the rent was too high

More Tenants Fighting for Back Rent After Downtown Ruling

Downtown residents have been fighting a battle over rent regulations for years.
Downtown residents have been fighting a battle over rent regulations for years. Photo: Ben Fractenberg/THE CITY

After a key rent-stabilization ruling, tenants in Lower Manhattan are on their way to getting years of back rent — and more residents are preparing to go to court to seek what they’re owed.

A judge on Monday set an October date for tenants of 50 Murray St. to meet with a court-appointed referee to determine how much money they’re due.

John Kuzmich — a 12-year tenant of 50 Murray St. who joined a lawsuit against his landlord with 40 of his neighbors in 2015 — cheered the ruling.

“They’ve gotten away with murder — with hundreds or thousands of tenants,” Kuzmich told THE CITY on Monday. “They pocketed all these hundreds of millions of dollars and they did not do what they were supposed to do.”

In June, the state’s highest court, the Court of Appeals, ruled Kuzmich’s building and another downtown rental at 90 West St. should have been rent-stabilized under a 1990s-era tax break known as 421-g.

That decision has made it possible for tenants in thousands of units to fight for a stabilized lease and repayment of overcharged rent in Lower Manhattan buildings that received the tax break.

About 6,000 Apartments Affected

According to THE CITY’s analysis of Department of Finance records, the ruling affects about 6,000 units within 39 downtown buildings that took the 421-g tax break — a program that’s cost the city at least $763.1 million in lost revenue.

Clipper Equities, which owns 50 Murray St., did not return a request for comment. But the firm’s attorneys have asked the Court of Appeals to allow them to reargue the case.

Manhattan Supreme Court Judge Carol Edmead rejected the landlords’ bid to stop the referee process in the meantime.

Kuzmich already is busy crunching numbers to figure out the average rent-stabilized cost of an apartment in his neighborhood, which will determine how much he and his neighbors are owed.

Is your Lower Manhattan building on the map of addresses likely affected by the 421-g ruling? Check below.

And many more tenants may be seeking redress soon.

Serge Joseph — the attorney representing the tenants at 50 Murray St. and 90 West St. — said he’s been contacted by multiple residents of at least three other buildings where landlords took the 421-g tax break.

‘It’s Screwing All of Us’

The ruling underscores a wasteful and unequal tax system in need of an overhaul, according to the rent-stabilization watchdog group Housing Rights Initiative.

Aaron Carr, HRI’s executive director, has been pushing the state and city to go after landlords who get tax breaks meant to ensure rent-stabilization — then charge tenants market-rate rent.

A lack of enforcement has been a problem for years, as laid out in a 2015 investigative series “The Rent Racket” by ProPublica.

For example, Carr cites the largest tax-exemption program, which according to Department of Finance records, cost the city $1.6 billion in the last fiscal year.

“What a thing not to enforce,” he said. “This is why everyone should care — rent-stabilized tenants and taxpayers. It’s screwing all of us.”

HRI called on the state Division of Housing & Community Renewal (DHCR) and the city Housing Preservation & Development (HPD) department, which both oversee affordable housing, to enforce the 421-g ruling.

“HPD has taken bold steps to hold owners accountable to meet the obligations associated with receiving tax abatements,” said Jane Meyer, a spokesperson for Mayor Bill de Blasio. “We believe firmly that any New Yorker entitled to a rent stabilized lease due to a tax abatement should receive one.”

Meyer said that HPD is reviewing the latest 421-g ruling to figure out “ways it can assist tenants.”

Spokespeople for Gov. Andrew Cuomo and DHCR did not respond to requests for comment.

To HRI and other housing advocates, the 421-g issue also points to a need to do away with tax exemptions and abatements as part of an overhaul of a property tax system that has long been criticized as deeply unequal.

But fixing the system has been a perennial political hot potato. To Carr, that’s because those who benefit the most are wealthy homeowners.

“They vote and they donate and they have a lot of political pull,” he said.

Slow Climb Towards Reform

A property tax reform commission started by de Blasio blew past its original deadline to draft recommendations.

Among the many problems with reforming the tax system: What to do with all the tax breaks already in place, like 421-g?

For example, noted Matthew Murphy, executive director of the NYU Furman Center, how can you figure out what a property is really worth when it was designed to be exempt from taxes for 40 years?

“When you have all of these existing exemptions, it makes it very difficult,” he said. “Everyone recognizes there needs to be reform, but then you have all these little programs.”

As Kuzmich learned, many renters are on their own.

“There’s no policing of it,” he said. “Luckily we’re a group with means … but the concerns that I have are for those individuals who don’t have the means — who may not have a good command of English, or the law, or the resources or time to put toward this. They don’t have a chance.”

Sign up for “THE CITY Scoop,” our daily newsletter where we send you stories like this first thing in the morning.

Want to republish this story? See our republication guidelines.