Battle in Albany: Rent Reform Showdown
Issue #
132

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President Barack Obama promised change in the 2008 election and voters responded by giving him a decisive victory. In New York, voters also demanded change by giving the Democratic Party the majority in the state Senate for the first time in 43 years. The Senate’s former GOP boss, the silver-haired majority leader Joe Bruno, had resigned a few months before the election, leaving his helicopter rides and pimped-out SUV, and was indicted for corruption in January. 

Bruno and the senate’s Republican majority had gutted the state’s rent-regulation laws twice in the previous 12 years, and refused to consider any measures that might have helped tenants. So the Democrats winning a majority — by a slim 32 to 30 margin — removed a roadblock to progressive change. Or did it?

On Valentine’s Day, 200 New York City tenants attended the Black and Puerto Rican/Hispanic Legislative Caucus weekend in Albany to push for vital rent reforms that would restore some housing protections and make the city more affordable. The Assembly passed a package of ten rent-reform bills Feb. 2. Those bills include measures that would limit landlords’ ability to claim occupied apartments for “personal use” and would repeal the “Urstadt Law” of 1971, which bars New York City from enacting any rent regulations stronger than the state’s. The Senate is expected to take up the bills in early April.

The top priority for the tenant movement, however, is repealing “vacancy decontrol.” Enacted in the 1990s, it lets landlords deregulate vacant rent-stabilized apartments if the rent can legally be $2,000 per month or more. (Rent stabilization covers buildings with six or more apartments built before 1974, or buildings where the owner accepted it in exchange for tax breaks.) Once an apartment is deregulated, there are no restrictions on rent increases and the new tenant has little to no housing rights. The bill to repeal vacancy decontrol, S. 2237, has 23 co-sponsors.

“This is about getting tens of thousands of apartments back into the hands of people who want to live in safe, decent and affordable housing,” said the bill’s chief sponsor, Sen. Andrea Stewart-Cousins (DWestchester).

“We have to get to the root cause of why landlords want to get rid of us — vacancy decontrol,” said Cathy Stephens, a Harlem tenant and member of Community Voices Heard. “With the same purpose that we got Obama elected, we need to put our efforts towards ending this law.”

Both sides expect a tough fight. “Real estate interests have poured a ton of money into Albany hoping to prevent exactly this,” says Dan Levitan of the Working Families Party. “It’s a battle for the soul of the Democrats. Whose interests do they represent, landlords or tenants?”

According to the New York Times, a group of “major real-estate developers, lobbyists and limited liability corporations,” anticipating a Democratic shift in the state Senate, gave more than $750,000 for the 2008 election. That is 15 times more than they gave to the Senate Democrats’ central campaign accounts for 2006. Those accounts are now controlled by Deputy Majority Leader Jeff Klein (Bronx-Westchester) and Majority Leader Malcolm Smith (Queens).

ILLUSTRATION: JOSE CARMONA CUTEUGLY.COM

Last year, a slew of tenant associations and groups raised money and, more important, supplied people power to staff campaigns for Democratic state Senate candidates. Tenant groups, labor unions, gay-rights organizations and other progressives knocked on voters’ doors and called them from phone banks to help Democrats gain key seats in Long Island and Queens.

Ironically, because the Democratic majority is so slim, the state senators who have most benefited from that activism are four considered among the party’s most conservative: Jeff Klein, Carl Kruger (Brooklyn), Craig Johnson (Nassau County) and Pedro Espada Jr. (Bronx). Espada and Kruger were among the “Gang of Three” that threatened to vote with the Republicans until they were given rewards — in Espada’s case, being named chair of the Senate Housing Committee. Tenant advocates believe that real-estate interests gave the gang the go-ahead and wanted to send a message about rent reform.

“When you got 32 Democrats and you need 32 votes, one member can hold you up,” says Michael McKee of the Tenants Political Action Committee.

All four of these senators have rent-regulated voters in their districts, with 76,500 in Espada’s and 15,600 in Klein’s. Although there are rent-regulated tenants in Johnson’s Nassau County district, vacancy decontrol is generally seen as affecting mainly New York City, especially Manhattan.

When the Republicans controlled the Senate, the landlord lobby, led by the Rent Stabilization Association (RSA) and the Real Estate Board of New York, contributed millions of dollars to the GOP. The GOP-controlled Senate repeatedly blocked pro-tenant legislation passed in the Assembly. According to multiple sources, Senator Malcolm Smith approached the RSA before the election about donating more to the Democratic senatorial cause but was rebuffed. However, the RSA reportedly offered to settle $600,000 of state Senate committee debts from campaigns after the Democrats took control. Senate Democrats and Smith reportedly declined the offer, but Smith has not taken a position on repeal of vacancy decontrol.

