de Blasio draws up tax break for landlords following state overhaul of rent regulations

The Real Deal

 
Landlords are finally getting some love from the de Blasio administration.
The city is preparing a proposal to overhaul a tax break program, in part to make it more appealing to owners of apartment buildings.


Department of Housing Preservation and Development Commissioner Louise Carroll said the J-51 tax break needs to be “right sized” because the incentive hasn’t kept up with the market.

“We’re looking at the program holistically, both as to what would be an appropriate reimbursement for the work done, what would be an appropriate tax exemption to incentivize people to take it and what would be the right tax abatement so that the program works,” she said during a Crain’s event Wednesday.

It’s not clear what the city agency wants to change, but state legislation would be required. A representative for HPD said the proposal will aim to make the benefits “more targeted and cost-effective” for owners while making sure tenant protections are as strong as possible. The agency expects to deliver its proposal to the state Assembly at the start of the next legislative session.

The tax break, which is set to expire next year, is provided to landlords who renovate apartment buildings in exchange for their keeping units rent-stabilized for the duration of the benefit, which can be from 14 to 34 years. In a bill signed by the governor in July, state officials expanded the types of condo and co-op properties eligible for the benefit and extended the J-51 program through June 2020.

Landlords continue to inflate rents based on dubious reconstruction costs and city loopholes

Crain's New York

In the fall of 2013, when apartment 1E at 171 W. 81st St. was vacated, the owner did what landlords have done with tens of thousands of other rent-regulated units in the city. Stellar Management claimed it had spent a bundle on renovations, which—combined with the 20% rent increase permitted when a tenant leaves—allowed it to push the $647 regulated monthly rent above $2,500—to the threshold at the time to make it a market-rate unit. A few months later Stellar rented the Upper West Side pad to massage therapist Jonathan Saballos for $3,300 a month.


It seemed like a routine example of the steady exodus of such units from the city's pool of about 900,000 rent-regulated apartments. Except that in January, after Saballos lost his roommate and then his job and was taken to housing court by Stellar for failing to pay rent, a judge ruled that apartment 1E shouldn't have been deregulated at all.

In the written ruling, Judge Sabrina Kraus of Manhattan Civil Court determined that Stellar had inflated its renovation costs of more than $71,600 by almost $45,000—including $3,500 for a bathtub that was never installed—and had overcharged Saballos at least $41,193. The judge ordered the owner of the 20-unit building to pay triple damages—$123,578—and place the apartment back into regulation with a monthly rent of $1,524.

Housing advocates say such episodes are common in a system where loopholes and lax oversight practically invite owners to pull units out of regulation. A review of several lawsuits against Stellar reveals how expensive or dubious renovations enabled the owner to convert rents to market-rate.

"The city or the state doesn't even know how many illegally deregulated apartments are out there, because they're only really examined when cases like this come up in court," said Mark Hess, an attorney who represented Saballos in the eviction proceeding. "Stellar thought it was going to be business as usual and they were going to throw my client out of his apartment. Instead we called them out."

Stellar is appealing and will not comment on ongoing litigation, said a spokeswoman for the company, which owns roughly 100 buildings, most of which are in the city.

Allegations of abuses by landlords are not new. In one high-profile case last year, the Associated Press reported, the family business of White House adviser Jared Kushner failed to disclose rent-regulated units in buildings it owned, then began disruptive renovations that some of those tenants saw as an effort to push them out. Kushner Cos. blamed a third-party document preparer for the erroneous filing and said its renovations were proper, but the episode led to a fine, a lawsuit by tenants and City Council legislation to deter harassment by construction.

Less focus, however, has been given to the method used in Saballos' case, which may have allowed landlords to improperly deregulate tens of thousands of city apartments—and even more of them legally.

 

Homeless woman is sick of De Blasio's BS

From PIX11:

Nathylin Flowers Adesegun says she organized the Friday protest with Vocal NYC, a homelessness advocacy group because she said they are fed up.

