The Drama Heightens for IPN Tenants:
Mayor and City Council Seek Tenant Protections
by Ronald Drenger   Reprinted with permission from The Tribeca Trib, November 2003

Independence Plaza North tenants and thousands like them got the attention of both sides of City Hall on Oct. 29, as the mayor and the City Council each presented proposals promising to help them save their homes.

At a morning news conference, Mayor Bloomberg proposed state legislation that would extend rent stabilization protection to 32,000 apartments in Mitchell-Lama developments, like IPN, that were occupied after 1973. Rent stabilization would kick in if a building owner withdraws from Mitchell-Lama.

“It will prevent families from losing their homes, but in a way that is fair to Mitchell-Lama owners,” Bloomberg said.

Bloomberg’s surprise announcement stole the spotlight from the City Council, which less than three hours later held a hearing on a bill, crafted with the help of IPN tenant association lawyers, that would make it harder for owners to withdraw, or “buy out,” from Mitchell-Lama and would give new protections to tenants.

Before the hearing, Council Speaker Gifford Miller led a rally on the steps of City Hall, attended by hundreds of Mitchell-Lama tenants, to promote the legislation.

The Council bill, which has 36 sponsors, would apply to Mitchell-Lama developments, like IPN, that are overseen by the city. (Others are administered by the state.) It would require owners to give tenants 18 months’ notice of a buyout, instead of 12, and to pay the city a $1,000 per unit fee. The city would have to study a buyout’s impacts on tenants and owners and would have to mitigate those impacts or pay the city to do so, though the bill is vague about what that means.

Bloomberg’s proposed legislation would have to pass the state legislature, and skeptics questioned its chances. Previous bills seeking to put more Mitchell-Lama developments under rent stabilization or to strengthen other tenant protections have been rejected by the Republican-led Senate.

Mark Hansen, a spokesman for Senate Majority Leader Joseph Bruno, said the proposal was under review.

Miller said that the Council bill will give tenants more immediate protection and will buy time while state legislation is negotiated. “The key is not just to say, throw it up to Albany and see what happens,” Miller said.

At the hearing, Councilman Alan Gerson said that the mayor’s proposal “is a welcome step forward but not a replacement for the bill we’re putting forward today.”

Diane Lapson, a vice president of IPN’s tenant association, testified that it wasn’t fair for the complex’s owners to reap large profits at the expense of tenants who built the community and made it desirable. She cited tenants’ efforts to bring a school, a supermarket, a park and other local amenities.

“Are Mitchell-Lama residents worker ants, sent in advance to create the future windfall of real estate investors?” Lapson asked.

Representatives of civic groups such as the Community Service Society, Housing First!, the Pratt Institute Center for Community and Economic Development (PICCED) and the Legal Aid Society also urged the Council to pass the bill. But opponents from the real-estate industry argued that the the Council has no authority to amend the Mitchell-Lama program, which was created by the state. In addition, they said, the proposed changes would violate the agreement between the government and developers who created affordable housing under Mitchell-Lama, in exchange for low-interest financing and tax breaks. The program allows owners to buy out of the program and take apartments to market rate after 20 years.

“Changing the rules now would be a serious breach of faith and would dissuade investors from creating much-needed units of new affordable housing in the future,” said Marolyn Davenport, senior vice president at the Real Estate Board of New York.

Edward Wallace, attorney for IPN’s owner, Laurence Gluck, said the bill “is blatantly illegal; it holds out false hopes to tenants; and it chills negotiations between owners and tenants.”

The Bloomberg administration also criticized the Council bill. Jerilyn Perine, commissioner of the Department of Housing Preservation and Development (HPD), testified that it was “flawed” and “inconsistent with state law.”

“This bill has a real potential to not be able to withstand a legal challenge,” said Perine, who had joined Bloomberg at his morning announcement. The mayor, when asked at the press conference about his position on the Council bill, said, “This is fundamentally a state issue.”

Under the Bloomberg’s proposal, if an owner buys out from Mitchell-Lama, apartments whose tenants are not eligible for federal rent subsidies would enter rent stabilization at their most recent Mitchell-Lama rent. Those units would be subject to the same annual rent increases that apply to all stabilized apartments.

Tenants who are eligible for the rent subsidies, known as “sticky vouchers”—HPD and Gluck have said that about two-thirds of IPN tenants would qualify—would still enter the voucher program, Perine said. Building owners would get market rent, subsidized by the government, for those apartments.

But if the vouchers become unavailable in the future—something IPN tenants have worried about but which Perine stressed was extremely unlikely—those units would fall under rent stabilization rules.

The owner would receive tax breaks for apartments that go into rent stabilization. The bill also offers a financial incentive for owners to stay in Mitchell-Lama, which keeps rents below market, by removing a 6 percent cap on their allowable return on equity.

The mayor wants the bill to apply retroactively to Oct. 29, to cover developments that are already in the buyout process.

Bloomberg said he was optimistic that the legislature would pass his proposal because it balances the interests of tenants and owners. But Steven Spinola, president of the Real Estate Board of New York, said that the group opposed putting former Mitchell-Lama developments into rent stabilization.

“It’s not a fair proposal,” he said. “It’s one-sided at the moment.”

Rent stabilization “would be a roadblock for buyouts, which owners have the right to do under Mitchell-Lama law,” and the tax relief offered to owners offers little economic benefit, Spinola said.

Several tenant advocates said that the mayor’s credibility on the Mitchell-Lama issue — and possibly the proposal’s fate — will depend on his willingness to fight for the bill.

“He’ll have to use up some of his political chits to get this done,” said David Jones, head of the Community Service Society. “He would have to go out there, go to Albany, and build a consensus.”