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.”
Tenants in Albany on Friday (Photos courtesy of Housing Justice for All)
By Sabina Mollot
On Friday, the governor signed the most tenant-friendly package of rent regulations the state has ever seen, including the repeal of vacancy and high-income deregulation, the end of vacancy bonuses and much stricter limitations on major capital improvement (MCI) and individual apartment improvement (IAI) rent increases.
As for what this means for tenants, most notably there will be adjustments to stabilized tenants’ rent, said Assembly Member Harvey Epstein. MCIs, which previously could be no higher than six percent of a tenant’s rent, will now be no higher than two percent. They will also be eliminated after 30 years instead of being paid in perpetuity. If tenants have signed a lease with a preferential rent, that amount, when the lease is renewed, will now only be allowed to climb as high as the rent increase voted on by the Rent Guidelines Board. Previously it could have gone as high as the maximum legal rent (often a difference of hundreds of dollars).
Additionally, while this doesn’t impact current tenants, tenants moving into an apartment won’t have nearly as much to pay in IAIs, which will now be limited to $15,000 each, and only three units will be eligible over a 15-year period. The increase would also last 30 years instead of remaining permanent. Tenant blacklists will also disappear and there will also be more protections available for tenants fighting an eviction. Additionally, any conversions to co-ops or condos must be non-eviction plans. Tenants who want to file overcharge complaints will now have longer to do so, six years instead of four.
The fact that the power has shifted drastically in Albany has been missed by no one, in particular landlords, who for many years could rely on the Republican-controlled State Senate to kill any bill deemed too tenant-friendly. While it’s tempting to dismiss the ongoing preening of Albany Democrats as the usual hot air, it isn’t. Good evidence of this is that the property owners of New York City are fighting tooth and nail to defend the status quo.
To keep major capital improvement (MCI) and individual apartment improvement (IAI) rent increases, which are permanently tacked onto a tenant’s rent, they’ve sought cooperation from contractors to argue that owners will stop improving their buildings, which will hurt middle class people who need the jobs. It’s a pathetic argument, however, because if a landlord allows his or her property to deteriorate, just because they can no longer get reimbursed for the project (and earn a profit on top of that) then he or she is nothing but a slumlord. And not deserving of anyone’s pity. Certainly not any more than the renters who are made to pay in perpetuity to improve properties they don’t own.
The system that allows MCIs and IAIs has been abused for many years. A story in this week’s issue of Town & Village demonstrates just how easy it is for someone in charge of renovations to wildly inflate costs of IAIs for the purpose of deregulating units. All they have to do is be willing to fill out credible looking paperwork, send it to a housing agency too under-resourced to verify the information and employ people who don’t mind getting paid more than a renovation should actually cost. This must end.
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.
Assembly Member Harvey Epstein during a recent tenant lobbying day in Albany (Photo by Sidney Goldberg)
By Sabina Mollot
With the rent regulations set to expire on June 15, the New York State Assembly has set public hearings on May 2 and 9 to discuss a package of proposals aimed at strengthening the current laws.
Among the legislation includes a bill that would end major capital improvement (MCI) rent increases and also require the state housing agency to create a program ensuring property owners maintain a certain level of repair. MCIs are charges tacked on to a tenant’s rent to pay for improvements to the property.
“The major capital improvement rent increase program is a flawed system which has been overly complex for property owners to navigate,” said the bill’s sponsor, Assembly Member Brian Barnwell, “and has been a great disservice in our efforts to preserve the affordable housing stock.”
Another bill would end individual apartment improvements (IAI). Under the current law, landlords are allowed to raise rent after making IAIs, which can range from cosmetic repairs to redoing various rooms.
ST-PCV Tenants Association Chair Susan Steinberg and other tenants at a vigil on Sunday outside the midtown Manhattan office of Governor Cuomo. (Photo by Anne Greenberg)
By Sabina Mollot
It wasn’t quite the climactic end to another four years tenants were hoping for when at midnight on June 15, the laws regulating rents in New York expired without being renewed or strengthened.
The following morning, the talks continued in Albany, though there was no sign that that they’d be concluded any time soon.
Part of the reason was that Governor Andrew Cuomo has been hoping to include the passage of an education tax credit in the negotiations, while Senate Republicans also last week passed a set of rent regulation legislation that’s wildly different from the package the Assembly passed in May. The much hyped 421-a tax abatement for developers who include some affordable housing in their projects has also been a factor, but hasn’t been given as much attention as it was expected to get, according to State Senator Brad Hoylman.
Hoylman described the tax program, which also expired on Monday, as being “radioactive” to many of his colleagues because of its being “at the heart of the investigations” into corruption in Albany by U.S. attorney Preet Bharara.