At 72 years old, Adesegun is herself homeless, living in a women’s shelter in Queens after being evicted from her rent stabilized apartment back in February 2015.

Adesegun said the group wants 24,000 units from new construction in our city to be used for homeless and low income people and cornering the mayor at the gym was the only way to get his attention.

Bill de Blasio was caught on camera on Thursday brushing off Adesegun, telling her “I’m in the middle of doing my workout. I’m sorry. I can’t do this now.”

The video then shows De Blasio’s security officers stepping in front of the woman as the Democratic mayor gets up and walks away, cell phone in hand.

Adesegun says it worked. She says the group received a call from city hall and was told a meeting would be arranged with the mayor.

However, when PIX11 called a city hall spokesperson to confirm those details, we were told VOCAL NYC will meet with city hall officials and not necessarily the mayor.

Adesegun said they’re not interested in being strung along any further. On October 24th the group plans to protest in front of Gracie Mansion.

421-a rule change causes dip in regulated apartments

From AM-NY:

This spring, the city announced it had given hundreds of property owners one last chance to recoup the 421-a tax benefit by complying with provisions of a perk that aims to encourage the creation of affordable homes.

Now that the May 1 compliance deadline has passed, 730 of the 1,788 targeted properties lost the benefit, according to data provided by the city Department of Finance last month. Collectively, the properties lost about $22.38 million, according to the Department of Finance.

The property tax benefit was launched in the 1970s to spur residential construction. Over the years, it has been extended to co-ops, condos, two- to three-family homes and rental developments.

Although the city yanked 421-a from properties for a variety of concerns, advocates have focused their attentions on rental properties, since they must abide by rent stabilization rules while receiving 421-a.

Earlier this year, at least 367 developments with rental units had 421-a suspended for undisclosed reasons. The new city data shows 175 of these lots have had the benefit reinstated by fulfilling all of the 421-a requirements by May 1.

City files lawsuit against AirBnB landlord

From AMNY:

One of the city’s “worst landlords” is accused of turning rent-stabilized apartments in Hell’s Kitchen into illegal hotel rooms and listing them on websites like Airbnb.

The Mayor’s Office of Special Enforcement (MOSE) announced a lawsuit Wednesday against Big Apple Management LLC for allegedly converting seven buildings on 47th Street, between Eighth and Ninth avenues, into illegal hotels despite years of complaints, violations and fines.

Based on the city’s inspections, at least seven of the unlawful hotel rooms had been rent-stabilized units before 2009.

Flushing landlord cheated tenants, city

From the Village Voice:

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.

Sunnyside tenants file class action lawsuit against landlord

From Sunnyside Post:

Nearly 70 tenants—many of whom live in Sunnyside and Woodside buildings–are part of a class action law suit that alleges that their management company has been illegally jacking up their rent by falsely inflating the cost of apartment improvements across its entire portfolio of properties.

The lawsuit, which has 67 plaintiffs, was filed Tuesday against Forest Hills-based Bronstein Properties, one of the largest residential landlords in New York City. The suit was filed in the New York Supreme Court on behalf of the named plaintiffs as well as all of Bronstein’s tenants who paid inflated rent between July 25, 2013 and today.

Many of the named plaintiffs are tenants from as many as seven Sunnyside and Woodside buildings.

The suit claims that Bronstein and its owner Barry Rudofsky have been in violation of New York City’s Rent Stabilization laws, which has led to unfair rent hikes.

Under the law, landlords are able to increase rent on rent stabilized apartments based on annual increases set by the Rent Guidelines Board, as well if there are major capital improvements to the buildings, such as elevators, new roofs or new windows, or if there is a vacancy or renovations to individual apartments.

The plaintiffs claim that many of the renovations to individual apartments were not done and the rents were increased illegally.

Public is subsidizing apartments for the well off

From the Daily News:

When David Sans applied for a $722-a-month two-bedroom in a luxury Manhattan apartment tower that includes taxpayer-subsidized affordable units, he claimed a full-time salary of $24,745.