Jack Freund of the RSA says he will not discuss the group’s campaign contributions. He argues that with the city financially strapped and dependent on real-estate taxes, now is “absolutely the wrong time” to impose regulations that would reduce landlords’ revenues. Vacancy decontrol and the other changes in the rent laws enacted in the 1990s, he says, “are the only things that have breathed life into the real-estate market” in the city. The prospect of deregulation has encouraged more investment in rental housing, he adds.

Tenant groups call some of those investors “predatory equity.” These are highly leveraged private equity firms that bought huge swaths of rent-regulated housing. Their business plan depends on gaining enough vacancies to jack the rents up to market rates. One such firm is Vantage Properties, which bought 48 Queens buildings for $300 million last year, according to the Real Deal.

Vantage tenant Nancy Encarnación says the firm is deliberately allowing living conditions to deteriorate to drive her and her neighbors out. “We don’t demand luxury, just a decent place to live,” she adds.

Legal Services New York claims that Vantage Properties’ profit model runs afoul of the law, because the only way to achieve such a large tenant turnover is by dubious means. It filed a lawsuit last year to curtail the firm’s practices.

The Stewart-Cousins bill would also re-regulate apartments that were deregulated after 1997 if their rent is below $5,000 (or $3,500 in Nassau, Westchester, and Rockland counties). According to Tenants and Neighbors, more than 100,000 apartments in the city have been deregulated by vacancy decontrol or condo/coop conversions. About 1 million apartments remain regulated, about half of the city’s rental housing stock.

“We need nine more senators to pass this bill,” Stewart-Cousins said. So far, 22 Democrats and one Republican (Frank Padavan, Queens) have signed on as cosponsors. The 10 Democrats who have not endorsed it include Smith, Klein, Espada, Kruger and Johnson.

Bennett Baumer, a New York City-based housing organizer, contributed to this article.

HOW VACANCY DECONTROL WORKS

Former-Governor George Pataki, the Republican-controlled New York State Senate and a compliant Democratic-held state Assembly enacted vacancy decontrol in 1997 after heavy real-estate lobbying and campaign contributions. Thus began the slow phasing out of rent-regulated housing.

For a landlord to get an apartment deregulated, it must be vacated by the tenant — either voluntarily or through eviction. Once it is vacated, the landlord can automatically claim a 20 percent increase. For an apartment with $1,000 in monthly rent, this gives the landlord a $200 hike a month without even having to put a new coat of paint on the walls.

For larger increases, the key law is that a landlord can raise the monthly rent by one-fortieth the cost of any remodeling work done. To get the rent from $1,200 to the $2,000 deregulation threshold, the landlord needs to say she or he did $32,000 worth of work. That sounds like a lot, but often the landlord does some cosmetic work coupled with cheap materials to make an apartment look better.

In many cases, the landlord swindles the new tenants by overstating the costs of renovations, but it goes undetected. The state housing agency, the Department of Housing and Community Renewal (DHCR), only investigates the landlord’s claims that an apartment was legitimately deregulated if the new tenants make an overcharge complaint.

Tenants who move into a new apartment should obtain a “rent history” from the DHCR. This will show the last registered legal rent in the apartment. If you see big rent increases, you may want to file an overcharge complaint. Act quickly, because you only have four years to make a claim. If you win an overcharge complaint, the housing agency will reset your rent; if it finds “willful” overcharges, it can award triple damages.

Call the DHCR at 718-739-6400.

RENT REGULATION: A KEY TO AN AFFORDABLE CITY

Vacancy decontrol has contributed to skyrocketing rents, gentrification and increased tenant harassment, as there is an economic incentive to evict rent-stabilized tenants for higher-paying occupants. According to the Rent Guidelines Board, the median income of households in rent-stabilized units was $36,000 in 2007, and the median monthly rent of rent-stabilized units was $925. Along with limits on rent increases, rent-regulated tenants also have stronger protections against eviction, rights to renew their leases and the ability to pass on their apartments to immediate family members. Senior and disabled rent regulated tenants can also qualify for rent freezes. According to the New York State Tenants and Neighbors Information Service, almost 60 percent of rent-regulated tenants are people of color.

For market-rate tenants, it is a different story. The mean rent in Manhattan for a one-bedroom apartment with a doorman is $3,737 a month, according to The Real Estate Group. Marketrate tenants have no protections against giant rent hikes. They also do not have a right to a lease renewal, which discourages them from complaining about living conditions in their apartments.

