With Rent Laws Expiring, the Showdown Is Over Deregulation

Is the script for the 2011 rent-laws fight already written? As the June 15 deadline to renew the rent-regulation laws for 2.5 million New Yorkers looms, it’s getting clearer what Governor Andrew Cuomo and leaders of New York’s State Assembly and Senate are planning.

With a Republican majority in the Senate that’s opposed to the rent-regulation system, and an Assembly that has passed legislation that would strengthen tenant protections by closing significant loopholes, Cuomo seems to be positioning himself to push largely for the status quo and call it a victory. The status quo, however, involves a phaseout of the system through the deregulation of tens of thousands of apartments every year.

Cuomo says that his position is to “extend and expand” rent regulation laws, but he has not specified what he means by “expand.” When asked if his goal is to eliminate vacancy decontrol, the primary means by which rent protections are being phased out, he has so far refused to say yes.

While the governor has remained tight-lipped about any plans he may have to improve the laws for tenants, it’s no secret that that he and top legislators in the Assembly and Senate are also seriously weighing measures called for by landlord lobbyists.

Those proposals involve letting landlords back out of the J-51 program so that they can deregulate units, and tweaking vacancy decontrol to make deregulation more difficult, but still achievable. The doomsday scenario of the rent laws simply expiring on June 15 seems not to be on the agenda of top lawmakers this year, but some may be counting on such fears to pave the way for a deal that hastens the phaseout of rent regulations while letting them claim to have saved the day.

Givebacks to Landlords
Landlord lobby groups are pushing to rewrite the law to undo the Court of Appeals’ 2009 decision in Roberts v. Tishman Speyer, which found that landlords could not deregulate apartments while receiving J-51 tax breaks—which are explicitly given for renovating rent-regulated apartments. An estimated 40,000 apartments across New York City that were rented as market-rate units are subject to rent stabilization as a result of that ruling. (See “Why Overriding the Roberts Decision Would Be Wrong” on page 8.)

A bill moving through the State Senate would change the law to permit landlords to give back the tax breaks in exchange for being able to deregulate those units. Though the measure would likely not pass the Assembly as standalone legislation, some fear that the Assembly and Cuomo may agree to it as part of a larger deal to renew the rent-regulation laws.

Undoing the Roberts decision is a top priority of the Real Estate Board of New York, a landlord lobby group that Governor Cuomo feels close to, if not indebted to.

Cuomo is also close to Tishman Speyer Properties, the losers in the case. Stuyvesant Town tenants sued the firm after it bought the 11,000-unit complex in 2006 in the largest real-estate transaction in New York City history. The $5.4 billion deal could have been profitable only if most of those apartments had been quickly deregulated, and the Roberts decision eliminated Tishman Speyer’s last hope of avoiding foreclosure. Daniel Tishman, whose great uncle was the firm’s founding chairman, and Jerry Speyer, who serves as its current chairman and co-CEO, were the top two contributors to Cuomo’s 2010 gubernatorial campaign.

Raising the Decontrol Threshold
Vacancy decontrol lets landlords remove an apartment from rent regulation by registering a legal rent of $2,000 or more on a vacant apartment. This process is made easy because owners get an automatic rent hike of 20 percent with every new tenancy, and they can raise the monthly rent by 1/40th of the cost of apartment renovations through Individual Apartment Improvement increases, which are permanent. There’s no limit to what qualifies for an IAI increase, so luxury items can be used to deregulate any apartment. With no oversight of IAIs performed on vacant apartments, it’s also easy to lie about what work was done. Fraud is rampant.

Through these mechanisms, landlords are deregulating tens of thousands of apartments every year, and the loophole is leading to the ultimate demise of the entire system.

Instead of eliminating vacancy decontrol, Cuomo seems to favor raising the threshold at which apartments can be deregulated from $2,000 to a higher amount, such as $3,000—and then tying that to the rate of inflation. While this appears as if it would significantly curtail deregulation in many areas outside of Manhattan, tenant experts warn that it would actually accomplish much less, while thwarting efforts to eliminate the loophole entirely. The deregulation threshold is a fictitious number, as it doesn’t reflect an actual rent. Once landlords claim that an apartment can be deregulated, it can be re-rented for any amount higher or lower than the threshold, making the level at which deregulation can occur almost irrelevant.

