ProPublica NYC Bill Targets Landlords Who Get Tax Breaks, Duck Rent Limits by Cezary Podkul and Marcelo Rochabrun

ProPublica
ProPublica
NYC Bill Targets Landlords Who Get Tax Breaks, Duck Rent Limits
Cezary Podkul and Marcelo Rochabrun
12/10/2015

New York City landlords who get big tax breaks in exchange for capping rent increases would have to provide an inventory of their apartments to city housing officials under legislation unveiled this week.

The measure, introduced by City Council Member Ben Kallos, Housing Committee Chairman Jumaane Williams and other officials, would require the city’s housing agency to keep track of every apartment built with taxpayer subsidies. It would also make it easier for tenants to get information online about apartments for low- and moderate-income residents.

Under the two long-standing programs, meant to encourage more housing, landlords are forgiven a portion of their property taxes. Benefits can last up to 34 years and cut taxes by more than 90 percent annually. Property taxes are generally the biggest expense landlords have.The proposed law was prompted by aProPublica investigation last month that identified 50,000 apartments in buildings receiving tax breaks under two programs, 421-a and J51. The apartments were not registered with the state for rent stabilization, which provides tenants with eviction protection and limits rent increases, as a requirement of receiving the tax breaks.

The failure to register units in more than 5,500 buildings exposes tens of thousands of tenants to the possibility of illegal rent increases or evictions. Owners of the buildings collected more than $100 million in property tax savings despite not holding up their end of the bargain, ProPublica found.

New York Attorney General Eric Schneiderman and city and state housing agencies recently cited owners of 194 buildings for failing to register. The 1,823 units they were able to get back on rent-stabilization rolls through this and previous enforcement actions are only a small fraction of a much-bigger problem, however.

“Everyone knew that this was a problem, and there was anecdotal evidence here and there, but nobody understood the gravity of the problem,” said Kallos, lead sponsor of the legislation.

“Even with the Attorney General, the Governor and the Mayor looking at it here and there and finding a thousand units here or a hundred units there, nobody’s actually going after the whole 50,000 units that have been identified,” Kallos said.

Kallos said ProPublica’s report “quantified the problem.” He hopes his bill will empower the city’s Department of Housing Preservation and Development (HPD) to bring all 50,000 units into compliance.

ProPublica identified the missing units by cross-checking two databases — one that tracks tax breaks and another that shows buildings that had registered for rent stabilization. Long-time HPD analyst Stephen Werner had warned higher-ups about the unregistered units for years, ProPublica reported.

The city’s housing agency is responsible for approving the tax breaks, but it hands off enforcement of rent-stabilization laws, including annual registration, to the state’s Department of Housing and Community Renewal. That’s created a regulatory blind spot that tenant groups have complained about for years.

“If (landlords) are getting a huge tax break, and the taxes they are not paying are city taxes, we should know if they are following through with their promises,” said Kerri White, of the Urban Homesteading Assistance Board, a tenant advocacy group.

At an October meeting at his office, New York City Council Member Ben Kallos, right, called HPD analyst Stephen Werner, left, a “hero” for alerting him to the problem of unregistered apartments. (Cezary Podkul/ProPublica)

Under the proposed law, HPD would be able to fine landlords up to $2,000 per unit each month for failing to register. HPD did not respond to a request for comment.

Kallos’ bill would also require HPD to create a new online "Housing Portal,” where prospective renters could browse and apply for rent-stabilized apartments that are specifically set aside for low- and moderate-income tenants. Owners would have the option to list market-rate units on the portal as well.

Wiley Norvell, a spokesman for Mayor Bill de Blasio, said his office will review the legislation and that “increasing accountability in these tax programs has been a major priority for the administration.”

Housing and tenant advocates briefed on the bill said it would be a big improvement over the current system, where registration is largely voluntary and penalties — such as revocation of tax breaks — have been mostly nonexistent.

“Self-reporting is not sufficient,” said Harvey Epstein, associate director of the Urban Justice Center, which advocates for low-income residents. “We need more government oversight and checks and balances on landlords.”

Issue: 
Affordable Housing