, you have obligations you have not met. How come so many landlords fail to register their rent-regulated units?”

In response, Joseph Strasburg, president of the Rent Stabilization Association, said the RSA encourages its members to resister their units, warning there are consequences if they don’t. He then said there should be more enforcement mechanisms and countered there wasn’t “an upside” to trying to game the system.

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Accusations of racism fly at rent regs hearing

Assembly members at a hearing on rent regulations (Photos by Sabina Mollot)

By Sabina Mollot

A hearing on Thursday about the rent regulations that are sunsetting this June in Albany at times got heated with a speaker representing the real estate industry being accused of racism by the crowd and even a couple of Assembly members.

After a few New York City tenant leaders and advocates spoke favorably about a package of tenant-friendly bills aimed at, among other things, ending vacancy decontrol and major capital improvement rent increases, Joseph Strasburg, the president of the Rent Stabilization Association, told the Assembly housing committee members not to “NYCHA-tize the private sector.”

The Rent Stabilization Association represents roughly 25,000 New York City landlords.

In response to his comment, a couple of audience members shouted out “Racist!”

Strasburg disagreed, but one black Assembly member, Latrice Walker, responded that as someone who had grown up in a NYCHA development, only to later lose that apartment and become homeless, she didn’t appreciate his comment.

This was echoed by another black Assembly member, Walter Mosley, who said, “I think the term used with regards to NYCHA, it’s not up to the person who doesn’t know what racism is to determine what racism is. To say it is disrespectful to the members here who are of color as well as those who live in NYCHA, who are a number of my constituents.”

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Teachout: More tenant protection needed against predatory equity

July19 teachout cropped

Zephyr Teachout discusses her platform in front of a Jared-Kushner-owned building. (Photo by Maria Rocha-Buschel)

By Maria Rocha-Buschel

Attorney General candidate Zephyr Teachout has announced specific tenant-friendly objectives she would implement in the office if elected in response to reports that 19 tenants are suing Jared Kushner’s real estate company for pushing them out of their rent stabilized apartments.

Teachout’s agenda, which she announced on Monday in front of the Kushner-owned building in Williamsburg whose tenants have filed the lawsuit, includes creating an ombudsman position that would be responsible for engagement with tenant groups and organizers to respond to complaints and increasing criminal prosecutions in the Real Estate Enforcement Unit, a division of the AG’s office that investigates and prosecutes cases involving bank fraud, deceptive lending practices, tenant harassment and other real estate-related crimes.

“These crimes are committed every day by real estate companies in New York,” she said. “If we really want to change their behavior, we have to go after them criminally and not just civilly.”

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Meet the Rent Guidelines Board’s new tenant member

Rent Guidelines Board’s two tenant members Sheila Garcia and the newly-appointed Leah Goodridge (Photo by Maria Rocha-Buschel)

By Maria Rocha-Buschel

New Rent Guidelines Board tenant representative Leah Goodridge is, first and foremost, a native New Yorker.

“Because I’ve seen the changes in the city over a number of decades, (joining the board) was definitely something I was interested in,” she said. “Being a native New Yorker has allowed me to really see the city and be connected to it where I care deeply about its future and its past.”

Goodridge, a supervising attorney at Mobilization for Justice, told Town & Village that tenant advocacy in her career impacted her decision to join the board as well but seeing so many changes for tenants throughout her life emphasized for her the importance of the work that the board does.

“(The RGB) plays a huge role in affordability, which is one of the main issues in New York,” she said. “I’m from Brownsville, I live in Bed-Stuy now and I’ve seen the neighborhoods change dramatically. People are being priced out.”

