Landlords Quietly Increased Donations to Fight Rent Law

Landlords Quietly Increased Donations to Fight Rent Law

By RICHARD PEREZ-PENA

New York Times, May 5, 1997

ALBANY, N.Y. -- In the five years leading up to the current battle over rent controls, New York City landlords and developers mounted a quiet concerted effort to build their influence in state government through a large increase in campaign contributions, with one of the stated aims being to do away with the rent laws.
The campaign has made real estate interests, always important figures in state politics, among the biggest contributors to the state Republican Party and Republican candidates for state office -- including the lawmakers leading the bid to abolish most rent regulation.
"This has been a long-term effort," said Joseph Strasburg, president of the Rent Stabilization Association, the major landlords' group. "If elected officials know you're going to be there for them, there's more comfort there for them to do the right thing."
The effort is illustrated by the pattern of political contributions from property owners and their political action committees, or PAC's:
The Rent Stabilization Association's PAC did not make a single contribution to a state race until 1992. In the next five years, it gave almost $750,000 to state candidates and party committees, making it one of the biggest players in state politics.
The two major landlord PAC's, the association's and the Neighborhood Preservation Political Action Fund, gave just $1,250 to state Republican Party committees in 1991 and 1992. In the next four years, they gave almost $200,000 to those committees, and nothing to their Democratic counterparts. Republican officials generally support abolishing or reducing rent protections, while Democrats usually want to preserve them.
The contribution of the same two PAC's to legislative races rose to $362,000 in 1995 and 1996 from $212,000 in 1991 and 1992, and favored Republicans over Democrats by a 10-to-1 ratio.
Political giving by the city's big real estate interests, which has also grown rapidly in recent years, far outstrips that of the PAC's. Just a small group of them -- the Mack family, Donald Trump, the Fisher brothers, Bernard Mendik, Leonard Litwin, Lewis Rudin, the Milstein family, Sheldon Solow and Peter Kalikow -- has given more than $1.1 million to state campaigns and party committees since the start of 1993, overwhelmingly to Republicans.
The money trail shows how, in 1992 and 1993, real estate interests increased their contributions to the Republicans who control the State Senate. It shows the swing, in 1994, against a Democratic governor and toward a Republican challenger who indicated he would be more supportive of their goals.
It also shows how, starting in 1994, landlords shifted their giving to Republican Party committees controlled primarily by the new governor, George Pataki, and his patron, Sen. Alfonse D'Amato. And it shows that, in 1996, they boldly took on the Democrats who control the Assembly, increasing their support for Republicans, including those challenging Democratic incumbents.
"It's all about a number of issues affecting the industry, including rent control," said Lester Shulklapper, a lobbyist for the Real Estate Board of New York. With the repeal last year of the state's capital gains tax on the sale of real estate worth more than $1 million, he said, "there's no doubt that at this stage, rent control is the main thing."
There is no sign that the contributions have changed many minds. Joseph Bruno, the Senate majority leader, wanted to kill the rent laws years before the landlords' campaign began. Pataki, too, has long favored some modification of the regulations, leading to a gradual elimination.
"If landlords contribute to me because they support me philosophically, well, that's their prerogative," Bruno said. "It won't change my mind one way or the other."
Bruno has long argued that the rent laws discourage the building of new houses, worsening the housing shortages and, paradoxically, driving up rental prices.
But tenant advocates say that Bruno would not be fighting so hard to do away with the rent laws without such strong financial backing from property owners. And they suggest that without so much support from the real estate industry, Pataki might not have been elected.
The Neighborhood Preservation fund was the fourth-largest contributor to last year's races for the legislature, according to a study by the New York Public Interest Research Group, and the Real Estate Board PAC was the sixth-largest. The Rent Stabilization Association PAC narrowly missed making the list of the top 16 that research group compiled.
The landlords' effort has been bankrolled and directed, to a great degree, by some of the biggest names in real estate, who are major political contributors on their own and officials of the landlord PAC's.
"They want to give the impression that this is about small landlords, that this is about wealthy tenants and poor landlords, when it's about superwealthy landlords trying to get a lot richer," said Billy Easton, the Albany representative of the New York State Tenants and Neighbors Coalition, the state's biggest tenants' group, which is lobbying to keep the rent laws in place.
Douglas Durst, one of the few major real estate figures willing to speak for the record about the campaign giving, denied that rent regulation was at the heart of it. "They were out to protect the interests of the landlords, which the Republicans have been more concerned with," he said. "It's not just the rent laws. It's housing courts, insurance issues, tax issues, code issues. I would flatly deny that there's been any campaign to end the rent laws."
But one landlord, who spoke on condition of anonymity, said: "Just like anyone else, we get involved in the political system for what's important to us. And getting rid of the rent laws is a very big deal to us."
And Strasburg said, "It's absolutely the biggest issue for us."
The current campaign to end the rent laws dates to 1992, when the Rent Stabilization Association first registered its PAC with the state, allowing it to give to state races. It quickly established itself as a force with a $50,000 contribution to the State Senate Republican Campaign Committee.
