The Real Deal New York

Officials cracking down on alleged 421a abusers

Landlords of 178 resi buildings are on notice
By Kathryn Brenzel | November 22, 2016 11:20AM

From left: Bill de Blasio, Andrew Cuomo and Eric Schneiderman

With 421a seemingly on the verge of returning from bureaucratic purgatory, officials are cracking down on landlords who are allegedly abusing the tax break, threatening to retroactively revoke benefits if they don’t register apartments as rent-regulated.

Owners of 178 residential buildings — with a total of 1,400 rental apartments — were warned on Tuesday that they will lose their 421a benefits if they don’t adhere to the law’s rent-stabilization requirements. The Department of Housing Preservation and Development must approve the rents, and landlords are required to register the apartments as rent-regulated. According to officials, the 178 residential buildings are condos and condominiums that are operating as rental buildings without fulfilling the rent stabilization requirements.

A majority of these buildings were in Brooklyn and Queens and had less than 50 units. A spokesperson for Mayor Bill de Blasio declined to provide a list of the landlords who received the letter, saying that it’s an ongoing investigation.

Attorney General Eric Scheiderman, Gov. Andrew Cuomo and de Blasio announced the latest revocation notices on Tuesday, saying this is the latest enforcement action by the Real Estate Tax Compliance Program, which formed in 2014. The news comes roughly a week after the Building and Construction Trades Council and the Real Estate Board of New York reached an agreement that will seemingly pave the way for the tax break’s revival. The deal established wage requirements in some areas — south of 96th Street and along the Brooklyn and Queens waterfronts and extended the tax abatement to 35 years in those areas.

News of 421a’s impending return has been served up with a dollop of political pressure. Days after the deal was announced, two bills were introduced in the City Council calling on the city’s housing agency to step up oversight over the program, ProPublica reported. One of the bills would require HPD to audit 421a properties annually to make sure that landlords are complying with rent-regulation requirements.

Last year, authorities sent compliance letters to owners of 285 buildings, but only ended up revoking benefits to 35 buildings, which together would receive $4.5 million in 421a tax benefits. One of the landlords filed a lawsuit against HPD this week, claiming that her benefits were wrongfully revoked even though she met all the agency’s requirements.