At the time, however, records Sans filed as a registered stockbroker listed him working full-time for securities firms as an investment banker specializing in health care companies.

When he came up for recertification to continue living in his ninth floor low-rent aerie, he now provided a 2012 tax form showing his income had suddenly jumped to $238,000.

The next year, Sans — who added a second job as a top executive at Mount Sinai Hospital three months after snagging his low-income apartment — reported an income of $456,502.

Sans’ sweet housing deal surfaced in an audit released last week by state Controller Thomas DiNapoli that looked at how tenants with six-figure incomes are able to obtain “affordable” apartments subsidized by the public.

DiNapoli found that as of December 2015, 160 tenants living in affordable units in New York City were making $100,000 or more, with eight making $250,000 or more.

DeBlasio jacks rent for his own properties

From Politico:

Despite calling for rent freezes for the city's roughly 1 million rent-stabilized apartments, Mayor Bill de Blasio continued to raise rents on several properties he owns in Park Slope, new figures obtained by POLITICO show.

The mayor and his wife have increased the monthly rent on one of the units in a two-family house they own to $2,850 last year, from $2,400 in 2009. The increases came in $50 and $75 increments annually, according to a City Hall source who would speak only on background. They raised the other unit's rent by $25 to $1,825 in June of 2015.

They charge $4,500 for their primary residence, which they left in 2014 to move into Gracie Mansion. The two row houses, worth a combined $3.7 million according to city assessments, are on 11th Street in Park Slope.

The City Hall source would not explain why the mayor raised his own rents while pushing for a rent freeze from the city's Rent Guidelines Board, which has ruled for two years against increases on one-year leases for rent-stabilized apartments. Several years ago, a previous City Hall spokeswoman said the mayor charged his tenants more when he made home improvements.

The mayor's properties are not part of the state's rent-stabilization program, so he is not subject to the board's decisions and is free to charge whatever he wants.

Landlord claims long-time tenant lives overseas

From the NY Post:

A developer is trying to boot an elderly concentration-camp survivor from his rent-stabilized Manhattan pad by claiming that the man really still lives in Romania — in the small shack seized from his family in the 1940s.

But tenant Lucien Orasel Tomberg, 73, says he hasn’t set foot in his family’s home since Romania’s Communist government took it over in 1948 and sent him, his three brothers and parents to a concentration camp.

Tomberg was the only one who survived.

“It is no small irony that the landlord has seized on the Banul Manta property as a basis for attempting to evict me from my apartment,” Tomberg says in Manhattan Supreme Court papers.

“It is vaguely reminiscent of a very dark episode in human history, of which I and my family were most unfortunate victims.”

At stake is Tomberg’s sprawling two-bedroom apartment at 1200 Fifth Ave., which its owner wants to convert to a million-dollar condo.

The longtime tenant pays $800 a month for the pad, which comes with views of Central Park; a similar unit is on the market for $1.7 million.

The Chetrit Group — the real-estate empire involved in the $1.3 billion sale of Chicago’s Willis Tower — owns the pre-war building through a subsidiary, 1200 Fifth Associates LLC, city property records show. The company began converting the apartments to condos in 2007.

The landlord claims that Tomberg should be kicked out because the cheap pad is not “his primary residence.”

The suit says Tomberg really lives at Banul Manta NR 79 Sector 1 in Bucharest.

Landlords given subsidies are eviction leaders

From DNA Info:

Much of Mayor Bill de Blasio’s affordable housing plan hinges on the preservation of existing affordable units.

But advocates worry that some landlords who get city subsidies to preserve affordable housing are the very same landlords who have the highest rates attempting to evict tenants from rent stabilized homes — and are therefore contributing to the loss of affordable housing.

One of the prime examples, they say, is A&E Real Estate Holdings.

A&E, which is believed to be the fifth biggest landlord in the city, inked a $201 million deal in 2015 to buy Harlem’s Riverton complex and pledged to keep its nearly 1,000 units affordable over the next 30-plus years in exchange for $100 million worth of tax breaks and incentives from the city, according to reports.

