Landlords Threaten to Warehouse More Apartments

Since the Housing Stability and Tenant Protection Act was enacted in June 2019, some New York City landlords have dropped hints that they would “warehouse” vacant apartments rather than rent them out.

“Most times, whenever I find an apartment, I am told that it is not available. People have told me that many are ready to be occupied,” says Khadija Canns, an activist with the Housing Justice for All coalition.

Last September, after the city Department of Housing Preservation and Development (HPD) began investigating whether Blackstone, the private- equity firm that owns Stuyvesant Town/Peter Cooper Village, was warehousing apartments in the complex, a company spokesperson told Real Estate Weekly that “in light of the new legislation, unfortunately, we have to make some difficult choices and scale back certain investments.”

Blackstone, which under the terms of a deal it made when it bought the complex in 2015 will receive $220 million in city subsidies in exchange for keeping 5,000 apartments affordable for the next 20 years, quickly backed down. But Anne Greenberg, vice president of the Stuy-Town/PCV Tenant Association, says that about 100 apartments are still being warehoused. Less than half of the 11,000 apartments are still rent-stabilized, she told Tenant/ Inquilino, and Blackstone is reconfiguring units by “making them smaller or joining apartments to make them larger”—which enables the owner to take them out of the rent-stabilization system.

The Community Housing Improvement Program, a landlord trade group, told Real Estate Weekly in September that in its survey of members, 60 percent of the respondents said it made more sense to keep units vacant than to invest in them, because the new law ended the deregulation of vacant apartments, repealed the 20 percent increase they could automatically charge new tenants, and limited rent increases for apartment renovations to about $85 a month over 15 years.

The 15 Lower Manhattan buildings formerly owned by Raphael Toledano, now owned by Madison Realty Capital and managed by Silverstone Property Group, have many warehoused apartments. At 325 East 12th St., 18 of the 37 units are vacant, with 13 ready to be occupied and five gutted but not renovated. Toledano, who emptied half the building by harassing tenants and got 14 to take buyouts, lost all 15 properties when he defaulted on a $124 million loan from Madison Realty Capital.

Warehousing is legal, Assemblymember Harvey Epstein, whose district includes Stuy-Town/ PCV, said, but asked, “Is it moral during a housing crisis?” One way landlords can use warehousing to evade rent regulations is by exploiting gaps in their rent history. The state Homes and Community Renewal agency, which enforces rent stabilization, told an Assembly hearing last May that approximately 200,000 rent-stabilized apartments are not registered with the state. Many have years-long gaps in their rent histories. “HCR should be more vigilant in enforcing landlords to register their apartments to track where rent-stabilized apartments are,” says Anita Long, a tenant leader with CASA (Community Action for Safe Apartments) in the Bronx. “Warehousing is an easy course of action for landlords to move rent-stabilized apartments into the market-rate rolls, especially when these apartments are not registered. Landlords are also warehousing for condo or co-op conversion. Warehousing is profitable to landlords whose buildings are in areas zoned for gentrification.”

Warehousing may also enable landlords to demand higher rent increases, by claiming loss of income due to empty apartments. That would skew the data for the city Rent Guidelines Board’s annual Income and Expense Study, which is used to estimate how much landlords’ incomes justify a rent increase.

The city has enacted a number of laws intended to address concerns about vacant properties. In December 2017, Mayor Bill de Blasio signed the Housing Not Warehousing Act. Intro 1039 requires HPD to report on vacant buildings or lots under its jurisdiction. Intro 1034 mandates private landlords to register all units that have been vacant for more than a year, with fines of $100 to $500 if they fail to comply within two months.

“This day has been a long time coming, and is a first step in identifying potential housing in every community,” Jose Rodriguez of Picture the Homeless said at the time.

How much those laws are being enforced is another issue. Several city agencies collect information about vacant buildings, including the Department of Buildings, the Fire Department, the Department of Finance, and HPD, whose Housing and Vacancy Survey is conducted every three years. Former HPD Commissioner Vicki Been, now with the Furman Center at New York University, told City Limits in 2017 that the real problem is not finding those properties, it is that there are no consequences for landlords who don’t return their properties to productive use.

“A visual inspection, such as the one the Department of Finance performs, can be imperfect and fail to count buildings that through observation, look as if it houses residents or is used for its intended purposes,” HPD Deputy Commissioner Daniel Hernandez told a 2016 City Council hearing on the Housing Not Warehousing Act.

Warehousing is a national problem. The 2010 census found 15 million vacant housing units, 11.4 percent of the nation’s housing supply. While many of these were occupied seasonally or occasionally, their number far exceeded the estimated 3.5 million people without homes.