The new PAC and the closely related Neighborhood Preservation fund quickly became a primary source of support for the Republican majority in the Senate, and that support grew steadily. They gave Senate Republicans $170,000 in the two years leading up to the 1992 election, $207,000 in 1993 and 1994, and $231,000 in 1995 and 1996.
"The Senate was the only place back then that we could even try to effectuate any change," Strasburg said. "In terms of the Assembly, it was absolutely worthless for us to talk to them."
The Republicans' hold on the Senate has not been seriously in doubt in decades; they now hold 35 of the 61 seats. But the size of the margin is crucial in the rent fight because a handful of Republican senators from New York City and its suburbs favor the rent laws.
"As far as real estate issues are concerned, there cannot be too many Republican seats in the Senate," Shulklapper said.
Landlord PAC's and the Real Estate Board PAC have poured large amounts into races where Republican senators were jeopardized, or where there appeared to be a chance for Republicans to gain a seat.
Last year, the PAC's invested $36,250 in the unsuccessful effort to keep one Senate seat from Brooklyn in Republican hands. The incumbent, Robert DiCarlo, received $15,250 from the PAC's but lost the primary to John Gangemi Jr. The PAC's switched their allegiance to Gangemi, giving him $21,000, but he lost the general election to a Democrat, Vincent Gentile.
Large PAC contributions have also gone to senators in key positions, like housing committee chairmen. But Republican senators who want to maintain the rent laws like Roy Goodman of Manhattan, Frank Padavan of Queens and Nicholas Spano of Yonkers have received little or nothing.
The landlords' cause received a boost in 1993, the last time the rent laws expired and were renewed. A Republican faction in the Senate, led by Joseph Bruno, from Rensselaer County, fought for and won the first important change in the rent laws since the 1970s. The state renewed the laws, but with luxury decontrol, meaning that all rent regulations were removed from some apartments that rented for $2,000 a month or more.
The amount of real estate money flowing into Republican campaigns soon soared. "It was partly in response to the Senate having shown some willingness to work with us on the luxury decontrol," Strasburg said. "People in the industry were encouraged."
The big political news of 1994, of course, was the defeat of Gov. Mario Cuomo by Pataki, a Republican state senator who had voiced a desire to ease the rent laws. Early that year, the Rent Stabilization Association hired Strasburg, a Democrat who had been chief of staff to Peter Vallone, the City Council speaker, in part because of his political savvy and contacts.
"I made a conscious decision, pushing our members and people in the real estate industry to really support George Pataki," Strasburg said. "It was a risk, but he looked like the right guy for us, based on his philosophy and his voting record. I received absolutely no commitments by the candidate as to what he would do on this issue. But he was at least willing to talk about it."
The Rent Stabilization and Neighborhood Preservation PAC's gave $59,500 to Pataki's campaign and none to Cuomo's.
Many major real estate owners and developers stepped up their political giving over those years, following much the same pattern as the PAC's.
Donald Zucker, who had not contributed to a state race since 1990, gave Pataki $21,000 in 1994 and Cuomo nothing. Rudin, who had given Senate Republicans $5,000 in 1991 and 1992, gave them $16,500 in the following two years.
Trump, who had not contributed to the 1990 governor's race, gave $25,000 to Pataki and $1,000 to Cuomo.
The Mack family, major developers and owners of real estate, gave Pataki's campaign $86,000, while giving $47,000 to Cuomo.
At the same time, the PAC's greatly increased their giving to Republican committees that are used to build the party apparatus and aid candidates around the state. The shift allowed landlords to increase their contributions considerably, because state law permits much larger gifts, from individuals or groups, to parties than to individual candidates.
"It's the infrastructure that gets the people who support you re-elected," Strasburg said.
The Rent Stabilization and Neighborhood Preservation PAC's contributions to state party committees rose from $1,250 in 1992, to $27,300 in 1993, to $75,500 in 1994. In 1995 and 1996, without a statewide race in sight, they gave $90,000 more.
The contributions gave them a way to win favor with the two men who largely control the party committees, Pataki and D'Amato. After Pataki's election, the city's biggest real estate interests followed the PAC's lead in giving to the Republican Party, including people, like the Milsteins and Litwin, who had supported Cuomo. In 1993 and 1994, the Macks, the Fishers, Litwin, Zucker, Trump, the Milsteins and Mr. Solow gave $14,000 to Republican state committees. In the next two years, they gave $240,500.
For the real estate interests, Pataki's victory soon looked like a double blessing. After the election, Pataki and D'Amato orchestrated the ouster of the Senate majority leader, Ralph Marino, a moderate who had shown little commitment to changing the rent laws. And they helped Bruno, the landlords' longtime ally, take control of the Senate.
Last year, the landlords shifted direction again, mounting a direct challenge to the Democratic leaders of the Assembly.
The Rent Stabilization and Neighborhood Preservation PAC's gave $101,000 to Republican Assembly candidates and the Republican Assembly Campaign Committee in 1995 and 1996, more than triple what they had given the previous two years. More surprisingly, they gave to eight Republican challengers running against Democratic incumbents, something that is almost unheard of among major PAC's, which usually take care not to make powerful enemies.
All eight challengers lost, and the Democrats retained their wide margin in the Assembly.
"We were sending them a message that, at a minimum, we're going to make you spend your summers campaigning, and there are going to be issues there that you're going to have to talk about," Strasburg said.
"I think we scared some of them. We said to them that if they continue to say to the property owners, 'You're not welcome here,' we're going to make your lives miserable."