Cuomo’s Rent Check: Governor in the Middle as Dems Split Big Real Estate
Last Thursday, Feb. 24, while journalists craned their recorders like goslings waiting to be fed, Democratic Senator Adriano Espaillat of the Bronx and Northern Manhattan gave the assembled tenant activists what they wanted.
“We will go down to the wire,” he said after the rally. “This is a 15-round fight.” Professional boxing matches are now only 12 rounds. Whatever. “This will be a 15-round fight.”
New York State’s rent-regulation law, which governs the rents for more than one million stabilized apartments in the city, expires June 15, but Democrats have already thrown the opening punch. State Assembly Speaker Sheldon Silver says that rent regulation must be renewed and strengthened in favor of tenants. If it isn’t, he will not support the renewal of a tax incentive that expired in December and was beloved by big apartment developers.
Mr. Silver’s move pits the two sides of Big Real Estate against one another-developers vs. landlords-and puts their onetime favorite candidate, Andrew Cuomo, in the middle.
“We shouldn’t be extending a tax break for residential developers without making sure we are strengthening protections for the tenants who live in their buildings,” Mr. Silver said in a statement last month, which his staff reiterated through an email to The Observer. In fact, the developers of shiny new condos, who stand to benefit the most from the credit, called 421-a, are distinct from owners of the older buildings that primarily house the city’s rent-stabilized apartments.
A Cuomo spokesman said the governor is “open to everything,” though he is not confident a deal will be reached before April.
On one side, the governor has his biggest donors in the 2010 election-developers and landlords, including his top two donors, Jerry Speyer and Daniel Tishman, who contributed a combined $187,400. And on the other side, liberal activists and the politicians they help elect, including Speaker Silver. (And never mind that some in Big Real Estate remember Mario Cuomo, who as governor himself spearheaded the late ’80s tax changes that industry people say all but halted real estate trades.)
At last week’s rally, the crowd of a dozen politicians and several times more aides and activists recited their new mantra, out of sync but passionate: “Put it in the budget! In the? Budget! Governor Cuomo can do it in the budget! Governor Cuomo must do it in the budget!”
To say rent stabilization is a flash point for the real estate industry understates the issue. It is their Lenin lite, a socialist weed poking through New York’s capitalist grange. Kill it, and a million more tenants would be available to pay market-rate rents. As it stands now, the deregulation threshold is $2,000 a month; however, those tenants are protected by annual income benchmarks.
“What if the city said, ‘If you own a car, one day a week you have to let somebody use your car because we have a transportation problem in the city’?” said Robert Knakal, chairman of the city’s biggest investment-sales brokerage, Massey Knakal, who has brokered the sales of billions in apartment stock. “‘You own this building, you pay for it, but you can’t charge what the market will bear because we have to protect tenants.'”
The topic clearly rankles. “I have Richard LeFrak to speak with you,” a brisk voice said when The Observer answered a recent ring. Then, sans pleasantries or an introduction, Mr. LeFrak, head of one of the city’s biggest and most storied real estate concerns, said: “I only have 14,000 of those things [rent-stabilized units] and it’s a relatively minor part of my business. … My comment is that it’s not that significant in my world. … I just built 4,000 apartments on the West Coast and none of them are rent-stabilized. That’s my comment.”