James Patchett, the incoming head of the city’s Economic Development Corporation who previously served as chief of staff to Deputy Mayor Alicia Glen, the mayor's point person for affordable housing, recently highlighted that deal, which he brokered, as a source of pride in reaching the administration’s housing goals.

But A&E was also responsible for filing more than 2,230 evictions cases between January 2013 and June 2015, according to an analysis by Rentlogic, a rental listings platform that aims to empower tenants by using open source data to grade landlords on things like vermin infestations, mold problems and construction violations.

Slumlord brothers sentenced to community service

From NY1:

Two Brooklyn landlords this week answered to charges of harassing and illegally forcing rent-stabilized tenants out of their apartments.

Joel and Aaron Israel own several buildings in Bushwick, Greenpoint and Williamsburg.

The brothers were arrested in April, accused of deliberately destroying the kitchens and bathrooms in several apartments under the guise of renovations.

Prosecutors charged they wanted to remove rent-stabilized tenants, to rent the apartments at market rate.

As part of a deal, the two have pleaded guilty to scheming to defraud and unlawful eviction.

Both will receive five years probation, perform community service, and pay a nearly a quarter-million dollars in restitution.

Developer illegally demolished affordable housing

From DNA Info:

A major developer that demolished a residential building by falsely telling the city it didn't contain any rent-regulated apartments should compensate for the lost units by constructing new, permanently affordable ones, local officials say.

Last week, representatives for The Related Companies attended a Community Board 4 land use committee meeting hoping to secure the board’s support to construct a mixed-use building at a five-lot site at the southeast corner of West 23rd Street and 11th Avenue currently owned and operated by U-Haul.

But ever since the committee discovered that Related filed false information with the city’s Department of Buildings allowing the developer to raze a residential building at 500 W. 28th St. in the Special West Chelsea District that shouldn’t have been demolished, the board has been “very upset,” committee co-chair Betty Mackintosh said.

Department of Housing Preservation and Development records show that the West 28th Street building housed six apartment units before its demolition — at least one of which was rent-controlled or rent-stabilized, according to a letter CB4 plans to send to the DOB.

Another Ciafone canopy makes its debut

So, being that these have all been installed on rent stabilized buildings, could this be part of a way to raise the rent by charging for "improvements"?

Slumlord arrested, sued

From New York Magazine:

Even in a city filled with bad landlords, Steven Croman stood out. A regular on “worst landlord” lists, his company would buy up Manhattan apartment buildings, then push for tenants in rent-regulated apartments to leave, either by buying out their leases or, tenants said, harassing them until they left. Then, once he deregulated the rent-stabilized apartments, he would charge much higher rents. But this morning Croman was charged with 20 felonies, including grand larceny, falsifying business records, and a scheme to defraud; he faces up to 25 years in prison.

That’s not all the bad news for Croman: The Times reports that the New York state attorney general’s office also sued Croman today, seeking to force him not just to give up his real-estate business, but to pay millions of dollars in restitution to tenants and penalties. In its lawsuit, the attorney general’s office, which investigated Croman for nearly two years, accused him of harassing and coercing “countless working-class and low-income families out of their longtime homes.”

Rent regulated apartments restored

From the Daily News:

State authorities say they have returned 50,000 improperly deregulated apartments in New York City to rent regulation while restoring more than $2.25 million in overcharged rent to tenants in the last four years.

Homes and Community Renewal’s Tenant Protection Unit in 2012 began tracking down rental apartments in the city that had disappeared from state data.

Notifying owners who failed to register rent-stabilized units since 2009 resulted in restoring tenant rights, officials said.

Tenants not benefiting from 421-a

From Brownstoner:

Despite some of the most extensive rent regulation laws in the nation, a bureaucratic entanglement is leaving New York City tenants at the mercy of developers’ illegal and unpunished abuse of tax breaks, according to a report.

The developers and landlords of several glassy new luxury condo towers have been swindling residents out of thousands of dollars each month by illegally increasing rents beyond regulated caps, found a new investigation by ProPublica and WNYC.

