Crown Heights Tenants Form Union to Fight Displacement, Rising Rents

1059-union-street-030514

Tenants of about a dozen buildings in Crown Heights have formed a group to fight gentrification, landlord abuse and rising rents called Crown Heights Tenant Union, Brooklyn Bureau reported. Formed in October, the group recently held a rally outside 1059 Union Street, above, to protest landlords who try to force out longtime tenants to deregulate apartments and raise rents.

“When long term tenants move out, landlords have been gutting the apartments to deregulate the rents,” said the story. “At the same time the long term residents are not getting repairs in their units.”

The group was created with the assistance of the Pratt Area Community Council and the Urban Homesteading Assistance Board, or UHAB. The union has a list of demands, “including a five-year rent freeze, timely repairs, a right to organize and a right to fair leases.”

“They’re beautifying the neighborhood,” the story quoted a long-term resident as saying. “I’ve been here for 36 years. I want to enjoy that also.”

Crown Heights Tenants Form Union to Fight Gentrification [Brooklyn Bureau]
Rapidly Rising Rents Drive out Recent Arrivals in Crown Heights [Brownstoner]
Photo by Nicholas Strini for PropertyShark

32 Comment

  • How does one fight “gentrification?”

  • What a great idea.

    The monthly maintenance fees for my condo are much too high and only go up every year–I should demand a five-year freeze.

  • would love to hear their definition of fighting gentrification above and beyond controlling rent.

  • awww they want a 5 yr freeze .

    i want a 5 yr freeze on my taxes, insurance, keyspan and con-ed . lets all form a union and demand that also

  • if you read the article , the tenants are complaining about slumlords who try to kick them out instead of keeping up their buildings. the landlords knew about rent stabilization and got a discount for that when they bought the spots. now they’re trying to take advantage of weak enforcement of the rules.

    not fair at all to compare to your condo.

    • Xchx, the comment was written tongue-in-cheek.

      You do, however, bring up an interesting point. Could you kindly provide the details vis-a-vis the purchase price/fair market value of the building?

      I ask because you seem absolutely certain that the current landlord got a significant discount on the building (and thus presumably have some leeway in regards to rising upkeep costs). Just wondering if your contention is based on knowledge of the facts or if you’re just reciting rhetoric.

      • 1045 Union St was recorded in June 2012 for $5.225 million (or approx.$150/sq. ft.)
        1059 Union St was recorded in July 2013 for $8.2 million (or approx. $194/sq ft.). Both buildings have around 32 residential units.

        By comparison, today an apartment at 255 Eastern Parkway (i.e., around the corner from those two buildings) is being sold as “untouched for decades” and asking just under $550/sq foot. (http://www.corcoran.com/nyc/Listings/Display/3099498). Although I don’t think it would make sense to compare to townhouses, a 2-family rowhouse on Carroll and Nostrand that “needs updating” is selling for $322/sq.ft. (http://www.corcoran.com/nyc/Listings/Display/3146645)

        In other words, the current owners obtained a discount of about 40-70% to market-rate, non-renovated properties.

        And nowhere is there any evidence that “upkeep costs” are rising unexpectedly or were not easily identifiable in due diligence to purchase thse properties.

      • 11201 – if the landlord paid for a building assuming cashflow from market rate tenants, he’s an idiot and should be a landlord. The question you ask seems very unreasonable. I think xchx is assuming what a reasonable landlord would purchase the propoerty for KNOWING FULL WELL that there are rent stabilization laws in place which affect cashflow. It’s like buying a treasury bond and being surprised that you have pay taxes on the interest, as if you didn’t know taxes were implicit in your purchase.

  • The LL didnt get a discount because of rent regulated tenacy. Multi-family properties like this are mainly valued based on the Rent Roll. Since the RR is controlled, the purchase price as a multiple of that rent roll is calculated (with some adjustment for condition, potential for improvements, location, etc…)

    LL bought with current tenancy, and if he bought within last year or so he is probably only making 4-5% on his investment (i.e. he’d be better off in tax free bonds). Therefore the LL must increase the RR to really make the investment pay off. (unless he can find another sucker to take even less of a return)

    Therefore there are number of things a LL can do to raise the RR – some 100% legitimate and good (despite what 1/2 the dummies in this city may think) and some are illegal and wrong.

