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In 2015, the de Blasio administration took credit for the conclusion of the Stuyvesant Town-Peter Cooper Village saga with a deal that preserved the largest number of affordable apartments “in a single City-led transaction in the history of New York City.” A just-released New York City Independent Budget Office (IBO) report analyses the complex interaction between the State’s rent stabilization laws and the city’s preservation deal, bringing to the surface the significant cost of rent law loopholes.
Stuyvesant Town-Peter Cooper Village (STPCV)–a massive 11,250-unit rent stabilized development on the edge of the East Village–has been a battle ground for housing issues since its opening in 1947. It was a site of early desegregation efforts in the late 1940s and become one of the most visible examples of real estate developer hubris during the mid-2000s real estate bubble. The development’s affordability came into focus again more recently after its sale to Blackstone Group and Ivanhoé Cambridge. As part of an affordability preservation deal, the city provided the new owners with $220 million in public benefits and transferrable air rights in exchange for a 20-year regulatory agreement that protects 5,000 rent stabilized apartments in the development.
Looking beyond the unit count, the IBO report compares the modeled outcomes of the 20-year regulatory agreement to a “do-nothing scenario”, where the city-negotiated deal does not exist but the State’s rent stabilization laws are in effect. IBO’s analysis shows that 64 percent of apartment-years (how many apartments benefit from tenant protections over a period of time) still would have been regulated under rent stabilization, without the deal.
IBO’s model hinges on the assumption that the rate of loss for rent stabilized units would be slower under the deal than under the do nothing scenario, because the agreement removes the incentive for the landlord to push units over the “high-rent” threshold, currently set at $2,700. It also assumes the landlord would be less likely to use the various (legal) methods to reach deregulation, including vacancy bonuses and the practice of using apartment renovations to help push rents over the high rent threshold. The city negotiated deal essentially brings STPCV under enhanced rent regulation, minimizing the impact of the loopholes that the complex’s previous landlord, Tishman Speyer, used to aggressively deregulate the development.
While the STPCV agreement is a particularly emblematic one, the city’s preservation efforts under the current affordable housing plan include a number of other agreements that trade public resources for enhanced rent regulation. These include the Riverton in Harlem, another development that was overleveraged during the housing bubble, and Atlantic Plaza Towers in Ocean Hill.
The IBO report raises important questions about the costs of the State’s inaction on the rent laws. High rent vacancy deregulation and vacancy bonuses were both later additions to the State’s rent laws, in 1993 and 1997. The city has since lost over 152,000 units to vacancy deregulation. At a time when more than half of the city’s residents are rent burdened, it does not make sense for the city to expend its limited resources on patching holes in the State’s rent laws. In the coming year, the State should focus on doing away with vacancy bonus, reforming the process by which capital improvements costs are passed on to tenants, and addressing other rent law loopholes like preferential rents. Stronger rent laws will not only protect tenants and preserve regulated apartments in STPCV and beyond; they will also allow the city to target critical preservation resources more strategically.
Mironova is a housing policy analyst for the Community Service Society.