These regulations would not stop landlords from evicting rent-regulated tenants in order to substantially renovate their apartments and make them into condominiums.

Click on "read more" below for the New York Times article and for some testimony given by tenant advocates and elected officials.

By PATRICK McGEEHAN
Published: August 12, 2008

When is a demolished apartment building not demolished?

That is not a child's riddle. It was the subject of hours of protest and impassioned oratory at a public hearing in Lower Manhattan on Tuesday about proposed changes to the rules on renovating rent-stabilized housing.

The State Division of Housing and Community Renewal has proposed to define what constitutes a demolition plan, which would allow the owner of a rent-stabilized building to evict its tenants. For several years, tenants' advocates have complained that the lack of a precise definition of demolition has allowed landlords to push out low-rent tenants and create luxury condominiums.

But now that the division has come up with a definition, those advocates do not like it. Neither, it seems, do building owners.

Representatives of both groups testified at a public hearing held by the division, and none of them had much positive to say about the proposed regulations, which would define demolition as the complete gutting of a building's interior — but not necessarily the removal of its outside walls or support beams.

Councilwoman Rosie Mendez of Manhattan said that demolition should be defined as "to be razed down to the floor, so if you can see it, it's not a demolition."

The division's more-liberal definition would "rubber-stamp the practice of partial, or phony, demolitions," said Serge Joseph, a tenants' lawyer with Himmelstein McConnell Gribben Donoghue & Joseph. He said it would "open the floodgates for owners to evict rent-regulated tenants."

That trend is already well under way, according to Monte P. Schapiro, a bookseller who lives in a five-story tenement on Fifth Street in the East Village. Mr. Schapiro, 51, said new owners of his building filed an application to demolish it but told him that they did not intend to raze it.

Instead, Mr. Schapiro said, they offered to pay the tenants to leave so that they could renovate their apartments into condominiums and capitalize on the city's real-estate boom. Mr. Schapiro said he flatly rejected the initial offer of a $5,000 buyout in lieu of facing eviction, but some other tenants accepted larger sums and left. He said the owners used similar tactics to clear out all of the tenants of another rent-stabilized building on Elizabeth Street in just four months.

The regulation regarding demolition was intended "to allow owners to demolish buildings which were unsalvageable," Mr. Schapiro said. "It was never meant to provide speculators and real estate investors with an easy way to displace all the tenants in newly acquired properties so that the building could be deregulated."

But lawyers for building owners said they should be allowed to do just that.

"This is not an issue of compelling necessity," said Sherwin Belkin, a partner in Belkin Burden Wenig & Goldman, a law firm that has advised owners on how to use demolition applications to upgrade their properties. "This is private property, and if an owner wishes to demolish it, then the owner should be able to."

Mitchell Posilkin, the general counsel for the Rent Stabilization Association, a group of about 25,000 building owners, told the panel, of three division officials, that they should drop the proposed definition altogether. A court ruling that called for the division to spell out its definition of demolition has been reversed, Mr. Posilkin said.

But James Plastiras, a spokesman for the division in Albany, said that while the court ruling had spurred it to define the term, state officials still felt obligated to provide clarification for both tenants and owners. With 47 applications for demolitions pending statewide, he said, there is a need for clarity.

The pending regulation also would create a more generous formula for compensating tenants in rent-stabilized buildings that are cleared out for demolition. For six years after their departure, displaced tenants would receive a monthly stipend equal to 120 percent of the average monthly rent of similar stabilized apartments in the same ZIP code.

"The product of this formula is insufficient," said Councilwoman Gale A. Brewer of Manhattan, "And you definitely can't find a rent-stabilized unit on the Upper West Side."

Ms. Brewer and other elected officials, including Assemblywoman Deborah Glick of Manhattan, called for the division to require landlords to relocate displaced tenants in similar-sized apartments at similar rents in the same neighborhood or to raise the stipends to cover market-rate rents.

Laura Taylor, a freelance fashion designer who lives on West 50th Street, said she was fighting to stay in her rent-stabilized two-bedroom railroad flat because she would not be able to find a similar apartment at the same price anywhere in the neighborhood. She said she had turned down an offer of $90,000 to move.