    On the negative and ILLEGAL side is to fail to do repairs, harrass existing tenancy, fail to provide heat, and otherwise make like miserable for existing tenancy to get them to move (and thereby be able to raise rent on vacancy allowance and potentially improvements) – this is wrong and illegal and LL who do this are slumlords and should be punished

    On the positive, legal and social constructive front,
    a LL can make building wide improvements that the law allows rent increases for (this improves peoples lives and living conditions – but yes there is a rent increase),
    LL can wait for people to move and make individual apartment improvements MCIs that allow a higher rent (as dictated by law) then just on a vacancy – again this improves the overall housing stock and is good for sustainability of neighborhoods (yes rent goes up for new tenant);
    LL can OFFER $ to existing tenancy to move – thereby allowing the renter to SHARE in the increase in the market value of the apartment (if not done in a menacing or harassing manner – this is good – it gives renters a ‘piece of the action’ as if they were owners)

    The problem with most of these groups is they equally condemn both types of LL and attack LL for making improvements and otherwise acting in a rational manner within a very pro-tenant system.

    • How is “allowing the renter to share in the increase in the market value” of an apartment they do not own and/or giving renters a “piece of the action as if they were owners” fair, exactly?

      • It is fair because it provides a method by which the vacancy and MCI increase (that would otherwise arise at some future undetermined date) can be monetized today. Also, resetting the rent provides a new base for annual increases

      • Do you mean fair to LL or tenant. Boerumresident gives a pretty good explanation of “fair” from the LL perspective.
        From the tenant perspective it is $ he/she would otherwise never see assuming they eventually move or die (which we all do at some point).

      • It’s sorta fair in an obtuse way – So if i’m a regulated tenant paying cheap rent, then i was a contributing factor in you buying this building for cheap (ie. a standard multiple of a low rent-roll). As the law protects my tenancy, you need to incent me to give up my right by sharing enough of your future gains with me.

        You can argue that the original RC “fix” was unfair when first conceived and applied, but the buyout is fundamentally a fair process – i keep saying no until the number is worth it to me. if i am too greedy, then you let me stay and work around me and i keep my low rent but get no cash… and if Albany strikes down RC the following year, i lose everything.

      • It’s fair because they have a legal right to continue living there, which the landlord is requesting (demanding; coercing; etc.) them to give up. If the landlord DIDN’T get a break on the purchase price in recognition of that legal right, then the landlord screwed up, which, if I correctly follow the free market logic going on in here, means he or she deserves zero sympathy, let alone assistance .

        • Its NOT a discount or a break on the purchase price!!!
          Its simple – 10 apartment building everyone Rent stabilized everyone paying Market rent of $1000 month – RR – 120,000 annually – building put on market depending on area at N X RR where N = multiplier generally reflecting location. So lets say its in a working class neighborhood in queens Price likely to be around 1.2Million (ie N=10). Now lets say its a free market building in SAME neighborhood and Rents are still $1000mo (because that is market) price is likely to be almost identical. I.E. price is a multiple of RR, no discount for RS.

          • I am not a landlord, but I know enough to know that it would be plain dumb to pay the same for ANY asset regardless of whether there was a cap on future returns.

          • If that’s how you value that asset, there is something seriously wrong. If in your neighborhood, rents are rising by 20% because its a “hot” neighborhood, you can expect once your current set of leases are done, you will receiving $144k in you market rate building but, assuming the RS increase is 5%, you’d only receive $126k the following year. If that differential is not taken into account in your analysis of the price paid today, then you shouldn’t be in the business of valuing assets. Valuing any project./asset, the price paid today is the present value of all its FUTURE expected cashflows, not how much you are paying today. If that’s the case, they should give away the Domino Sugar Refinery for free.

          • Leases typically go for 1yr. Rents generally dont rise 20% a yr for to many years (and there arent too many sellers of property’s where it does) Further every 20% increase in rent means that the RS rents are that much below market – so your future earnings are there too (albeit captured way more slowly) – you forget that RS rents (especially ones that are below market) virtually NEVER go down, in fact historically, RS tenants can look forward to getting an official looking piece of paper telling them their new HIGHER rent each and every year.
            Market Rate apartments might go up 20% a year, but they also go down or require rent concessions, free tvs etc….in down periods.
            Anyway the point is – RE is valued by Rent Roll and there is no effective discount just because it is rent controlled – obviously many other factors can influence the multiple but you will be hard pressed to quantify any RS “discount”.

