“There isn't likely to be any large displacement of people with moderate income because rent-stabilized units are only decontrolled if a renter's income is over $175,000 for two years,” says Neill Coleman, spokesperson for the New York City Department of Housing Preservation. “The number of people moving out of rent-controlled units in Peter Cooper Village and Stuyvesant Town is a very small number.”
As more units at Stuyvesant Town and Peter Cooper do stop being under rent control, though, affordable housing advocates fear it will become even more difficult for working people such as teachers, firefighters and policemen to afford to live in the pricey New York borough.
“Communities like Manhattan need to provide opportunities for those moderate-income working families who are the muscles and sinews of their communities,” Egan says. “Essential moderate-income working families are otherwise forced to travel long distances to work, with all the negative consequences of that.”
Others agree. “It could [cause relocations],” Lamberg says. “It's probably going to be gradual, but I'm sure it will do damage and be a loss of affordable housing to the city. These are people who have lived in the city forever. It's not what we want.”
HOLDING THEIR GROUND It's obvious that the renters at Stuyvesant Town and Peter Cooper don't want to see rent increases. They've fought for their homes from the beginning. During the sales process, they cobbled together a bid for the properties. They lost, but they're still fighting to keep the properties affordable. Right now, they're embarking on a lawsuit.
Stuart M. Saft, who represented one of the bidders for the properties (who also didn't win the bidding), noticed during his due diligence for his offer last year that Met Life previously had received the city's J-51 exemption, which provides real estate tax breaks for rehabs, for the properties. He argues that, since the old owner used these benefits to rehab more than 3,000 units, all of the units in Stuyvesant Town and Peter Cooper should remain under rent control for the next eight years, which is the amount of time until their J-51 tax breaks expire.
“It's a section of the law that's never been interpreted before, and we're either right or wrong,” Saft says. “My interpretation is that you can't have a J-51 benefit and remove a rent-stabilized apartment. Their position is that one has nothing to do with the other.”
Saft admits he only has a 50 percent chance of winning the lawsuit, “It [the suit] just came up now because of the sale,” he says. “It's a mechanism to keep the apartments affordable.”
Right now, litigation seems to be the only way for Stuyvesant Town and Peter Cooper Village to remain affordable in the short- and long-term. As Lamberg observes, the lawsuit “could delay the units from becoming high, high rent for years.”
Les Shaver is a freelance writer in Arlington, Va.
- The Sares-Regis Group of Irvine, Calif., bought CityGate, a 241-unit apartment community in Denver from JPI for $38 million. The purchase is part of the buyer's goal to reacquire a large portfolio presence in Denver. The property is within walking distance of Coors Field and close to lower downtown and the city's central business district. Apartment Realty Advisors represented the seller; the buyer was self-represented.
HOW TO GET A RETURN ON A $5 BILLION DEAL
Once word leaked out that Tishman Speyer and BlackRock Realty paid $5.4 billion for Stuyvesant Town and Peter Cooper Village, people scratched their heads. No one knew how the buyers could make a realistic return on the huge apartment deal. While the answer to that question remains elusive, there are some theories on how the new owners might achieve their desired numbers.
- Raise the rents. The quickest way for the new owners to turn a profit is to hike the rents on the market-rate units or on the affordable ones, once the residents in those apartments leave.
- Develop the land. “The story with the properties is that there's a lot of open space and parking lot space that could possibly be developed for more market-rate uses,” says Carole Lamberg, executive director of Settlement Housing Fund, a nonprofit that owns and develops affordable housing in New York.
- Convert to condos. Once a unit becomes destabilized under rent control, the owners also have the flexibility to turn it into a condo. Given Peter Cooper Village and Stuyvesant Town's prime location on New York's East Side, there's little doubt buyers would pay a lot to purchase a unit in such a desirable area.