Below is the testimony of:

• Serge Joseph of Himmelstein, McConnell, Gribben, Donoghue & Joseph
  
• Michael McKee, Tenants PAC
  
• Gale Brewer, NYC Council Member
  
• Linda Rosenthal, NYS Assembly Member
  and
• Daniel O'Donnell, NYS Assembly Member

My name is Serge Joseph. I am a partner at the firm of Himmelstein, McConnell, Gribben, Donoghue & Joseph. Our firm represents hundreds of tenants and tenant associations in rent regulated housing. Over the past few years our firm has also represented tenants in more than twenty buildings who are faced with eviction on the basis of demolition applications.

In issuing the recent proposed demolition regulations the DHCR missed a historic opportunity to strengthen tenant protections and reverted to its unfortunate previous role as facilitator of tenant displacement. Tenants depend upon the agency to support rent regulations at a time when the loss of low and moderate income housing is accelerating day by day. The DHCR is in a position to slow the loss of affordable regulated housing while still preserving the rights of landlords. I urge it to do so by withdrawing the proposed regulations and issuing new regulations consistent with the purpose of the rent laws.

The proposed regulations rubber stamp the practice of what has come to be called partial or "phony" demolition. The Rule Making Notice indicates four flawed rationales for the agency's proposal. I would like to address one of those rationales - that long-standing DHCR policy and case law requires such a result. This argument is flawed for several reasons.

First, the court decisions that the agency relies upon did not construe the Rent Stabilization Law or the Rent Stabilization Code. Rather, the court decisions relied upon by the agency construed commercial and residential rent control law. Reliance on decisions interpreting commercial rent control law is misplaced because the preservation of residential housing is a very different matter. These ancient rent control decisions are irrelevant because rent control[led] tenants then were protected by the Sound Housing Act which required owners to establish that they were not able to earn a fair return on their property before permitting evictions on the basis of demolitions. The Rent Stabilization Law or Code makes no such demand on owners.

Similarly, the recent Appellate Division, First Department decision, Matter of Peckham v. Calogero, which is on appeal, does not require that the agency adopt the proposed regulations. To the contrary, the court expressly observed that the agency "has the right, going forward, to take any actions available to it under its authority."

Likewise the argument regarding long-standing DHCR policy is equally flawed. The agency has been known to change its policies. For instance, [while] the agency used to require hearings prior to making a determination on a demolition application, it no longer does - a change that was arguably to the detriment of tenants. Adherence to a flawed policy which is inconsistent with the authorizing statute is no grounds to adopt regulations that undermine the rent laws.

A regulation must be consistent with the purpose of the relevant statutes. Similarly a word utilized in a statute must be read in light of the overall purpose of the state. In light of the purpose of the Rent Stabilization Law it is rational to read the word "demolition" to mean a complete razing of the building . To define the word otherwise will result in opening the floodgates to owners to evict rent regulated tenants.

In regard to the stipend adjustments - again the DHCR missed an opportunity to protect tenants and preserve affordable housing. It must be noted that the Rent Control Law mandates that tenants be relocated. There is no provision in the Rent Control Law for stipends as an alternative to relocation. The new proposed formula, like the old formula, is based upon an illusion - the illusion that a rent regulated tenant will be able to obtain another rent regulated apartment in the same zip code in which he or she lives. A fair formula would be calculated on the basis of the difference between the regulated rent and a market rent. The Rule Making Notice suggests, correctly, that the stipend is meant to be a substitute for being relocated to a suitable housing accommodation in close proximity to the building being demolished. The current stipend formula does not fulfill that purpose.

The DHCR has an opportunity to fulfill its mandate and maintain rent regulations in the face of the current housing emergency. Again, I urge the agency to withdraw the proposed regulations, go back to the drawing board, and promulgate regulations which are consistent with its mandate.

These proposed regulations are a disgrace. DHCR should withdraw them at once and go back to the drawing board.

The purpose of our rent and eviction protection laws is not merely to protect tenants in place, but to preserve and maintain the limited and diminishing supply of affordable rental housing. These proposed regulations betray and defeat that purpose. The mission of DHCR should be to protect our supply of affordable rental housing, not to assist landlords in their efforts to destroy it in order to increase their profits.

