Despite rent freeze, landlords still raise rents on some rent-regulated apartments [Updated]

This apartment building, located at 1646 Union Street in Crown Heights, Brooklyn, is home to many tenants paying preferential rents to their landlord, Renaissance Realty.  The landlord has raised the rents on the tenants of rent-regulated apartments, in excess and in violation of orders issued by the Rent Guidelines Board, the regulatory body that caps the rate of rent increases for rent-regulated apartments in New York City.  Source :  Louis Flores/Progress Queens

This apartment building, located at 1646 Union Street in Crown Heights, Brooklyn, is home to many tenants paying preferential rents to their landlord, Renaissance Realty.  The landlord has raised the rents on the tenants of rent-regulated apartments, in excess and in violation of orders issued by the Rent Guidelines Board, the regulatory body that caps the rate of rent increases for rent-regulated apartments in New York City.  Source :  Louis Flores/Progress Queens

By LOUIS FLORES

At the end of last June, Mayor Bill de Blasio (D-New York City) heralded the decision by the Rent Guidelines Board to impose a rent freeze on one year lease extensions for occupants of rent-regulated apartments, saying that the rent freeze would provide "relief" to tenants, whose incomes have not been keeping pace with the spiraling rent increases in recent years.

However, some tenants in rent-regulated apartments have been facing the economic pressures of crippling rent increases, in spite of Mayor de Blasio's assurances against the contrary.  

How is that possible ?

Some landlords of rent-regulated apartments have raised rents on tenants, whose leases are subject to preferential rents.  A preferential rent is a discounted rent amount that is less than the legal rent for a rent-regulated apartment.  Landlords raising preferential rents claim that orders issued by the Rent Guidelines Board only restrict the amount of rent increases on the legal rents, not on preferential rents, an argument that many tenants reject and that some argue lead to abuse, resulting in potential rent overcharges and, thus, illegality.

In Crown Heights, Brooklyn, Renaissance Realty, a Brooklyn landlord, has moved to raise the preferential rents for tenants in two apartment buildings located at 285-291 Schenectady Avenue and 1646 Union Street, in some cases more than doubling the rents, from approximately $990 to over $2,100, as written about by Renaissance Realty tenant Natasha Creese for the CitiLimits news Web site.  

Calling for updates to rent regulation laws to close the preferential rent loophole that allows landlords to skirt the caps on rent increases ordered by the Rent Guidelines Board, Ms. Creese wrote last May, "The state's rent stabilization laws are supposed to protect tenants in rent stabilized apartments from sudden and drastic rent hikes, but thanks to years of greedy landlords and corrupt politicians in Albany, the laws are not working."

It is estimated that between the two apartment buildings, 60 families are facing rent increases by Renaissance Realty. 

A representative of Renaissance Realty's Brooklyn headquarters declined to comment for this report.

Another building owned by Renaissance Realty in Crown Heights, Brooklyn.  This apartment building is located at 285-291 Schenectady Avenue.  Tenants face crippling rent increases that will in some instances more than double their rents, despite assurances from Mayor Bill de Blasio that tenants would receive a rent freeze from the Rent Guidelines Board.  Source :  Louis Flores/Progress Queens

Another building owned by Renaissance Realty in Crown Heights, Brooklyn.  This apartment building is located at 285-291 Schenectady Avenue.  Tenants face crippling rent increases that will in some instances more than double their rents, despite assurances from Mayor Bill de Blasio that tenants would receive a rent freeze from the Rent Guidelines Board.  Source :  Louis Flores/Progress Queens

In an interview with Progress Queens, two Renaissance Realty tenants would only speak on condition of anonymity, so as not to incur any retaliation from their landlord.  One tenant claimed that she faced the prospect of paying seventy per cent. of her income on rent, adding that, "After paying your rent, you have nothing left in your pocket."  

Tenant advocate groups are working to provide assistance to tenants facing the crippling increases in preferential rents, that many say serve as a backdoor to evict existing, low-income tenants, thereby allowing landlords to sign higher rent-paying tenants, particularly in rapidly gentrifying neighborhoods, like Crown Heights.  In the case of the Crown Heights tenants of Renaissance Realty, for example, the Urban Homesteading Assistance Board, or UHAB, is providing assistance to the tenants. 