          • If you’re in a neighbourhood where market rents are the same as RS rents, then yes, this simple rule of thumb would value the freemarket building same as the fully stabilised building right next door. This difference in *potential* income growth would be factored into the price, and if not… you’d be a moron to buy the RS one, and then buying me out of my RS lease is the penalty for being an idiot.

        • It is a discount, it just depends on what factor you want to apply the discount to. If you like to focus on the multiplier, the the multiplier should always factor legal differences in the property. Even in a market rate environment, a jurisdiction that is more tenant friendly (in terms of eviction costs for non-payment, e.g.) should always have a lower multiple than one that is LL friendly. A building that is landmarked likely will have higher maintenance costs than a non-landmarked building.
          Similarly, a market rate building should always have a higher multiple than a RS building because there a greater chance that legal rents will increase faster in the market vs. the RS. (Conversely, there is no legal rent control on the downside — i.e., RS tenants are not locked into the existing rents beyond the term of the lease if market rents are lower. But that would likely only occur in circumstances where vacancies have surpassed 5% and thus collapsing the whole RS threshold.) The buyer who pays the same price and fails to discount for RS (or any other legal risks) in your example is not analyzing the financials correctly.

          • We are comparing buildings in the same market. And I will concede 2 identical buildings with 2 identical rent rolls in the same geographic location the RS building will be cheaper (however there will also be WAY more administrative costs too so not really a ‘discount’), but you will virtually never have that situation (not least of which is because no RS building has all “market rate apartments” – so that building will always have some upside while many Market rate buildings can potentially have all the (reasonably expected) upside to already be realized.
            As to downside protection – Every year RS tenants get an official renewal notice with the legally mandated rent typed in….it is exceedingly rare that a RS tenant ever requests a reduction due to market rates falling. Vacancies again I concede are different.

            The sum is, you can cite a hundred factors and examples but in the end, you will be unable to identify any real “rent stabilization discount” and therefore saying LLs of such properties get what they deserve is stupid.

  • I think commentators are confusing the word “discount.”

    A given rent-stabilized building will sell for less than an identical building that’s not rent-stabilized. The difference is considered a “discount.” It’s not the same kind of discount you get on an 30%-off after-Christmas sale. It’s just the same word. Please understand that.

    Now continue commenting.

    • I think these buildings USED to sell for less, because the rule of thumb USED to be that it was more trouble than it was worth to get rent controlled and rent stabilized tenants out. However, for a multitude of reasons–the biggest one being the amount of sheer cash that’s being poured over NYC real estate, (somewhat indiscriminately), those rules no longer apply. Now investors are buying up rent stabilized buildings with the assumption that by hook or by crook they’ll get those long-term tenants out, out, out. Buy-outs are increasingly common and increasingly large. Illegal strong-arm tactics are also now socially acceptable, and housing court is a lot less of a sure thing than it once was for tenants.

      Nothing about this situation is sustainable or pretty for anyone. Yes, it’s hard to make ends meet when you had to pay $8MM to buy a building and the rent roll for it is only 100K. (I didn’t even bother to try and make those numbers realistic–nothing about NY real estate at present is in any WAY realistic). It’s also hard to make ends meet when you’ve carved out a life for yourself in New York city making $40K a year and your rent being $1300, when suddenly apartments for that only exist in Yonkers or Far Rockaway or the north shore of Staten Island–all of which are nowhere near your job, your child’s school, your church, or the community you’ve help to shape for your entire life.

      The good news, (I think?) is that we’re in bubble territory again. This cannot hold. Already I’m amazed at the sheer number of rentals available in Bed Stuy and Crown Heights–most of them from obviously deregulated apartments. Something’s going to give, and I think it will soon.

  • So much good convo here. Risks related to RS for an owner are definitely factored into price by anyone who knows what they are doing.

    Love the line in the article at the very end:

    “We have a right to affordable housing. That’s what we’re fighting for,” says Donna Mossman, a resident of another BCB building at 1159 President St. “They’re beautifying the neighborhood. I’ve been here for 36 years. I want to enjoy that also.”

    Donna wants her cake and to eat it too. I want a drive a Ferrari and want to pay the price of a Chrysler for it if thats how we are gonna roll!!!! Typical democrat.

    • Sounds more like you want to buy a building with a low rent roll at an inflated price and then evict the tenants to me. Or perhaps you’re just the real agent brokering such deals.