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Opinion: Why we’re pushing for stronger rent laws early

(Pictured after returning from Albany, left to right) Tom Kuhn, Peter Sullivan, Judy Miller (back row), Mary Garvey, Sherryl Kirschenbaum, Michael Madonia (back row), Susan Steinberg, Patrice Michaels, Anne Greenberg, Alex Lee, Regina Shane and Chandra Patel. (Photo by Harvey Epstein)

By Susan Steinberg
President, Stuyvesant Town-Peter Cooper Village Tenants Association

Here we go again.  New York State’s rent laws expire in June 2019 and tenant groups are already taking action to renew and strengthen them.

The 2019 date was deliberately set at the time of the 2015 rent law renewal so it would occur in a non-election year, saving incumbents from the danger of losing their seats as a result of a strong, forceful tenant lobby. 2018 is, of course, an election year which means that now is the time to start putting the pressure on state legislators who want tenant support for their election or re-election runs. Since bills to strengthen rent laws can be passed any time prior to the June 2019 expiration, the challenge is to get them to the floor of the Senate for a vote. They are now languishing in the Senate’s Housing Committee. (The State Assembly has already passed two bills and will easily pass a third but the Senate has yet to act.)

What is the tenants’ game plan? We are pushing for passage of three bills to strengthen regulations by repealing two laws most responsible for the loss of rent-regulated units — vacancy deregulation and vacancy bonus — and for closing the preferential rent loophole.  Vacancy decontrol is responsible for the loss of 250,000 rent-regulated units over the past decade; the vacancy bonus gives landlords a 20 percent rent increase each time an apartment turns over; preferential rents are a discount from the legal rent that can be taken away at lease renewal leading to a sudden increase of hundreds of dollars.

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No rent freeze this year, RGB decides in preliminary vote

Tenants react to the board voting down a rent freeze (Photos by Maria Rocha-Buschel)

By Maria Rocha-Buschel

The possibility of a rent freeze was quashed last Thursday at the Rent Guidelines Board’s preliminary vote, held at Cooper Union’s Great Hall. As is the case in most previous years, the proposal that ultimately passed was from the board’s chair, Kathleen Roberts, with ranges from 0.75 to 2.75 percent increases for one-year leases and 1.75 to 3.75 percent increases for two-year leases for rent-stabilized tenants.

Tenant representatives Sheila Garcia and newly-appointed Leah Goodridge offered a proposal that would have included a rent freeze for one-year and two-year lease renewals but the chair, the board’s four public members and the two owner members voted against the measure.

The owner representatives attempted to offer their own proposal but were shouted down by tenants who started chanting and yelling once the proposal for a rent freeze failed. Roberts read her proposal and held a vote amidst the yelling and the board walked off the stage with most tenants in the crowd unaware that anything had been decided. The chair’s proposal passed in a vote of five to four, with the owner and tenant representatives voting against the measure and the public members and chair voting for it.

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Hoylman, Powers ask HCR why it approves all MCIs

ST-PCV Tenants Association President Susan Steinberg, pictured at the podium, discusses MCIs at a Tenants Association meeting held in November, alongside local elected officials. (Photo by Sabina Mollot)

By Sabina Mollot

Fed up with the consistent approvals of major capital improvement (MCI) rent increases by the state’s housing agency, Stuyvesant Town-Peter Cooper Village Tenants Association President Susan Steinberg called on local elected officials last November to get the agency to stop what seemed to be a rubber stamping process. Or at least, Steinberg said, while hosting a meeting for neighbors, to explain the reasons for the approvals of every MCI ever applied for by the landlord, when the Tenants Association has challenged each and every one of them. She noted at the time that the agency, by its own regulations, was supposed to provide explanations for its decisions.

The two state elected officials sitting on the stage of the auditorium of MS 104, State Senator Brad Hoylman and then-Assemblyman Brian Kavanagh, said they’d follow up.

Five months later, Hoylman, as well as new City Council Member Keith Powers, have penned a lengthy, legalese-filled letter to RuthAnne Visnauskas, the commissioner of the state housing agency, Homes and Community Renewal (HCR) that reiterates the TA’s arguments against the permanent rent increases.

