Pol seeks to punish landlords with “warehousing fee” for vacancies

The practice of keeping units vacant arose in response to the state’s rent law

Linda Rosenthal and Stuyvesant Town-Peter Cooper Village  (Credit: Brett Carlsen/Getty Images; Orjan F. Ellingvag/Corbis via Getty Images)
Linda Rosenthal and Stuyvesant Town-Peter Cooper Village  (Credit: Brett Carlsen/Getty Images; Orjan F. Ellingvag/Corbis via Getty Images)

A Manhattan politician wants to penalize landlords for “warehousing” rent-stabilized apartments and use the proceeds to address the city’s persistent homelessness problem.

A bill proposed by Assembly member Linda Rosenthal, who represents the Upper West Side and Hell’s Kitchen, would levy fees on landlords for keeping units off the market — a practice that arose after last year’s changes to New York’s rent law.

After three months of vacancy, landlords would have to pay a penalty equal to the unit’s last legal rent. After that, landlords would be charged a monthly fee of 150 percent of the last legal rent. The proceeds would go to a new fund administered by the state agency Homes and Community Renewal to provide housing vouchers for the homeless.

Rosenthal said she did not have specifics on the number of apartments that are empty, nor did she have an estimate of how much money the proposed legislation would pull in.

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In a statement, the small-landlord lobby group Community Housing Improvement Program called the bill “political pandering,” and said warehousing is a “rational decision to reduce the overall operational costs in order to maintain the long-term financial stability of the building for the residents who still live there.”

The warehousing of rent-regulated apartments first came to the fore at Stuyvesant Town, the sprawling World War II-era complex that Blackstone purchased with Ivanhoé Cambridge for $5.3 billion in 2015.

Last July, Blackstone announced it would halt improvements in light of the new limits on rent increases allowed to pay for renovations to rent-stabilized units. Later reports that Blackstone was keeping as many as 50 apartments vacant led authorities to promise a review of the complex, after which Blackstone said it was leasing out all apartments at the 11,000-unit complex.

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A spokesperson for Blackstone declined to comment on the legislation, but said in a statement that the firm is continuing to renovate and lease units that are vacated.

“In many cases, units have not been renovated for decades and require significant improvements, which takes time. In addition, in light of the rent legislation passed last summer and the limits on capital expenditures, we have had to adjust our processes and vendors for conducting the necessary renovations,” a spokesperson for Blackstone said. “This has led to longer improvement periods and turnaround.”

The bill would allow landlords to petition to have the fee waived if they can demonstrate that units are vacant because of “substantial renovations” that make the unit uninhabitable.

There has reportedly been an increase of New York City landlords warehousing apartments, although no data is available to give a sense of scale. Many rent-regulated landlords say that after an apartment becomes vacant, especially after a long tenancy, they now lack the resources to make repairs to bring the apartment up to snuff.

But several real estate experts said that warehousing apartments also pressures lawmakers to reverse the tenant-friendly reforms they made last year.

That strategy has not gained any traction with the bill’s sponsor. Rosenthal called the practice of warehousing apartments “unconscionable” in light of the city’s homeless crisis.

“When you become a landlord in a city as relentless as New York City, you enter into a social contract to make units available for rent,” Rosenthal said, calling warehousing “a game of chicken.”

“Landlords hope the legislature will flinch and we’ll change the law,” she said. “But that’s not the plan.”