Big Landlords Are Happier Than Small Ones
By RANDY KENNEDYNEW YORK -- For Richard Lefrak, one of New York City's largest real-estate developers, with tens of thousands of apartments, the rent agreement reached in Albany Monday had its faults. But his guarded satisfaction kept peeking through his complaints.
New York Times, June 17, 1997
"What was done was something that was politically expedient," Lefrak said. He added: "Having said that, I think the governor did a decent job. I think people can find many straws to grab onto that are an improvement."
But for David Whitmore, whose family owns a six-apartment, rent-stabilized row house in Astoria, Queens, the outlook was profoundly different. "We didn't get much of anything," he said. "Only God knows really how long this is going to take to help us, if it will."
As details of the compromise plan filtered down to rental property owners throughout the city Monday, such were the extremes of opinion within an industry that has sought for three decades to scale back laws limiting rents on more than a million apartments.
Tenant advocates, meanwhile, said that the agreement seemed to be a nearly complete victory for their side, but that they would wait for details of the compromise to be released before celebrating.
While landlords from the Upper East Side to Harlem to the north Bronx expressed unanimous disappointment that the system would remain in any form, it appeared that larger owners stood to benefit more from the changes, which would allow bigger rent increases on vacant apartments and would end protections for tenants with higher incomes.
Smaller landlords complained bitterly that legislators had delivered relief only to those who needed it least, and to those who could provide the biggest campaign contributions. "I hope that's not true, but I think it probably is," said Whitmore, who also manages 15 small buildings in Brooklyn and Queens. "It sounds logical: money talks."
Perhaps because they were farther from the political fray than large landlords, with less access to the strategies of lobbyists and lawmakers, smaller landlords also said Monday that they were shocked that the Republican-led state Senate had given up pushing for full vacancy decontrol. Under that plan, all rent limits would be eventually be lifted as tenants moved out or died.
Privately, larger landlords said that for months, they had held out little hope for such a plan.
Several developers of new property -- whose decisions on whether to build more were at the heart of Republican deregulation plans -- said the compromise fell far short.
"I don't think it's the kind of message the government was wanting to send out there that this is a good town to work in, to come on in," said H. Henry Elghanayan, chief executive officer of the Rockrose Development Corp., which recently committed to build 2,000 apartments south of Canal Street in Manhattan. "This isn't a big step at all."
The outlines of the plan lawmakers haggled over Monday would allow rent increases of 20 percent or more after a tenant moved out or died, in addition to small increases for each year a longtime tenant had lived there.
Because of higher turnover in larger apartment buildings, landlords like Lefrak could see a substantial rise in income at sprawling complexes like Lefrak City, with 25,000 units across 40 acres in Elmhurst, Corona and Rego Park, Queens.
And in luxury buildings, where landlords have long complained about tenants with six-figure salaries and below-market rents, the compromise would allow them to raise rents on apartments renting for $2,000 a month or more, whose occupants earn an average annual salary of $175,000 in two consecutive years. Until now, that threshold was $250,000.
But small and even mid-sized landlords, mostly those outside Manhattan, said that so-called luxury decontrol had never been an issue in their buildings, where many tenants struggle to make monthly rent payments.
And they complained that the increases allowed under the compromise would have an unexpected effect.
On the lowest rents, those kept far below market because tenants had stayed in them for many years, the plan, even at its best, would mean modest gains for landlords. On apartments with higher rents, they said increases already allowed by the state had moved those close to market rates anyway.
Even if they were allowed the 20 percent increase, they might not be able to use it because the apartment, depending on its location and condition, would not command that price.