The Renaissance Realty tenants are locked in a legal battle with their landlord in housing court.  The tenants have refused to sign leases with higher rents, but, at the same time, they have managed to stay any eviction proceedings.  Presently, UHAB is trying to coordinate with elected officials to pressure the landlord to make good by its tenants, a strategy that would work, if only elected officials could actually stand up to the city's influential real estate interests.  Renaissance Realty's bid to jack up the rents on its long-term tenants has been documented in a report published by The Village Voice.

One Renaissance Realty tenant told Progress Queens that he was not optimistic that elected officials could persuade his landlord to end the preferential rent overcharges that are in contravention to the orders issued by the Rent Guidelines Board, saying, "Nobody can ever count on a politician." 

Requests for interviews were not answered by the press offices of either Mayor de Blasio or Gov. Andrew Cuomo (D-New York).  As has been reported by numerous news Web sites, including Progress Queens, each of Mayor de Blasio and Gov. Cuomo have close political relationships with real estate developers, which are also the source of large campaign contributions for both politicians.

According to information obtained by Progress Queens, Double A Property Associates, a landlord in Jackson Heights, Queens, that owns at least two buildings on 77th Street, is also making drastic rent increases to tenants of rent-regulated apartments that are likewise subject to preferential rents.  (Double A Property Associates is the landlord for the publisher of Progress Queens.)  A landlord up in Harlem, Emo Realty Partners, was recently exposed for having made over $14,500 in rent overcharges to at least one rent-regulated apartment tenant, who was subject to a preferential rent, according to a report published by DNAinfo.  In an exposé published by the nonprofit online news Web site Pro Publica, it was further revealed that landlords, including The Rabsky Group, which were receiving the lucrative and controversial 421-a property tax abatement, were also engaged in rent overcharges in respect of tenants paying preferential rents for rent-regulated apartments.

In a 2007 analysis of a New York County Supreme Court ruling, landlord lawyers reviewed the history of preferential rent rules, including the abandonment of the Collingwood rule, a regulation that formerly forbade landlords from arbitrarily raising preferential rents.  

Since that time, landlords have been able to corrupt tenant protection laws by arguing that preferential rents can be arbitrarily increased.  Preferential rents are generally provided to tenants as an inducement to sign leases for rent-regulated apartments.  Yet, landlords now want to claim the right to arbitrarily abandon preferential rents, leading some tenants to argue that landlords are systemically engaging in fraud in the inducement by offering non-binding preferential rents, leading to accusations of illegality that can be construed to mean that landlords are essentially in breach of contract of the lease agreements.

This pattern of preferential rent corruption led The Nation magazine to publish its own exposé earlier this year, documenting how landlords can turn rent-regulated apartments into luxury apartments.  Landlord abuse of preferential rent overcharges is flagrant, yet it is not known how many tenants of rent-regulated apartments subject to preferential rents are facing crippling rent increases in spite of the Rent Guidelines Board's order of a rent freeze.  However, it was estimated that as of 2013, the most recent year for which statistics are available, over 175,000 apartments, or approximately 23 per cent. of the 765,000 total rent-regulated apartments, were subject to preferential rents.

Of turning to elected officials for assistance to push back against the preferential rent overcharges being collected by landlords, John Fisher, the founder of the tenant resource Web site TenantNet, told Progress Queens that landlords were exploiting the preferential rent loophole most likely according to guidance being received from the Real Estate Board of New York and the Rent Stabilization Association, two real estate industry groups that represent landlords, adding that political pressure can be brought to bear on corrupt landlords either on a one-off basis or across the board.

If a particular elected official has oversight in respect of matters of land use when a landlord must seek approval, then that elected official should advocate for the public interest by trying to persuade the landlord to cease the preferential rent overcharges.  Another route, Mr. Fisher said, would be for tenants and tenant advocates to pressure an elected official, like Gov. Cuomo, to persuade the state's tenant protection agency, the Division of Housing and Community Renewal, also known by its former acronym, DHCR, to update its preferential rent interpretation rules, to put an end to the exploitative preferential rent loophole.

Referring to tenants and tenant advocates, Mr. Fisher said that in a perfect world, "They need Cuomo or somebody to sit on DHCR to change its policy," but any such effort would clash with the political realities of the influences of the real estate developers.*

* Updated to reflect a qualification in the quotation attributed to John Fisher.