In luxury apartment buildings like Williamsburg’s The Driggs, pictured above, generous 421-a abatements give property owners massive tax cuts in exchange for designating a certain number of those apartments rent-stabilized. The Driggs received a 93 percent property tax reduction this year through the program, from $678,000 to $47,000, according to ProPublica.

The city hands out more than $1 billion in tax breaks every year through 421-a, yet ProPublica found many developers are not carrying through with their part of the deal. The government does little to ensure landlords are not overcharging tenants, the report said.

AirBnB not happy with council bill

From the Daily News:

Airbnb has come out swinging against a bill that would hit homeowners who rent out their pads on home-sharing sites with fines as high as $50,000, saying it’s “bad policy” that could bankrupt New Yorkers looking to make a quick buck.

The company sent a three-page letter to City Councilman Jumaane Williams on Wednesday, a week before the Brooklyn Democrat, who chairs the Housing and Buildings Committee, holds a hearing on the bill.

“A fine of this size being imposed on middle-class families would lead to bankruptcies,” the letter from Christopher Lehane, Airbnb global head of public policy, states.

The $50,000 fine for repeat offenders is larger than fines for other serious infractions — including the $500-a-day penalty for not providing a tenant heat, the $10,000 maximum fine for lead-paint exposure and the $2,000 that landlords pay for rat violations.

The bill appears to be “promoted for only one reason: to scare middle-class people out of their homes,” said Lehane.

He called it the “Freddy Krueger of bills” and said holding the hearing around Halloween was particularly appropriate.

But Williams said it’s Lehane who is trying to frighten people.

He conceded that the $50,000 maximum fine might be a little steep, but said that it wouldn’t be levied against the occasional Airbnb user. “This isn’t about people going on vacation,” he said. “Any time someone gets caught (illegally renting out their apartment), it’s because they are doing it repeatedly.”

Both Williams and City Councilwoman Helen Rosenthal, who is the prime sponsor of the bill, said it’s targeted at greedy landlords who illegally rent out regulated apartments, which exacerbates the city’s housing crisis.

Fire damaged property left to rot with tenants inside

From DNA Info:

The city’s worst illegal hotel operator has left tenants living without gas or a roof for more than six months, residents said.

And they suspect it's a tactic employed by Highpoint Associates to force them to abandon their rent-stabilized homes.

The lack of gas followed a fire on Feb. 4 at 412 W. 46th St., which the FDNY concluded was sparked accidentally by electrical wires and tore through the building's roof.

Nearly seven months later, the landlord still has not completed repairs.

Developers fail to register apartments with tax incentives

From the NY Times:

Developers of nearly 200 small buildings in New York City have flouted the terms of tax breaks they received by failing to place their apartments on the rent-stabilization rolls, state and city officials said.

In letters that went out Tuesday, officials from three agencies told the owners to register their units as rent-stabilized or risk a range of penalties, including being required to return the value of their tax incentives. The action affects 2,472 apartments in 194 buildings scattered across the city, but mostly in Brooklyn.

The developers received discounts on property taxes under a state program known as 421-a, which is meant to spur construction. Advocates for affordable housing and Mayor Bill de Blasio, a Democrat, had criticized the program, which led to $1 billion in forgiven taxes in New York City last year, for not producing enough low-cost housing. They persuaded the Legislature this year to modify the rules to require more units for low-income tenants in exchange for the tax breaks.

The buildings in question did not necessarily have to offer below-market rents, but if the apartments were rentals, the 421-a program required the owners to register them with the state as rent-stabilized apartments. That would entitle tenants to leases whose rents are regulated by the city and the guarantee to renew their leases every year.

The 421-a program also benefits condominiums, and in each of the 194 buildings in question, the owners had originally intended to build condos, but changed their mind, possibly because of market conditions, and decided to rent the apartments rather than sell them, officials said.

Regardless of motivation, the officials said, by avoiding rent-regulated leases the owners could give themselves flexibility to clear out tenants when they decided to go through with the sales.