Lawmakers vow to end 421a as tenants sue landlords getting tax break

Three of the most prolific landlords in Brooklyn and Queens are being cast as villains by state and city legislators seeking to abolish New York developers’ favorite tax abatement.

Three tenants filed lawsuits seeking class-action status against the building owners for allegedly defrauding the 421a program by overcharging tenants by an estimated $10 million. Pointing to the cases, several lawmakers held a virtual press conference Wednesday vowing to support Assembly member Linda Rosenthal’s new bill to abolish 421a.

“Bad landlords will always find a way,” said Queens Sen. Michael Gianaris, who was among the attendees. “But as relentless as they are, we are going to be equally relentless.”

Other senators who threw their support behind the bill were Julia Salazar and Jabari Brisport of Brooklyn.

“I’m ready to regulate the hell out of these landlords,” said Brisport, who was joined in backing the bill by Cea Weaver, a tenant organizer and recent appointee to the City Planning Commission.

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The three state lawsuits were filed by tenant attorneys Tuesday in Brooklyn and Queens against Joseph Brunner, one of Brooklyn’s biggest landlords, for rents at 1875 Atlantic Avenue; tech entrepreneur David Lubinitsky for 12-15 Broadway in Astoria; and developer and manager Heatherwood Luxury Rentals for 544 Union Avenue in Williamsburg.

The landlords are accused of extending rent concessions to the initial tenants at their respective projects, which all received the 421a property tax break, but registering a higher legal rent with the state’s Division of Homes and Community Renewal. This enabled the landlords to subsequently raise rents from that higher base, according to the watchdog group Housing Rights Initiative.

The group uncovered the alleged scheme at the three buildings and assisted the tenants in getting legal representation.

An attorney for Brunner called the complaint against the landlord baseless and inaccurate, and denied any overcharges had occurred at 1875 Atlantic Avenue.

“The great majority of tenants are paying less than the occupants who first entered possession,” said Lisa Faham-Selzer, a partner at Kucker Marino Winiarsky & Bittens representing Brunner’s firm, via email. “The owner looks forward to fully vindicating itself in court.”

The other landlords did not immediately respond to requests for comment.

To encourage apartment development, 421a, which has been revised and renamed Affordable New York, provides a substantial property tax break but also limits rents on some units in projects that receive it. Until the tax break expires, those rents cannot increase by more than the percentage allowed for rent-stabilized housing.

HRI made the same allegation last year in four Brooklyn buildings where tenants then initiated suits against the landlords. The plaintiffs are seeking class-action status in those cases as well.

In three of those cases, the city’s three primary trade associations representing landlords have filed a motion to appear in support of the defendants. The groups include the Real Estate Board of New York, the Community Housing Improvement Program and the Rent Stabilization Association. In a joint statement, they argue that offering a one-time concession as compensation for enduring ongoing construction is an “agency- and court-approved” practice.

“When temporary circumstances arise, such as delays or other issues during the final phases of construction at a building, tenants should be able to negotiate a rent concession where appropriate. Additionally, the housing providers should be able to provide one without strings attached,” their statement read.

The trade groups declined to comment on the suits filed this week against Brunner, Lubinitsky and Heatherwood. The plaintiffs also seek class-action status for the new cases.

But HRI, tenant attorneys and lawmakers contend that the section of the Rent Stabilization Code that deals with the establishment of initial rent for units under 421a states that the first legal rent a landlord registers with the state must be equal to the rent tenants actually pay, including concessions.

What position the court takes on these seven suits will be closely followed by the industry and lawmakers alike.

Sen. Brian Kavanagh, who chairs the Senate housing committee, took part in the press event with the other lawmakers and called 421a “problematic” but he did not expressly support Rosenthal’s bill to abolish it. He said he would discuss with city and state agencies administrative remedies and auditing projects receiving the abatement as the court cases played out.

“It is important that we get a judicial interpretation of these rules,” said Kavanagh.

Other lawmakers have already made up their minds. Assembly member Zohran Mamdani, whose district includes Lubinitsky’s 12-15 Broadway, where HRI estimates more than 1,000 tenants have been collectively overcharged $5 million over a decade, is among them.

“This is, in many ways, akin to wage theft,” he said.

He called for ending 421a this year. Putting together political coalitions to modify the program has historically been difficult, a constraint that has led to the expiration of the program in the past.