“It’s understandable that it wouldn’t be a front burner issue,” said Hoylman, adding he wouldn’t be mourning the program’s loss if it isn’t ultimately renewed and that he thinks it ought to be negotiated separately.
Tenants carry signs at a rally for stronger rent laws. (Photos by Sabina Mollot)
By Sabina Mollot
On Thursday night, hundreds of tenants and housing activists and numerous politicians gathered to rally for stronger rent laws, with the laws expected to be renewed in Albany on June 15.
The rally took place downtown in Foley Square, followed by a march over the Brooklyn Bridge.
During the rally, politicians spoke on the theme of needing to end vacancy decontrol and end 20 percent vacancy bonuses and to reform MCI (major capital improvement) rent increases to make them temporary as well as reforming IAI (individual apartment improvement) increases.
City Council Housing Chair Jumaane Williams was one of the speakers, eliciting cheers when he told the crowd if the rent laws weren’t strengthened it would be the fault of one person — “Governor Andrew Cuomo.” He then led a chant of “We will remember!” that reverberated through the street.
Other speakers at the event included Manhattan Borough President Gale Brewer, Public Advocate Letitia James, Comptroller Scott Stringer and Assembly Housing Chair Keith Wright. Local attendees included State Senator Brad Hoylman, Assembly Member Brian Kavanagh and Council Member Dan Garodnick.
The real stars of the event, however, were the many creative signs brandished by tenants, including a bunch that depicted building windows with spaces for their holders’ faces to show through with the slogan “Not moving.” Some tenants carried signs or wore boxes designed to look like buildings. Even more signs included, “Blood sucking landlords call for stronger rent laws” with a graphic of a giant bedbug, a banner with landlords depicted as dragons shootings flames onto a building, and the ST-PCV Tenants Association’s graphic of a vulture overlooking Stuyvesant Town.
One of the Stuy Town residents marching, Nancy Arons, commented on statements recently made by Cuomo about how the rent laws could just be extended as they are or tweaked slightly. The reason for this, the governor had explained, was all the turmoil in Albany.
“Well,” commented Arons in response. “That’s not our fault, is it? He wants to run for president, but if you don’t support the people who vote for you, I’m not going to vote for you for president. He thinks he’s his dad, I guess.”
Another marcher was Kavanagh, who, while heading across the bridge, discussed the fact that the “LLC loophole” has been getting some attention in Albany. The loophole has allowed developers to funnel enormous amounts of campaign cash to elected officials through numerous limited liability companies.
Legislation authored by Kavanagh would cap contributions from corporations to a total of $5,000 per calendar year to candidates and/or committees. The legislation passed the Assembly on Tuesday. “Now it’s up to the Senate,” said Kavanagh, although he added that new Senate leader John Flanagan has been dragging his feet on bringing it up.
As for whether or not the legislation will be voted on in the Senate before session ends in five weeks Kavanagh said he doesn’t know. But, he added, “I want to say this is about doing the right thing because people are watching and people are realizing the corruption both in legal and illegal forms.”
One of the rally’s organizers was the healthcare workers’ union, with an 1199SEIU speaker explaining that 70,000 healthcare worker members live in rent regulated housing.
City Council Housing Chair Jumaane Williams
Assembly Member Brian Kavanagh
Politicians including State Senator Brad Hoylman, Council Member Dan Garodnick, Assembly Member Linda Rosenthal, Council Member Corey Levine, Assembly Member Richard Gottfried and Manhattan Borough Gale Brewer
Over 400 people listen as local state elected officials brief them on the uphill battle over the rent laws coming in June. (Photo by Sabina Mollot)
By Sabina Mollot
On Saturday, over 400 residents of Stuyvesant Town and Peter Cooper Village gathered for a meeting held by the Tenants Association that focused on the upcoming expiration of rent laws and the uphill battle tenants would have in trying to get them strengthened.
Speakers briefed the audience on the current power dynamic in Albany, while also telling those in attendance that without tenants writing to Albany lawmakers, especially the governor, the effort is a lot less likely to succeed.
“If I go to Albany and say (to Governor Cuomo) two and half million people are going to be very upset with you, if that’s not clear in the streets and not in the mail in his email inbox, it’s very hard to believe,” said Assembly Member Brian Kavanagh.
Kavanagh was one of the speakers of the event, which was held at Simon Baruch Middle School, along with State Senator Brad Hoylman and TenantsPAC treasurer Mike McKee.
