Sam Zell discovers Jersey City rent control the hard way
Tenants facing big rent hikes figure out they are illegal
If Sam Zell didn’t know Jersey City has rent control, he does now.
Zell’s Equity Residential was compelled to roll back drastic rent increases proposed at a waterfront multifamily building after tenants realized they qualified for rent control, the Wall Street Journal reported. Rent increases for part of Portside Towers are now capped at 4 percent. Some residents had been facing 40 percent increases, which the landlord blamed on an algorithm.
As neighbors at the building became aware that many of them were getting renewal offers at substantially higher rents, they began organizing and researching city laws. They took their case to the city’s rent control administrator, who agreed that the 19-story building was subject to rent control.
All Jersey City apartment buildings with five or more units are presumed to be rent-controlled based on an old city ordinance. But under a 1987 state law, developers of new buildings were able to apply for exemptions of up to 30 years. For some buildings, including Portside, the exemptions are starting to expire.
The western building of the 500-unit Portside Towers lost its exemption on Aug. 24, the city ruled. The eastern building wasn’t built until 1997 and remains exempt from rent control, though tenants are appealing the decision.
The multifamily market in Jersey City has surged in recent years. The average asking rent in October was $2,850 per month, according to CoStar, a 28 percent increase from 2012. On the waterfront, apartments could get $1,000 more; the 40 percent increase one Portside Towers resident faced would have pushed the rent past $6,000 for her two-bedroom.
The drama at Portside Towers also exposed the risk of relying on software to propose rent increases. An Equity spokesperson said the company used market comparisons and software in lease negotiations; the software can determine what rent a unit can get on the open market, but could not have predicted a large hike would prompt tenants to research rent legislation.
It’s not clear what software Equity used. RealPage’s YieldStar recently made headlines for allegedly inflating apartment rents and suppressing competition across the country, ProPublica reported last month. The report has already led to several lawsuits.
— Holden Walter-Warner