By allowing landlords to evict their rent-regulated tenants so that they can perform a “complete gutting of all interior space in the building,” DHCR is continuing one of the worst pro-landlord policies of the administration of Governor George Elmer Pataki. Tenants expect better of the new administration, and deserve better.

With this proposal, DHCR is codifying PHONY DEMOLITIONS. Landlords will be allowed to reconfigure their buildings into substantially similar ones that differ from the original buildings only in one essential way: rent-regulated apartments and tenants will be gone, replaced by market rate rents and tenants without basic rights, or by upscale condos, or boutique hotels. You are allowing landlords to “demolish” their buildings for no legitimate business purpose, but solely to deregulate their buildings and increase their profits.

Furthermore, the proposed regulations continue the current unfair procedure for these cases, by failing to restore the requirement for a hearing before the agency decides a demolition application. Such hearings were required in demolition cases before the Pataki administration eliminated them.

An administrative hearing is an important procedural safeguard, allowing both sides to testify, and allowing a real investigation of whether the landlord is proceeding in good faith. Mass evictions of rent-regulated tenants should not be based on paperwork.

Finally, the proposed stipend formula is a joke. The regulations pretend that tenants who are displaced from neighborhoods with overheated real estate submarkets will be able to find a comparable rent-stabilized apartment in the same area. Who are you kidding? DHCR knows as well as anyone that tenants will be forced to pay market rents if they are evicted from their regulated units. The supply of regulated apartments is diminishing every month due to vacancy decontrol amendments that were incorporated into the rent laws in the 1990s. Basing a stipend on regulated rents in the tenant’s zip code is a guarantee that the displaced tenants will not be able to remain in their communities.

Withdraw these proposed regulations. Go back to the drawing board. Here are some recommendations:

► An administrative hearing, with full procedural safeguards, should be required before DHCR acts on any application by a landlord to demolish any building.

► Demolition should be defined to mean the complete razing of the structure to the ground. No evictions should be allowed based on reconfiguration of the interior spaces of a building.

► The landlord should be required to demonstrate that the proposed demolition is designed to meet a legitimate business purpose, and is not primarily designed to achieve decontrol of the building.

► The stipend formula should be discarded. A landlord whose application is granted should be required to relocate all tenants to similarly-sized units for similar rents in the same neighborhood, and these units should be permanently subject to rent stabilization.

► Landlords who are found to have harassed tenants while seeking permission to demolish their buildings should have their applications automatically denied.

DHCR has justified these proposed regulations as simply codifying past practices, and past holdings by courts. How sad. How unimaginative. How typical of the agency’s depressing policy of risk avoidance. You should redesign the regulations completely, with the goal of preservation of our rent-regulated housing. Only by doing that can you fulfill your mission.

My name is Gale A. Brewer. I represent the residents of the Upper West Side and Northern Clinton in the City Council. Before I discuss the current topic, I want to express my appreciation to DHCR Commissioner Deborah VanAmerongen and to her staff for their on-going responsiveness to my staff and to our constituents.

New York has long been at the forefront of housing policy, particularly as it relates to support for low- and middle-income households. But while some programs have successfully provided affordable housing, policies that provide for on-going rent regulation continue to face opposition and challenges from property owners and landlords. Among the most recent challenges to the preservation of affordable housing is the proposed revision of the Rent Stabilization Code Provisions Regarding Demolition of Buildings by the Division of Housing and Community Renewal (DHCR).

I believe that this revision is in conflict with DHCR's stated mission to preserve and expand affordable housing for low- and moderate-income households. Instead of supporting this mission, the proposed revision opens a loophole for owners to circumvent the rent stabilization law, effectively eliminating rent stabilized units. According to the Rent Guidelines Board, landlords may refuse to renew leases if they seek "in good faith" to demolish a building and construct a new one. But while the intent of the demolition provision is to allow for the replacement of unsafe housing in need of repair with new, safe housing, no safeguard exists in the proposed revisions to prevent landlords from making cosmetic renovations to their buildings and then converting them into condominiums or unregulated market rate rentals.

