The second-highest court in the state ruled this month that New York landlords must renew rent-stabilized Section 8 leases, affirming that landlords may not opt out of the federal rent subsidy program.

The Appellate Division of State Supreme Court unanimously ruled in favor of tenant Sonia Rosario in Rosario v. Diagonal Realty. Rosario’s case represents a victory that will protect about 60,000 units of rent-stabilized Section 8 housing in New York City.

The ruling sets a precedent in New York state, where other courts have previously ruled in favor of landlords who no longer wanted to participate in the Section 8 program, in which low-income tenants receive federal rent subsidies. The case could have implications for other localities.

Prior to the Rosario case, landlords would try to use opting out of the Section 8 program as a back door to evicting tenants to increase rents. Jenny Laurie, director of the Metropolitan Council on Housing, said the decision has a “tremendous” impact on Section 8 tenants who live in rent-stabilized apartments and live in areas that are becoming gentrified or more expensive. She said landlords would love to rent to higher-income tenants, but can’t now because of the Rosario ruling.

Rosario, 60, lives with her daughter and grandchildren in her Manhattan apartment. She has lived there for more than 30 years. With the help of Legal Aid Society attorney Judith Goldiner, the question of whether or not she can remain in her apartment has finally been answered.

Goldiner said the Legal Aid Society is trying to reach out to other tenants in situations similar to Rosario’s. “I think there are many clients [to whom] …the landlord said they’ll take Section 8 away,” Goldiner said. The fear is that tenants “will believe them and will move.”

Under the decision, a landlord is not permitted to renew rent-stabilized tenants’ leases without Section 8 benefits because the benefits are defined as a “material term” of the lease. Landlords who rent to Section 8 tenants living in buildings that are not rent-stabilized, however, are not required to renew their leases.

Landlords who participate in the Section 8 program do so by renting to tenants with Section 8 vouchers or by participating in the J-51 tax abatement program. J-51 gives participating property owners tax benefits in return for placing their buildings under rent stabilization. Diagonal Realty’s attorney, Richard Walsh, said the ruling makes the J-51 tax abatement program burdensome. “If landlords are smart they won’t put themselves in that position,” Walsh said.

Walsh noted that in 1996, “endless leases” and the “take one, take all” concept were repealed under the Federal Fair Housing Act, giving property owners the right not to renew leases. But the recent ruling said “those rights were already restricted by the J-51 and rent stabilization promulgations.”

If landlords want to get out of the Section 8 program, there must be something wrong with the program, said Mitch Polsikin, general counsel for the Rent Stabilization Association, a property owner’s group. Polsikin said the “innumerable” procedures, bureaucracy and retroactive rent increases for rent-stabilized apartments make the system difficult for property owners to deal with.

“Unfortunately the promise with Section 8 and the reality of Section 8 are two very different things for property owners,” Polsikin said.

In neighborhoods where more renters can now afford to pay market value, property owners see an opportunity to lift the financial burden of late Section 8 payments from the government, he said.

Brad Lander, director at the Pratt Center for Community Development, said the broader issue in the Rosario case is “source-of-income discrimination,” where property owners won’t take Section 8 tenants’ money because it comes from the government. [10/02/06]