Come September, the state’s highest court will consider Roberts v. Tishman Speyer, a suit challenging rent deregulation at Manhattan’s Stuyvesant Town and Peter Cooper Village. If the Court of Appeals upholds the decision of the Supreme Court’s Appellate Division, mega-developer Tishman Speyer will be deemed to have illegally deregulated apartments, promising financial compensation not only for the residents of Stuy Town, but for tenants throughout the city.
“The decision is hugely significant,” says Patrick Coleman, director of organizing and advocacy for tenants’ rights group Tenants & Neighbors. “There’s an opportunity for tenants to be repaid some of the funds they’ve improperly shelled out.”
Nobody, however, is quite sure of the full ramifications of the decision – should it be affirmed. “There’s going to be a hell of a mess sorting this out,” says Harold Shultz, senior fellow at the Citizens Housing and Planning Council, a nonprofit research center. “And that mess is going to be big.”
Back in October 2006, Tishman spent an unheard-of $5.4 billion to purchase the 110 residential buildings that make up Stuyvesant Town and Peter Cooper Village, in what was trumpeted as the most expensive real estate transaction in U.S. history. Now it seems like the moment the housing bubble swelled to the limit – and the biggest in a long list of local purchases in which developers bought buildings or complexes with an eye to forcing out rent-regulated tenants and replacing them with tenants who can afford the market rate (thereby helping to pay off the price tag on the deal).
Stuy Town, however, was already receiving a city subsidy known as J-51. As CHPC's Shultz puts it, J-51 “evolved well beyond its origins.” In the mid 1950s, the city wanted to ensure that every building had central heating and hot running water. So it offered landlords a deal: in exchange for making the improvements, they would receive a break on their taxes. The catch: any landlord who took J-51 had to place the benefiting building under rent regulation. “J-51 is designed to say, if you make improvements in your building, the city will share the cost by giving you deferments on your real estate taxes,” Shultz says.
When the state reformed rent regulation in 1993, it allowed what’s known as luxury decontrol. If the rent for a stabilized apartment went over $2,000 a month, and the tenant left (or made more than $175,000 for two years in a row), that apartment would be “decontrolled,” or removed from rent regulation. Activists estimate that “vacancy decontrol” allowed roughly 300,000 units to leave rent regulation and go to market rate, while fewer than 20,000 units were surrendered due to the “luxury” provisions.
The question posed by Roberts was whether a building receiving J-51 benefits could also take advantage of the decontrol provisions. The 1993 law was ambiguous on this point, and the state’s Division of Housing and Community Renewal interpreted the law to say that only buildings solely subject to rent regulation because of J-51 were prohibited from opting out – as opposed to buildings which took advantage of J-51 but were subject to rent regulation for other reasons.