Furthermore, the definition of "demolition" in DHCR's proposed revision unfairly provides landlords the ability to do an end run around the rent stabilization law. As proposed, this definition stipulates that buildings gutted of their interior walls and systems but not totally razed to the ground be considered demolished. A more sensible definition of demolition would require a more purposeful use other than decontrol of rent stabilized units. Because there is no definition, owners often renovate the building, instead of demolishing it, and use the building for market rate units, extended stay, or other lucrative uses. Enforcement measures should be adopted to dissuade landlords from adopting circumvention tactics.

I also believe that the proposed change to the stipend formula for compensating displaced tenants is inadequate, as it does not serve those tenants who wish to relocate within their own neighborhood. As proposed, the formula uses the difference between the tenants' current rent and the average rent for similarly sized units in their zip code, plus 20 percent (multiplied by 72 months). Unfortunately, the product of this formula is insufficient and unlikely to aid displaced families wishing to relocate within higher income zip codes. For example, in my Upper West Side district, most of the available apartments are unregulated and charge market rents far above the amounts that this stipend formula would provide.

The stipend formula must be revised to better reflect the reality of procuring affordable housing in an increasingly unregulated rental market. We also believe that as displacement is a result of the landlords' action, the onus of finding new housing for displaced tenants should be on landlords, and not tenants as is currently the case.

Finally, in concordance with the recommendations presented by affordable housing advocates such as the Community Service Society, Metropolitan Council on Housing, and the DHCR Policy and Practice Working Group, I agree with the suggestion that DHCR restore to tenants the right to a hearing on an owner's application for demolition – a right which was required until it was rescinded in 2002 by the Pataki administration. I also agree that DHCR must require owners to prove financial ability at the application stage; require owners to produce all required permits at the application stage; and that DHCR deny permission for demolition to owners who have harassed their tenants. Presently, DHCR allows owners to file incomplete applications for non-renewal of leases based on demolition, during which time ill-intentioned owners do not offer new leases and intimidate vulnerable tenants into surrendering their apartments.

Let me be specific regarding demolition permits in Community Board 7.

According to the Department of Buildings web site, there are 7 demolition permits pending in CB7. I am very familiar with four of the buildings. 508 and 510 West End Avenue are partially occupied buildings with some rent stabilized residents; they are in stable condition and not in need of a major upgrade. Why should they be demolished? In addition, how can a permit for demolition be issued with rent regulated tenants living on the premises? 732 and 734 West End Avenue are vacant brownstones; were they legally emptied? There is no rent history. Why should they be demolished? As a community, we are working hard to preserve these brownstones and others like them.

How can DOB and DHCR work together to mount a preservation effort that is an asset for affordable housing and for owners alike?

At a time when rental units in New York City are very difficult for working families to afford, I urge you to reject the proposed revisions of the rent stabilization code. I encourage you to join our efforts and those of other advocates for affordable housing to maintain and expand the stock of affordable housing in our city.

Thank you.

am Assemblymember Linda Rosenthal, and I represent the Upper West Side and parts of Hell’s Kitchen/Clinton. Along with several other elected officials and tenant advocates, I am a member of the DHCR Policy and Practice Reform Working Group. We are here today to protest DHCR’s recently revised regulations concerning the use of “demolitions” to remove buildings from rent stabilization. Currently, DHCR’s proposals allow owners to evict their rent-stabilized tenants in order to perform a “complete gutting of all interior space in the building.” This means that any owner who wishes to reclaim a building with existing tenants from rent stabilization need only apply for an application to demolish that building. The demolition need not even be complete; in far too many cases, the owner has no intention of “gutting” the building, and plans only to knock down a wall or two and perform certain renovations, while simultaneously driving all the tenants out on the pretext that the building will be destroyed. Owners often claim that they will demolish a building when their construction plans show only that they will renovate the interior of the building and convert it into market-rate rentals, co-ops or other higher-profit ventures. DHCR’s most recent proposals do not appear to end this practice.

