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ProPublica: The Road to Rent Stabilization

Dozens of New York officials support tenants’ lawsuit over rent stabilization.

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Image by Flickr user O Palsson

By Marcelo Rochabrun
By arrangement with ProPublica

More than three dozen New York officials stepped into a high-profile court battle over rent stabilization yesterday, filing a brief on behalf of tenants who have sued their Lower Manhattan landlord, claiming they were denied rent caps that should have been guaranteed under a state tax program.

The fight between residents of 90 West Street and developer Kibel Companies, which ProPublica first chronicled in a story published in May, could determine the legality of two decades of rent increases in more than a dozen downtown high rises.

Developers received hefty tax breaks for converting these former office buildings into luxury rentals under an obscure program known as 421-g. In exchange, they were supposed to provide tenants with leases that limited yearly rent increases to levels set by the city. In practice, they often haven’t, maintaining that units renting for more than a certain amount (now 2,700 dollars) were not subject to rent stabilization.

The amicus brief filed late Thursday afternoon by New York City Public Advocate Letitia James, twelve state senators, twelve assembly members, and thirteen city council members, all Democrats, accuses Kibel of claiming a “windfall grant of tax abatements…in exchange for nothing at all.”

Officials said they decided to wade into the case, in part, to demand stronger oversight of an array of programs that swap tax benefits for rent limits, potentially affecting hundreds of thousands of units citywide. Preserving rent-stabilized units has become an increasingly hot political issue, with many local leaders calling for Mayor Bill de Blasio to do more to expand lower-cost housing options.

“The deal behind 421-g was clear—tax breaks for housing in lower Manhattan must include more affordable housing,” State Sen. Daniel Squadron, who represents the neighborhood, said in a statement. “It is not acceptable to shortchange the tenants or the community.”

Sherwin Belkin, a lawyer for Kibel, dismissed the brief as little more than political posturing and said the company would ask the judge in the case to reject it. “The amicus submission essentially repeats the same legal errors already made by the tenant-plaintiffs,” Belkin said.

Republicans worked behind the scenes before the 421-g bill was approved to weaken its protections for tenants, though not by changing the wording of the measure itself.

The law creating the 421-g program was passed in 1995 with the goal of transforming the Financial District, then a virtual ghost town, into the thriving mix of commercial and residential space it is today. It incentivized developers to convert offices into homes, but also explicitly stated that “each” apartment would be subject to rent stabilization for the duration of the tax benefit.

At the same time, Republicans worked behind the scenes before the 421-g bill was approved to weaken its protections for tenants, though not by changing the wording of the measure itself.

Instead, then New York Mayor Rudolph Giuliani wrote Joseph L. Bruno, the Republican leader of the Senate, a letter declaring that the city’s intention was for the rent limits to apply only to tenants who paid less than two-thousand dollars a month. Anyone else would have to pay market rates.

Since then, state agencies have quoted Giuliani’s letter in interpreting and applying the law in various cases. The suit filed by more than forty tenants of 90 West, however, challenges whether the Giuliani-Bruno exchange should have the force of law—given what the law actually says.

If the tenants win their case, thousands of additional apartments in Lower Manhattan could gain protections against unlimited rent increases.

The changing status of units in the building shows the effects of how 421-g has been interpreted. When the building opened, 140 of its 410 units were rent stabilized. But as of June, only seven still were, according to tax records. If the tenants win their case, thousands of additional apartments in Lower Manhattan could gain protections against unlimited rent increases.

Taylor West, who moved to 90 West in 2011 and leads the building’s tenant association, saw his rent increase by 33 percent in 2015. He said he spoke with the Public Advocate about tenants’ grievances four months ago but hadn’t expected this many public officials to join their case.

“We were elated to see the support from public officials that recognize the greed and deceptive practices of these companies,” West said.

Marcelo Rochabrun is a reporting fellow with ProPublica.

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