McKee told the crowd if the laws are renewed in their current state, “It would be a terrible defeat for tenants.” Referring to a recent Daily News article that quoted Cuomo as saying the laws and the controversial 421-a tax abatement for developers could possibly just be renewed and not changed, due to the federal investigations being conducted in Albany, McKee added, “I’m sorry, but that is crap.” McKee has said that 421-a is expected to be used as leverage during the rent law negotiations.
Both Hoylman and Kavanagh spoke about Albany’s power system and how with the Senate in the hands of Republicans whose campaigns are financed largely by real estate, the only hope for tenants is in swaying the Assembly, led by Carl Heastie, and the governor.
Meanwhile, Kavanagh has said he wants to close the “LLC loophole” that makes New York one of the few states where each LLC created counts as a separate campaign contributor, but, he admitted, “I’m not sure we’re going to do that this year.”
However, he added that recent media attention on the issue may prove helpful anyway.
“There may an opportunity to shame people into backing off,” he said.
Assembly Member Brian Kavanagh, ST-PCV Tenants Association Chair Susan Steinberg and State Senator Brad Hoylman (Photo by Sabina Mollot)
McKee said that while in the past, major decisions in Albany have been made behind closed doors by the “three men in a room” (the governor, the Assembly speaker and Senate Majority Leader Dean Skelos) this year there might be four — if Jeff Klein is allowed to participate. Klein is the head of the State Senate’s Independent Democratic Conference, a breakaway group that caucuses with Republicans. McKee, who’s often blasted Klein as being a tool of the real estate industry, commented that his participation would only be to tenants’ disadvantage.
As for Skelos, McKee added, “Dean Skelos will not do anything voluntarily to help tenants or to hurt landlords. The Assembly has to do what’s called taking hostages. There are dozens of things everybody wants at the last minute. Some of it is minor stuff, nothing to do with housing even.”
One advantage of tenants, he added, is that with Heastie being new as speaker, “he has to prove himself. He has to be accountable not only to us but the members that elected him speaker.” Heastie has said he considers strengthening the rent laws a priority. That said, McKee warned, there’s still always the possibility a tough talking pol will “wimp out” at the eleventh hour. “There is always a wimp factor in Albany,” he sighed.
As for what tenants could do, he urged people to write to the aforementioned three men (letters rather than postcards), and get three neighbors to do the same as well as turn out, if possible for any upcoming rallies. One rally, organized by the Real Rent Reform campaign and the union 1199SEIU, which is aimed at strengthening the rent laws, is scheduled for Thursday, May 14 at 5 p.m. at Foley Square (corner of Centre and Worth Streets). The group will then march over the Brooklyn Bridge.
“We need a very big turnout,” said McKee.
Another rally is on Wednesday, May 6 in front of Cuomo’s Manhattan office at 633 Third Avenue (between 40th and 41st Streets) from 10 a.m.-noon.
He then claimed to have a plan aimed at shaming Cuomo into helping tenants. McKee declined to discuss this further. “That’s all I’m prepared to say,” he said later.
When taking his turn at the podium, Tenants Association President John Marsh echoed the sentiment of the other speakers, calling on neighbors to get involved. “If everyone takes a small step, we can have a very loud voice,” said Marsh.
He also mentioned a door-knocking campaign that he and Council Member Dan Garodnick led through ST/PCV the following day, with Garodnick’s two young sons in tow. Garodnick later said the building walk-throughs resulted in many tenants being appreciative of the reminder of the looming rent negotiations in June.
Kavanagh, when addressing the audience, said that while he realizes many new residents at ST/PCV probably feel the rent laws have no teeth when they look at the numbers on their rent bills, being rent regulated still offers New Yorkers protections they wouldn’t have otherwise.
“It prevents landlords from arbitrarily evicting tenants and that doesn’t exist for most tenants in the city,” he said.
Because of the outcome of the “Roberts v. Tishman Speyer” lawsuit, all units in ST/PCV will be regulated until the property’s J-51 tax abatement expires in 2020.
Kavanagh reiterated the goals for strengthening the rent laws, which include repealing vacancy deregulation and other policies that give incentive to owners to vacate units such as vacancy bonuses and reforming the way individual apartment improvement (IAI) rent increases are issued. Reform of major capital increases (MCIs) is another goal.
Kavanagh also got a round of applause after saying he wanted to close the preferential rent loophole. Due to preferential rents, which are given to most new residents in renovated apartments in ST/PCV, rent increases can be far higher than those issued by the Rent Guidelines Board, if the tenants’ legal rents are higher than what they’ve been paying (the preferential rent).
“In our community it’s a particular problem due to the way ‘Roberts’ played out,” said Kavanagh. “(Tenants) are facing enormous increases.”