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What does the Democrats’ ‘unity’ deal mean for tenants?

Apr12 Cousins Cuomo Klein

Senate Democrat Leader Andrea Stewart-Cousins, Governor Andrew Cuomo and former Independent Democratic Conference leader Jeff Klein (Photo courtesy of governor’s office)

Following what is being touted as Senate Democratic chamber reunification, Town & Village reached out to Michael McKee of TenantsPAC. He outlined the scenario as it is likely to play out in an op-ed while also sharing his thoughts on the reason for the governor’s sudden insistence on reunification.

“Everything comes down to two words. Cynthia Nixon,” said McKee. “Andrew’s scared to death and trying to hide it and he’s not fooling anyone.”

As for the Independent Democratic Conference’s sudden demise, read on, but, warned McKee, “We’ve been down this road before.”

 

By Michael McKee, treasurer, Tenants Political Action Committee

In a stunning development, Governor Andrew Cuomo has persuaded Jeff Klein and his fellow turncoat members of the Independent Democratic Conference not only to rejoin the mainstream Democratic conference but also to dissolve the IDC.

This is a huge political defeat for Jeff Klein, who up to now has insisted that while he was open to a reunification deal, the IDC would continue as a separate conference and he would be co-leader with Andrea Stewart-Cousins.

Now he has agreed to disband the IDC, and accept a lower position as Andrea’s deputy.

Why? Because Andrew Cuomo, Jeff Klein, and the other turncoat senators are scared of losing their jobs this year. This is a perfect illustration of how grassroots political pressure can produce results. While Klein and Cuomo are desperate to lessen the pressure on them, we need to keep the pressure on – and increase it.

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Hoylman: J-51 tenants need info from HCR

State Senator Brad Hoylman (Photo courtesy of Brad Hoylman)

By Sabina Mollot

With the exception of residents of Stuyvesant Town and Peter Cooper Village, for most New Yorkers, the letter J followed by number 51 has no meaning whatsoever. And consequently, this could mean they are living in an illegally deregulated apartment without even knowing it.

However, State Senator Brad Hoylman said he wants to make sure New York’s renters know what their rights are if they’re living in buildings where the landlords have benefitted from the J-51 tax break.

In a letter, he called on the state housing agency, Homes and Community Renewal, to inform tenants living in deregulated buildings if their landlords have been enrolled in the tax benefit program. The letter, which was sent to the agency’s commissioner, RuthAnne Visnauskas on August 7, Hoylman noted that the HCR routinely reaches out to the owners of more than 4,000 buildings with information about reregulation. But renters, meanwhile, are left in the dark as to their buildings’ history and may not know if they’re being overcharged.

He called the practice of keeping landlords but not tenants in the loop “baffling.”

Hoylman added, “It’s tenants who don’t know what their rights are and should be informed that their building may have been illegally deregulated because the owners had received J-51. It’s fine to notify landlords so that they will be compliant but they should let the tenants know.”

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Rent will go up 1.25, 2 percent

June29 rgb limbo.JPG

Tenants play limbo at the vote. (Photos by Maria Rocha-Buschel)

By Maria Rocha-Buschel

The city’s rent-stabilized renters will be seeing increases of 1.25 percent for one-year leases and 2 percent for two-year leases.

The increases were voted on by the Rent Guidelines Board on Tuesday evening, after two years of rent freezes for one-year leases, frustrating tenants as well as landlords.

Tenant advocates and community groups were pushing for at least another freeze and in many cases a rollback, but owner representatives felt that the increases didn’t go far enough.

Tenant member Harvey Epstein said in his remarks prior to introducing the proposal that ultimately passed that he and Sheila Garcia, the second tenant member on the board, knew tenants needed a rollback or at least a freeze, but he said that neither were possible at this year’s vote.

“It’s our job to do the best we can and live with the political realities,” Epstein said. “We take this job seriously and today is the first day to move to a better system.”

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