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Tenants May Catch a Break: 50,000 apartments eyed for illegally high rents

Steven Wishnia Feb 2

Governor Andrew Cuomo has pledged a “major initiative to return up to 50,000 illegally deregulated apartments to rent regulation,” but tenant advocates say there is less to it than meets the eye.

The governor’s plan, announced January 6, involves sending letters to the owners of more than 4,000 buildings that received J-51 tax breaks intended for rent-stabilized buildings and contain apartments that are not registered with the state housing agency. Close to half of those buildings are in Manhattan, with more than 800 in Brooklyn, 700 in Queens, 500 in the Bronx and 15-20 in Staten Island, according to the agency, New York State Homes and Community Renewal. It has instructed those owners to register all apartments in them as rent-stabilized or face having to pay treble damages if the rent is illegally high. The letters also told them to offer tenants rent-stabilized leases.

The J-51 program, created in 1955 to help landlords install hot-water systems, gives owners of rent-regulated buildings property-tax reductions that cover as much as 90 percent of the costs of major renovations, such as a new boiler. A 2012 report by the Community Service Society called it “one of the city’s most expensive housing programs.” In 2011, it cost the city about $257 million.

In 2009, in a case involving Stuyvesant Town/Peter Cooper Village, the state’s highest court ruled that it was illegal for landlords who were receiving J-51 tax breaks to take apartments out of rent regulation. About 4,300 apartments in the 11,000-unit complex had been deregulated, primarily through vacancy decontrol. 

“There will be zero tolerance for those who disregard the law and reap these benefits while denying tenants affordable housing they are obligated to provide,” Governor Cuomo said in a statement January 6. The Division of Housing and Community Renewal (DHCR), which administers rent stabilization, “reserves the right to seek and impose appropriate penalties as warranted,” according to an agency spokesperson.

The problem, advocates say, is that state law offers nearly 100 percent tolerance for landlords who don’t register rent-stabilized apartments. Until 1993, unregistered apartments’ rents could have been frozen at the last legal regulated level, Legal Aid staff attorney Ellen Davidson explains. But that year, the law was changed so that owners could register apartments at any time and keep any legal rent increases. And the 1997 vacancy-decontrol law, which deregulated vacant apartments if their rent was high enough ($2,000 a month then, now $2,700), also prohibited tenants and courts from looking back more than four years to determine whether an apartment’s rent was legal.

The 1993 law “essentially made registration voluntary,” says Michael McKee of Tenants PAC. He calls the state’s initiative “very feeble.”

“It’s good that they’re doing this, but it’s ridiculous that they didn’t do anything before,” he says. It would be more effective to write to tenants in the affected buildings and tell them “you are likely being overcharged” — or to take legal action against landlords who charge too much.

DHCR says it will continue to audit data to find apartments that should still be regulated, and tenants should contact its Office of Rent Administration if they believe they’ve been overcharged. In those cases, the courts will determine how much the rent should be, based on the individual apartment’s history.

Almost 200,000 apartments that are supposed to be rent-stabilized are not registered with the state, investigative reporters at ProPublica wrote in December. The city Department of Housing Preservation and Development estimates that there were about 1,030,000 rent-stabilized apartments in the city in 2014, but only 840,000 were registered with DHCR, according to agency figures ProPublica obtained. Many of those also have illegally high rents, says Davidson.

If a tenant can prove that they were illegally overcharged and that it was “willful,” the standard penalty is triple the excessive rent. McKee says that landlords who received J-51 benefits will have a hard time proving that any overcharges weren’t willful, as they know the law, and the Stuyvesant Town decision was major news in the real-estate industry. The catch, says Davidson, is that unregistered apartments have no paper trail documenting what the legal rent actually is. 

The law effectively requires tenants to enforce it themselves, she says, and landlords have been evading it for years. “When it’s in their business interests to ignore the law, they do,” she says, “and there are no consequences.”

If you believe your apartment was illegally deregulated, DHCR has placed a notice on its website, nyshcr.org, with instructions for how to find out more. It contains links to city sites where you can obtain your building’s block and lot number and use that to find out its J-51 tax benefit status. You can then ask for a rent history of the apartment by e-mailing rentinfo@nyshcr.org or calling 718-739-6400.

If you don’t get any notification from the landlord within the next couple months, Ellen Davidson recommends that you think about filing an overcharge complaint.


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