Manhattan Borough President Gale Brewer, who’d been sitting in the audience at the meeting, along with Garodnick, at one point, popped up to comment about preferential rents, which she said was happening all around the city.
“We go case by case and try to fight it but there is no great answer,” she admitted.
The meeting then concluded with a Q&A period, with most of the questions from the audience—which were limited to the topic of rent—being on the theme of MCIs. Tenants mainly asked why they were being forced to pay them. Hoylman and Kavanagh suggested that tenants’ use their frustration and personal experiences as inspiration to write to the governor.
When a woman asked where the mayor was in this fight, saying, “He seems to have had a low profile lately,” Kavanagh responded to say he thought the mayor would be more visible soon. “This is the time we roll out this fight and I think you’ll see the mayor rolling out this fight,” he said. Hoylman added that a lot is done “behind the scenes,” going on to note that this is part of Albany’s dysfunction.
When a man asked if strengthening of the rent laws would help a conversion effort, Kavanagh said he thought it would in that it would help thwart predatory bidders.
Another tenant then asked if it could work to tenants’ advantage if Skelos, who’s being investigated by U.S. Attorney Preet Bharara, were to be indicted. The answer, however, was that it wasn’t likely to have any impact during rent negotiations.
“If he’s indicted and forced to step down, it’s unlikely that he’d go to trial before June and you don’t have to leave office until you’re convicted,” said Hoylman. “It would have a greater impact next year than this year.”
Town & Village later contacted the office of the governor to ask his position on strengthening the rent laws. In response, a spokesperson emailed prepared statements made by Cuomo at the Association for a Better New York breakfast on rent laws and 421-a.
Included in the written statement was a comment that “At a maximum maybe we can make some fine modifications in both of them.”
“The 421-a, first I believe has to be extended and I believe that’s essential,” the statement read. On changes to it, which he said he believed were needed, he said, “If it was a different time in Albany, frankly, and Albany was a little bit more of a stable situation I would normally take those negotiations to Albany and try to work it out among the parties. Albany has a lot going on right now let’s say, so I’m hoping and I’m asking the parties to work out the disagreements among themselves or their desires for modifications. If they can great, in any event 421-a has to be extended.”
He went on to say, “Rent has to be extended. It is a New York City issue. If we don’t extend rent you would have chaos in the real estate market, these are rent regulations, rent stabilization etc. You would have chaos in the real estate market unlike anything we have seen because it regulates the private industry not another government. It lapses one day you will see real estate entities and landlords start rising rents and evicting tenants. I mean it would be immediate mass mayhem.
“So at a minimum we have to extend those protections but in truth, because everyone has been watching the situation, to have these final negotiations on these delicate points is going to be problematic this year. So, at a minimum rents extended 421-a, is extended. At a maximum maybe we can make some fine modifications in both of them. The democratic assembly is going to be more aggressive on extending rent than the senate Republicans. 421-a, both houses want.”
A spokesperson, Frank Sobrino, when asked if the governor could clarify what was meant by “fine modifications,” said this was a general statement in response to suggested changes. He also denied that the statements were an attempt to remain neutral.
“He said that ‘at a minimum,’ both rent regulations and 421-a must be extended,” said Sobrino. “That’s not neutral.”
Despite allegations that the Cuomo administration compromised the governor’s own corruption watchdog panel and despite the fact that Cuomo’s opponent in the primary has been interviewing non-stop — thanks to an unusually interested press in a longshot candidate — that opponent has still retained her title of just that, a longshot.
Still, there’s no doubt at this point that Zephyr Teachout is gaining momentum. Cuomo recently attempted, unsuccessfully, to have her tossed off the ballot over allegations she didn’t live in New York for the past five years. Meanwhile, the move to keep her from running may have backfired. Along with pointing out that Teachout, a Fordham law professor, was an underdog candidate, it also alerted New Yorkers to a fact many weren’t aware of previously, which was that there was even a primary election at all.
During a recent interview over the phone, Teachout shared her thoughts with Town & Village on why voters are starting to pay attention to this race. She also spoke about her ideas on what can be done to keep New York affordable for tenants (including small businesses) and why developers like Extell are part of the problem. (The interview has been edited for length.)
Why do you think people are finally noticing your campaign? Do you think it’s just the Moreland Commission?
