Landlord Wins 25% Rent Hike
Tax debtor hired lobbyists
close to Rudy

Daily News Staff Writers

A controversial landlord who hired the law firm of two close advisers to Mayor Giuliani has won city backing for a steep rent increase in a Brooklyn housing project.

In 1995, landlord Herman Kraus hired the law firm of Ray Harding and Herman Badillo to help him win rent increases for Bedford Gardens, a 647-unit complex in the Williamsburg section.

Last month, city officials okayed a 25% rent hike even though Kraus has been cited for inflating his expenses and owes the city $9.5 million in unpaid property taxes.

Tenants learned of the increase in a March 24 letter from city Housing Preservation and Development officials stating the city has agreed to let Kraus refinance his mortgage and that rents will rise 25.7% as a result.

City approval is required for the increases because the complex was built with government aid.

Tenant leader Isaac Abraham said the city's moves show that "someone with a lot of power is helping Kraus. The city is ignoring its own findings on how this landlord operates."

Kraus did not return calls. City housing officials refused to comment on the rent deal.

Former Housing Commissioner Lilliam Paoli said former Mayor Ed Koch also went to bat for Kraus, asking her last year to meet with the landlord. She said she did not meet with the firm of Fischbein Badillo Wagner Harding about the matter.

"I thought the rent increases were justified," said Paoli, who now heads the Human Resources Administration.

George Arzt, a spokesman for Fischbein Badillo, denied that the rent increase is related to the firm's efforts.

He said the firm proposed "a complicated workout plan for refinancing Mitchell Lama mortgages." He said the firm stopped representing Kraus last year.

Giuliani has insisted that even though Harding and Badillo's firm has done a booming lobbying business since his 1993 election, they get no special favors.

Records show the Dinkins administration turned thumbs down on a 1991 rent-hike application filed by Davidoff for Kraus because of questions about Kraus' expenses.

A city hearing officer ruled that Kraus had a "cost-plus rent-setting policy" and "consistently overpaid" for goods and services received from other companies he controlled.

Kraus also is one of the city's worst tax deadbeats, according to city records. A Finance Department spokesman said Kraus stopped paying taxes on the site in 1988 and defaulted on a 1991 agreement to pay off the millions he owes.

Original Story Date: 041297
Original Story Section: City Central