Spokespeople for REBNY have expressed public support for raising the threshold. Landlord lobbyists see this is a measure that won’t do much to slow down the rate at which apartments are being deregulated—particularly in already high-rent or gentrifying neighborhoods—but which would cripple and possibly destroy the growing movement to eliminate vacancy decontrol.

Renewal Isn’t Enough
Tenants who are currently protected by rent stabilization or rent control should not sit content on indications that legislators are largely calling for their extension. A rundown of those lining up to support a straight renewal of the laws should give pause. Senate Majority Leader Dean Skelos (R-Nassau), a staunch opponent of rent regulation, said in March that he’s “open to extending” the current laws.

Joseph Strasburg, president of the Rent Stabilization Association, a landlord lobbyist group whose primary mission is to eliminate rent regulations, acknowledged that the RSA isn’t pushing to end the laws this year; it is more focused on stopping measures to strengthen them. “The debate will be over what [the bill] ultimately looks like,” he told The New York Times in April.

More recently, Strasburg told City Hall News that he preferred the rent laws to be “extended so far down the road that it will be dealt with by somebody else…. I would let them do a 14-year extender, this way I could be gone. It will be somebody else’s headache.” The 14-year suggestion may have been facetious, but not the desire for a long renewal—and the reason Strasburg wants this isn’t that he’s growing weary. Efforts to eliminate rent regulations all at once could backfire politically, but renewing the laws for many years with mechanisms available to deregulate units would keep the issue out of the spotlight long enough for the system to wither away.

The top landlord lobbyist groups understand that with an as-is rent-law extender, or a vacancy-decontrol threshold that’s higher but still achievable, time is on their side.

Rent-protected tenants must similarly take a long view. As rent regulation becomes a smaller and smaller program, tenants paying outrageous market-rate prices often resent their neighbors who have rent and eviction protections that they don’t have, rather than being inspired to fight for an expansion of the laws. Many media outlets portray rent regulation as a lucky break bestowed on the undeserved.

The strategy to end rent regulations is taken from the playbook also being used to dismantle Social Security, pension benefits, and Medicare: Promise to keep programs for people who already rely on them, but raise a generation of people to expect that there won’t be a safety net left when they’ll need it.

Tenants can’t let the 2011 debate be about maintaining the status quo with rent regulation. The status quo is that every year we lose tens of thousands of affordable apartments, families and neighborhoods are torn apart, homelessness rises, and people are pushed out and priced out of their communities.

Politicians can’t be given a pass for extending the rent laws only for the shrinking number of people currently covered by them. That’s like supporting the right to vote only for people who have already registered and calling it democracy. Rent-regulation laws provide basic protections that the vast majority of New Yorkers desperately need, and which everyone deserves. We must unite behind what we hope to win, not what we’re afraid to lose.

Finally, we can’t be afraid to be more aggressive in our strategies. Writing his “Letter from a Birmingham Jail” in 1963, Dr. Martin Luther King Jr. chronicled the steps civil-rights leaders took before choosing to engage in direct-action protests in Birmingham, Alabama. They agreed to a moratorium on demonstrations based on negotiations with store owners, which they said made them “victims of a broken promise.” They postponed actions before an election “so that the demonstrations could not be used to cloud the issues,” and when elections did not go as they wished, they “endured postponement after postponement.” They ultimately chose to do direct actions “to create such a crisis and foster such a tension” as to demand a response.

“I have yet to engage in a direct action campaign that was ‘well timed’ in the view of those who have not suffered unduly,” Dr. King wrote. ‘Wait’ has almost always meant ‘Never.'”

The opportunity to win significant gains for tenants in 2011 still remains. Is the tenant movement in New York City tired of waiting?