A new investigation into buildings that benefit from the 421a tax abatement by New York Attorney General Letitia James found that four developers in Brooklyn and Queens received the tax break but didn’t live up to the program’s requirements.
The developers’ misdeeds ranged from falsely reporting a full building was vacant to not offering rent-stabilized leases to tenants as the program requires in most cases.
“Rent-stabilization laws exist to protect tenants, and we will not let landlords or developers circumvent them,” James said in a statement. “The agreements announced today affirm my office’s commitment to promoting access to safe, affordable housing for all New Yorkers. This is a notice to all bad actors seeking to take advantage of tenants: Not on my watch.”
None of the developers named in the latest investigation return requests for comment.
The Real Estate Board of New York issued a statement in support of James, adding that such violations are rare, and underscoring the program’s importance for affordable housing.
“We applaud Attorney General James for taking action to ensure that 421a is used only as intended and required under State law,” said James Whelan, president of the Real Estate Board of New York. “The 421a program continues to play a crucial role in the production of much-needed below-market rate housing across New York City — and while bad actors are rare, it is always unacceptable for any developer to try to utilize the program without complying with its rent-stabilization requirements.”
One firm, Tuhsur Development, tried to evict tenants from its property at 63-36 99th Street in Rego Park even though a state investigation found it had overcharged those tenants $22,042.
That developer was one of four firms that paid $460,000 in penalties after an 2014 investigation by attorney general Eric Schneiderman found it had violated its regulatory agreement.
Tuhsur will pay $159,592 to the Department of Housing Preservation and Development, $43,066 to tenants who were illegally overcharged, and a $30,000 penalty. The firm must also drop the eviction proceedings and lower rents in some units.
At Bridgeview Tower at 23-01 41st Avenue in Long Island City, the owners said in an offering plan that their building would be a condominium, which allows developers to waive rent-stabilization requirements. But the building’s units were instead rented out, and no tenants received rent-stabilized leases. The developer must now pay a $150,000 penalty, provide the correct leases and refund any illegal overcharges.
The investigation also found that 5-11 Realty, LLC, the developer of 5-11 50th Avenue in Queens, told the Attorney General that its building was empty when it was occupied by tenants. The company also overcharged tenants and didn’t give them rent-stabilized leases. It will pay a $178,842 penalty and $21,158 to those who were illegally overcharged, as well as provide rent-stabilized leases to tenants.
Wheelock Development also rented out apartments at its condo development at 33 Bay 41st Street before the building’s offering plan was completed, and did not provide rent-stabilized leases to its tenants, despite receiving tax benefits. According to the settlement, Wheelock will pay a penalty of $31,000 and offer regulated leases.
Progressives have pushed to get rid of the tax break over the years. In October 2019, tenants’-rights group Housing Justice for All called the program “costly” and “wasteful,” and demanded its elimination in order to put the money toward the state’s decaying public housing system. The Association for Neighborhood and Housing Development estimated in 2017 that the program costs $1 billion a year in forgone taxes.
Developers in turn have sought to extend the program, which they argue provides jobs and supports the creation of affordable housing. A 2013 investigation found that Extell’s Gary Barnett shelled out $300,000 in donations to Gov. Andrew Cuomo while he was considering renewal of the tax benefit, which would save Extell $35 million over a decade at its One57 development.
The program was overhauled in 2017 to include construction wage agreements and revived as Affordable New York.