Ex-Housing Official’s Bombshell Statement Rocks State Agency

In 2023, under pressure from lawmakers, tenant organizers and New York Attorney General Letitia James, state housing regulators secretly changed a policy to make it harder to remove buildings from rent stabilization.

No public discussion was held, nor was any notice given to the real estate industry, according to a bombshell statement by Woody Pascal. At the time he was in charge of substantial rehabilitations — the state program being kneecapped — and had been since 2010.

Pascal learned of the move at a mid-2023 meeting with other state housing officials. He raised objections but they were dismissed, except for his suggestion that the change apply only to future projects.

But the Division of Homes and Community Renewal — which Pascal left in March 2025 to join the New York Apartment Association — did indeed apply the new policy retroactively, including to disqualify 31 sub-rehab projects by a single firm.

That company, Peak Capital Advisors, is now suing to rescue those investments. Pascal is a paid expert in its case. The attorney general objected to his statement, which Peak filed in federal court, and a judge temporarily sealed it Thursday morning, but not before The Real Deal obtained a copy.

Real estate insiders have been circulating the statement over the past two days as validation of their belief that regulators have a pro-tenant bias.

“Wow. As many of us in this field have suspected for years, concerns about DHCR’s neutrality and impartiality were not without basis,” wrote Jillian Bittner, a partner at Horing Welikson, on LinkedIn.

She added, “What makes Woody Pascal’s observations so significant is that they come from someone who was inside the agency, understood its mission, and spent decades applying the law and facts in DHCR proceedings. His perspective confirms what many practitioners have believed was always present just beneath the surface.”

In a court filing, James’ office downplayed Pascal’s statement as “mental impressions regarding events that allegedly happened years ago.” DHCR declined to comment on pending litigation.

Tenant buyouts weaponized

The policy that DHCR changed concerned tenant buyouts, which for decades had been routinely used by owners to qualify buildings for sub-rehabs. Under a 1995 agency bulletin, buildings that were 80 percent vacant and had at least three-quarters of their major systems replaced were presumed eligible for deregulation.

This gave tenants great leverage. Because rent-stabilized tenants are entitled to perpetual lease renewals, they could negotiate for five- and six-figure sums from landlords who needed to reach 80 percent vacancy.

“If there had been no finding or complaint of tenant harassment before a sub-rehab, DHCR did not take a stance regarding tenant buyouts,” Pascal’s statement said. “Owners and tenants were free to sign buyout agreements.”

But at the 2023 meeting, Pascal learned that his agency would start using buyouts as evidence that buildings were not in poor condition and thus would not qualify for removal from rent stabilization under the sub-rehab program.

“DHCR proposed to eliminate any disclosed tenant buyouts from the 80 percent vacancy rule,” Pascal wrote.

The agency’s ostensible rationale was that tenants would only have received a buyout if their building were in fine shape. If the building were truly dilapidated, they wouldn’t demand a buyout to leave.

In one example, the agency ruled in 2024 that a four-story building in Williamsburg had been illegally removed from rent stabilization following its rehabilitation. The building’s last tenants had received buyouts ranging from $150,000 to $175,000. Had the property actually been run-down, DHCR ruled, tenants would have vacated for little or nothing.

In practice, buyout amounts vary greatly for reasons that have nothing to do with the building’s condition. “It would be a gross generalization to say that every tenant buyout was proof

of a building’s inherent value,” Pascal said.

Nor could the agency figure out what each buyout signified. “DHCR did not have the means to investigate every tenant buyout,” Pascal noted, adding that “discounting them would only punish owners who volunteered them.”

Politics intervenes

“To me and a few others,” Pascal said of the policy change, “none of this made sense.”

Except for one thing: politics.

Pascal asserted that the new policy stemmed from political pressure that had intensified since progressives captured the state Senate in the 2018 election. He noted that Linda Rosenthal was at the crucial 2023 meeting, although did not identify her as the Assembly Housing Committee chair who has long been a defender of rent stabilization.

“Between 2018 and 2023, state government began to change as tenant groups became more influential,” he stated. “More and more, DHCR was under pressure from elected officials, NYAG [the attorney general] and organized tenant groups to ‘take their side’ and start applying

regulations in a way they deemed ‘more favorable’ to tenants.”

That could explain why the agency did not publicly disclose the policy change on buyouts, and reneged on its initial plan to not enforce it on finished rehabs.

“When DHCR got tenant complaints and DHCR investigated completed sub-rehab projects, DHCR usually enforced the rule, even for projects that predated the rule change,” Pascal said.

The 31 rehabs by Peak Capital Advisors were done two or more years before the change, but investors who did projects afterward — having not been told of the rule — were also victimized.

“Owners who had no advance notice of the new anti-buyout rule invested money in substantial renovations, but then had their exemptions denied,” Pascal’s declaration said.

Such rulings can bankrupt a rehabbed building because they would roll back rents to what they would have been had the units remained rent-stabilized — a difference of thousands of dollars per unit, per month.

The reversion to stabilized rents, together with the potential reimbursement of tenants’ past market-rate rent payments, would in most cases leave owners unable to service the debt taken on to buy and upgrade the properties.

Peak has said it sank $150 million into the 31 properties and that its investors would be wiped out if the state’s decision stands. Lenders, who contributed $95 million, would get back pennies on the dollar. Freddie Mac financed eight of the properties, Santander Bank six, Webster Bank five and Wells Fargo four.

About 11,000 deregulated buildings would also be at risk of having their rent-stabilized rents reinstated.