James, HCR return over 300 affordable housing units to NYC

New York Attorney General Letitia James and New York State Homes and Community Renewal (HCR) Commissioner RuthAnne Visnauskas on Tuesday announced the return of 263 apartments to rent stabilization and reduction of rent for an additional 43 apartments throughout New York City.

James said the apartments, located in 21 buildings in Central Brooklyn, Upper Manhattan and Queens, were either illegally deregulated or were subjected to illegal rent increases by the former owners, who were landlords affiliated with the Sentinel Real Estate Corporation (Sentinel).

Following an investigation, Attorney General James secured $4 million to preserve and expand affordable housing in New York City from the Sentinel-affiliated owners in August 2022.

Before the settlement was reached, James said the former owners had sold some of their buildings to new owners after illegally deregulating units and increasing rents.

In order to return these units to affordability, the Office of the Attorney General (OAG) and HCR developed a compliance program and worked with the new owners to reduce rents in more than 300 apartments, including 263 reregulated units.

“Rent-regulated apartments make it possible for countless New York families to find a safe and affordable place to live,” said Attorney General James. “The previous owners of these buildings broke the law to pad their pockets and denied hardworking families a rightful home. Because we were able to return these units to the rent regulation program, more than 300 families will be able to access the affordable housing they deserve.

“I thank the new owners for their cooperation and will continue to work with our partners at HCR to protect affordable housing across New York,” she added.

“Thanks to the strong partnership between Attorney General James and our Tenant Protection Unit, we are recovering illegal profits and securing the rights of hundreds of New Yorkers whose homes were illegally deregulated by predatory landlords,” said Commissioner RuthAnne Visnauskas.

“This case demonstrates very clearly that we will do everything in our power to protect New York’s rent-regulated housing stock and the rights of tenants everywhere as we support Governor Hochul’s efforts to make the state more affordable and more livable for all New Yorkers,” she added.

Prior to June 2019, if landlords made improvements to rent-stabilized apartments, they could increase the regulated rents of those units, James said.

She said increases were calculated based on the cost of those improvements through a system known as Individual Apartment Improvements (IAIs).

The attorney general said some property owners and landlords used IAIs to increase rents enough to bring them over the rent deregulation threshold and convert them to market-rate units in an attempt to increase the buildings’ profits.

Before the 27 affected buildings were purchased by the current owners, James said they were owned by landlords affiliated with Sentinel.

She said these affiliates employed two now-defunct property management firms – Newcastle Realty Services, LLC (Newcastle) and Highcastle Management, LLC (Highcastle) – which falsely inflated IAI renovation costs for some rent-stabilized apartments, so that they could deregulate them and charge tenants the market rate.

In some cases, James said Newcastle and Highcastle intentionally set the cost of labor for a renovation project to be equivalent to the amount necessary to deregulate a particular unit, regardless of the amount spent by the contractor.

For example, she said an apartment in one building required $38,000 in IAIs to get over the deregulation threshold, while another apartment in the same building required $52,500 to deregulate.

The New York Attorney General said both units received nearly identical renovations, but Newcastle and Highcastle reported the renovation expenses at $52,500 and $38,000, respectively, so they could deregulate the units and rent them at the market rate.

In August 2022, OAG entered into an agreement with the affiliates, securing $4 million for Attorney General James’ Affordable Housing Fund with the New York City Department of Housing Preservation and Development (HPD) and launching an audit of the rents of apartments still owned by the settling landlords.

Following the settlement, James said OAG and HCR conducted their own audit of the apartments that were no longer owned by the settling affiliates but were nevertheless affected by the deregulation scheme.

She said the OAG, in partnership with HCR, developed a program by which the new owners could work with OAG and HCR to move the units in the buildings they purchased from Sentinel back into compliance.

“I commend Attorney General James for her strong actions to protect tenants from landlords who illegally deregulate rent-stabilized apartments or raise rents beyond what’s allowed,” said Haitian-American Assemblymember Phara Souffrant Forrest, who represents the 57th Assembly District in Brooklyn, which consists of the neighborhoods of Fort Greene and Clinton Hill, as well as parts of Bedford-Stuyvesant and Crown Heights in Brooklyn.

“Strong tenant protection against predatory landlords is critical to preserving the fabric of our communities,” added the daughter of Haitian immigrants, who was first elected in 2020. “When landlords manipulate the system to push tenants out or make housing unaffordable, they threaten the stability and security of working-class families who have built their lives here.

“Housing is a human right, and we must ensure that no one is forced out of their home due to corporate greed or illegal practices,” Souffrant Forrest continued. “I am committed to strengthening tenant protections, holding bad actors accountable, and ensuring that everyone has access to safe, affordable, and stable housing, and I forward to partnering with the Attorney General to deliver for tenants in my district.”

Assemblymember Rodneyse Bichotte Hermelyn, another daughter of Haitian immigrants, who represents the 42nd Assembly District in Brooklyn, applauded Attorney General James, the OAG and HCR “for fighting to restore justice for hard-working New York tenants – including many in my Assembly District 42.

“By restoring illegally de-regulated rent stabilized apartments and ending illegal rent increases, the Attorney General is sending a clear message that unscrupulous landlords will not get away with ripping off renters, as we continue to protect housing rights for all,” added the chair of the Brooklyn Democratic Party.