It is incomprehensible to me that the DHCR’s “new” proposals regarding phony demolitions are functionally identical to those put forth under the Pataki administration. After working so hard to put a Democrat in the Governor’s office, and after years of careful study and the production of a detailed White Paper on the part of this working group, tenants and their advocates deserve better than to be presented with the same guidelines year after year. Pretending a set of proposals is new and fairer to tenants doesn’t make it so, and trumpeting the release of “new” guidelines that preserve every unfair advantage granted to landlords under a Republican administration is insulting to the people these rules most directly affect.

Defining “demolition” as “the complete gutting of all interior space in the building from the ground floor and above and including the removal of the building’s roofs and of all internal building systems” and then adding the sentence, “However, a demolition under this subparagraph shall not require the removal of the outer walls and structural supports of a building” has the twin effects of confusing the reader and muddying the issue; what, precisely, IS a demolition, and what is not? What’s a “demolition” without “removal of a building’s structural supports”? I call that a “renovation,” and maintain that it is both illegal and unethical to evict a building full of tenants to make way for renovations and/or conversion to a market rate building.

As the representative of a district whose tenants have experienced phony demolitions firsthand, I am particularly concerned about the harassment of rent-stabilized tenants. A former constituent of mine, after living on the Upper West Side for more than 25 years, was recently forced to move to Brooklyn. A community activist and an asset to the neighborhood, she was forced out of her home by greedy landlords after experiencing months of anxiety and mental anguish over her living situation. Owners who harass their tenants must be considered to have forfeited the right to demolish their buildings, and their demolition applications should be rejected out of hand. Harassment of tenants must cancel out any prior demonstration of good faith on the part of the owner.

Although DHCR’s current policy requires landlords to relocate displaced tenants or to provide them with a stipend enabling them to relocate themselves, this policy, in practice, simply permits owners to cheaply rid their buildings of rent-stabilized tenants. It does not provide tenants with assistance sufficient to guarantee them affordable replacement housing.

I do not believe that tenants should be driven out of their neighborhoods on a whim of their building’s owner. While DHCR claims to want to prevent this displacement, it cannot realistically hope to do so under its current regulatory proposals. Owners are required, under the proposed formula, to provide tenants with a stipend equal to 20 percent above the difference between the monthly mean registered rent in the tenant’s zip code and the tenant’s rent, multiplied by 72 months. The assumption upon which this formula is based—that displaced tenants will be able to find another rent-stabilized unit in their zip code—is, at best, wildly unrealistic. The number of regulated apartments is on the decline, while an increasing number of individuals and families struggle to pay rent and seek affordable housing. The vast majority of displaced tenants will end up being forced to pay market rate rents, which are substantially higher than stabilized rents. A stipend based on registered rents is therefore wholly inadequate for a displaced tenant of modest means who must suddenly seek a market rate apartment.

In lieu of this inadequate stipend, DHCR should require owners to take responsibility for relocating tenants to similarly-sized apartments for similar rents in the same neighborhood. Instead of assigning tenants the near-impossible task of finding another rent-stabilized apartment in the same neighborhood, it is the owners who must take responsibility for helping tenants to locate such apartments (assuming they exist, as owners who apply for demolition applications routinely claim they do). As industry professionals with greater resources at their disposal, the onus should be on owners to locate these fabled units.

If owners continue to be allowed the option of paying stipends instead of actually relocating tenants, DHCR must substantially revise the formula so that this stipend would provide real assistance to displaced tenants, such that they would be able to afford a market-rate apartment in the same zip code. This stipend should be paid for the duration of the new tenancy, rather than for the 6 years DHCR is proposing. Ending assistance after 6 years would only postpone a tenant’s displacement; it would hardly prevent it.

In order to better protect the rights of tenants, DHCR must adopt additional procedural safeguards. Prior to 2002, a hearing was required before DHCR decided a demolition application. This hearing allowed both tenants and owners to testify and submit proof on all relevant issues, including whether the owner was seeking to demolish a building in good faith. According to the Rent Stabilization Code, DHCR cannot grant permission to demolish before the owner has demonstrated that he or she is financially able to complete the project or before the owners have produced all required permits. However, DHCR currently allows owners to file incomplete applications for non-renewal of leases based on demolition and to hold the proceeding open indefinitely while they supposedly seek the necessary information or permits. For the duration of this period, owners do not offer renewal leases. Such a practice has the effect of intimidating vulnerable tenants into leaving their homes or accepting unfair buy-out offers out of fear of an anticipated or threatened demolition. Ultimately, an owner may not even pursue the demolition application, or the application may be denied, but the tenants will already have been forced out of their homes.