Tenant groups say the long-term effect of vacancy decontrol will be to eliminate rent regulations in all but the city’s poorest neighborhoods. The RSA’s Jack Freund agrees — but he says that’s a good thing. Although almost all of the unregulated apartments built in the city have been luxury housing, he contends that the increase in the housing supply “ripples down through the system” and that if the market were freed up, owners would be in a position to provide housing to all levels of the market.

THE LANDLORD LOBBY

Along with real-estate concerns, individual landlords and deep-pocketed developers, the Rent Stabilization Association (RSA) and Real Estate Board of New York constitute the landlord lobby. Its power comes from their money, plain and simple. The landlords cut the campaign checks to politicians and expect legislation benefiting their interests.

Tenants, Housing Groups and Progressive Organizations

Tenants as a voting bloc have massive potential in New York politics. There are more than two million rent-stabilized tenants in the city and hundreds of thousands more in Mitchell-Lama, Section 8 buildings and public housing.

Housing Here and Now is the housing organizing arm of ACORN (Association of Community Organizations for Reform Now), a national group that organizes lowincome workers and people of color. Housing Here and Now is leading trips to Albany and holds rallies to strengthen the rent laws. (Contact them at 718-246-7900 ext. 247 to get involved.) The Real Rent Reform campaign is a coalition of housing groups and tenant associations that organize phone banks targeting rent-regulated constituents of state senators who have not yet endorsed repealing vacancy decontrol.

The union-backed Working Families Party (WFP) has the skills and resources to target rogue Democratic state senators who do not support repealing vacancy decontrol. The WFP’s Dan Levitan says it has no current plans to do so, but notes that Pedro Espada, Jr.’s district “is full of tenants” and that might persuade him to do the right thing. The WFP also supplied 50 organizers to propel Craig Johnson to victory in a special election in 2007.

ACORN has been concentrating on foreclosure assistance, but it also has the constituents and resources to reform the rent laws. It is influential in the WFP.

Two important tenant organizations are the city-based Metropolitan Council on Housing and the statewide Tenants And Neighbors.

THE HOME RULE QUESTION

The fact that the state legislature in Albany has power over New York City rent and eviction laws has long been a source of frustration for tenant groups and city elected officials. In 1971, the Urstadt law took home rule over rent laws away from New York City. It barred cities of more than one million people from enacting rent regulations stronger than the state’s.

Tenants argue that restoring home rule to New York City is good government, but landlords fear that the City Council would be more apt to enact pro-tenant legislation than state legislators who take campaign donations from the landlord lobby and have no rent-regulated tenants in their districts.

Although tenant groups, such as the Metropolitan Council on Housing, have long called home rule essential for preserving the city’s affordable housing, others may have conceded the issue. The Housing Here and Now coalition supports repealing Urstadt, says Executive Director Michelle O’Brien, but ending vacancy decontrol is its top priority.

“Some Democrats have made it pretty clear they’re against repeal of Urstadt,” said Dan Levitan, spokesperson with the Working Families Party.

One of them is Pedro Espada Jr.

NEW YORK STATE SENATORS

Jeff Klein: Klein is the numbertwo guy in the state Senate. He is known to prefer raising the vacancy-decontrol threshold to $3,000, instead of the current $2,000. He is rumored to be actively campaigning against the repeal of vacancy decontrol and triangulating on other progressive initiatives such as raising taxes on the rich — the top New York State income-tax bracket now starts at $40,000 a year.

Pedro Espada Jr.: Espada is the chair of the housing committee and has not taken a position on vacancy decontrol, although he is against restoring home rule to New York City. He told Daily News columnist Juan Gonzalez that he has an alternative plan to vacancy decontrol, but would not reveal it. Elected to the Senate last November, Espada previously held a seat in another Bronx district, but lost it in 2002 after he switched to the Republican Party. He is not respected by Senate Democrats, who resent his use of their small majority to extort personal power. Espada might also be indicted for campaign-finance violations later this year. As of press time, he did not have a district office in the Bronx.

Craig Johnson: Johnson won his Nassau County seat in a 2007 special election with strong support from the Working Families Party and tenant groups. He takes his cues from fellow-senator Jeff Klein and is also triangulating on tax reform and vacancy-decontrol repeal.

Carl Kruger: Kruger has a campaign war chest of $1.6 million, “much of it from city real-estate moguls who appreciate his support,” wrote Tom Robbins of The Village Voice in April 2008. Kruger ran unopposed last year and brokered a deal with Bruno to redraw his district in 2002 in exchange for supporting conservative issues. Fellow senate Democrats believed that he “spied” on for senate Republicans. According to the Daily News, Kruger also wants to take some surplus campaign cash to form a “Blue Dog” coalition of centerright Democrats in the senate.