There’s a latent, deep frustration about our economy, about how New York State has the most segregated schools; it’s the most unequal state. It’s a closed all-boys club in Albany. It’s supposed to be an egalitarian state. I’m anti-corruption. Extell gives $100,000 in campaign donations — and this is Extell of the poor door fame — and Extell is getting subsidies that other New York businesses aren’t. What I think people are starting to see is that Extell is not just a developer. They’re spending so much money on developing political power and connections. One thing about me. You’ll always know where I stand. Andrew Cuomo is hiding from the issues. He’s hiding from a debate right now. He’s scared of bringing more attention to the campaign. I won’t tell you that the reason people are (paying attention) is any one thing, but Moreland is pretty shocking. I think he’s governing like an ad man. He’s putting on a lot of ads, but he doesn’t engage reporters. We like to say that Andrew Cuomo is my biggest campaign donor. That (Cuomo has taken me to court) has perked up a lot of reporters’ ears.
As a political outsider, how do you feel about political alliances, like the recent announcement that the Independent Democratic Conference was breaking away from the Republicans, and the expectation of a Democrat-led Senate as a result?
Not to toot my own horn, but Andrew Cuomo only started fighting for a Democratic Senate when I entered the race. I entered the race at the end of May and within three days Cuomo was making all kinds of concessions that he hadn’t agreed to in years. He could have made a Democratic Senate years ago if he vetoed the redrawn districts, which had been a campaign promise. There’s no excuse for not having a Democratic Senate in New York. The reason we don’t is Andrew Cuomo. If it was in Democrat control we’d be a lot better off in terms of affordable housing.
As a political outsider, how would you handle the actual politics of governing? Dealing with the various alliances in order to get things accomplished?
I think the job is leadership. You’re not going to win every fight. My vision of leadership is hiring great people and respecting people who work for the state.
In Stuyvesant Town/Peter Cooper Village, everyone’s rent-stabilized, so there’s concern over the fact that the Rent Stabilization Law is coming up for renewal in 2015. What would you do to strengthen it?
I’m very familiar with Stuyvesant Town. I used to live near there on East 7th Street and I would go up there to go swimming at Asser Levy. (On Rent Stabilization Law), there is precisely a role for the city to play. We need to repeal the Urstadt Law. At a minimum the city should be free to directly do things. It’s a crisis of people living in expensive housing. It’s a crisis for our economy.
In ST/PCV, some people pay affordable rents, while others pay double for the same apartments. A big concern is all the legal ways owners can raise rents from major capital improvements (MCIs), to individual apartment improvements (IAIs) to vacancy bonuses.
Rent stabilization is still one of the best sources of housing for low income people in the city. We have to make sure affordable means affordable, not unaffordable.
Zephyr Teachout with running mate Tim Wu, candidate for lieutenant governor (Photo courtesy of campaign)
It seems that more and more small businesses are being priced out of their locations and being replaced with chain stores. What do you think of the idea of rent regulation for commercial tenants?
We have two different visions. One is commercial rent control for small businesses. The other is making sure big box stores aren’t getting an unfair advantage. We have to make sure our lending system is accessible to entrepreneurs who need it. You have to have a blend of strategies. We also have to make sure for retail diversity that there’s a range of minority owned businesses.
What made you write a book about corruption?
I began writing it years ago. I began writing in 2008 because the New York Supreme Court’s vision of corruption was narrow and cramped. They said it was only about illegal bribery, so it wasn’t about Extell. If you’re giving $100,000 in donations and getting tens of millions in subsidies, it is a violation of democratic principles. I think the core of it is if you want to be a public servant, you have to serve the public and not just serve yourself.
When you meet with voters, what are their top concerns?
Housing is one of the top concerns. People just don’t have the money to meet the basics. Another concern is people feel there aren’t enough (services) for people with psychiatric disabilities, but the more mainstream (concern) is housing. Upstate it’s property taxes and schools are central. With schools, it’s high stakes testing and over-crowding.
What would you do to alleviate classroom crowding?
There needs to be smaller classes, no more than 20 in a class. I used to be a special ed teacher’s aide, and you can’t give each child the attention they need when there are 33 kids in a classroom. There needs to be art and music for every child. They’re not extras. They’re essentials. We should be the best public school system in the country.
What’s your opinion of charter schools?
Charters have a role, but a very small role. Eva Moskowitz’s assault on education is not what charters are supposed to do. I am opposed to colocations and I don’t think charter schools should get money that was intended for our public schools.
What would you do to create jobs?
I’m a traditional Democrat. One (idea) is investing in the infrastructure, in the MTA, in transit. Upstate it’s in renewable energy. All of these create jobs in the short term and enable jobs in the long term, and affordable higher education.
If elected, what is your first priority?
My first priority is taking on the old boys’ network that allows corruption to continue. The school system is unequal and there’s immigration. Andrew Cuomo has a running mate who’s anti-immigrant. Every child at the border should see New York as a sanctuary.