* *I am calling on DHCR to reinstate the hearing requirement it did away with in 2002. DHCR should not be making decisions regarding applications for demolition based on paperwork alone. These applications could potentially result in hundreds of tenants losing their homes, and those who stand to lose the most should certainly be guaranteed the right to speak at a public hearing. I respectfully request that DHCR stop granting owners virtually unlimited extensions on the proper filing of all necessary paperwork. Owners should be required to prove their financial ability and to secure the necessary permits at the application stage.

DHCR’s mission is supposed to be to protect affordable housing in the state of New York. I am extremely disappointed in the recent proposals concerning demolitions. They do nothing to further the goal of protecting affordable housing in New York, and everything to undermine it. These proposed regulatory changes are simply not good enough, and they fail utterly to protect New York’s tenants. I am wholeheartedly and adamantly opposed to them, and will remain so until they are again revised to take into account our working group’s carefully considered recommendations.

Thank you for this opportunity to submit testimony on this very important matter. My name is Daniel O'Donnell and I am a member of the New York State Assembly, representing the residents of the 69th District which includes sections of Morningside Heights, Manhattan Valley, Harlem and the Upper West Side. Since taking office in 2003, no issue as been more apparent to me than the continual erosion of the city's stock of affordable housing. Under the Pataki administration, landlords succeeded in passing laws and regulations which have enabled landlords to deregulate thousands of units. The demolition law, when abused, has had the same result. When originally passed, the law allowed owners of buildings that were dilapidated and dangerous to be replaced with new, safe housing. This provision in the law has been abused by landlords seeking nothing more than to empty buildings of rent regulated tenants so that they could replace them with market rate tenants. The law was not intended to allow landlords to simply renovate their buildings but this is what has occurred.

The Division of Housing and Community Renewal (DHCR) is the State agency charged with the duty of protecting the states' stock of affordable housing; this is an integral part of its mission. Therefore, proposals considered now should succeed in defining "Demolition" narrowly so as to prevent the continual abuse of this law. Under the current proposal which defines demolition as a "complete gutting of all interior space in a building" the DCHR falls short of what is needed. This proposal would allow owners to simply reconstitute a building into a substantially similar one that differs from the original only in that it contains no rent-regulated units or tenants. We must be clear: demolition is not the same thing as renovation, even a gut renovation. DHCR must define demolition with sufficient clarity to prevent the reduction of affordable housing units when in fact all that is occurring is a desire on the landlord's part to renovate and raise rents.

The proposed stipend formula is also inadequate in that is does not ensure that tenants will find alternative housing at affordable rents. The proposal assumes that tenants displaced by demolition will be able to find other stabilized units in their zip code. This premise is deeply flawed in part because of the devastating effect vacancy decontrol has had on the number of stabilized units now available for rent.

DHCR should eliminate the stipend alternative and require relocation of all tenants to similarly sized apartments for similar rents in the same neighborhood. This burden should fall on landlords, not tenants. If DCHR decides to continue to allow owners the option of paying stipends instead of relocating tenants, the formula must be substantially revised to provide displaced tenants with the financial assistance necessary to afford market rate apartments, not for six years, as has been proposed, but for the duration of the tenancy.

Finally, DHCR should require that a hearing be held before a demolition application is granted. This would afford tenants the opportunity to defend their homes and compel owners to prove financial ability and for them to secure necessary permits at the application stage.

As it stands now, an owner in my distinct has been allowed to file an incomplete application for demolition. In the meantime, he has issued letters to tenants indicating his intention not to renew their leases. Tenants claim he has cut services in their building and offered buy-outs to tenants at prices which may well be below what they are worth. These practices are rampant and are a direct result of the DHCR'S policy of allowing owners to submit incomplete applications. Owners who resort to these tactics must have their applications denied based on a finding of a lack of good faith.

In closing, I urge the DHCR to reject the proposed regulations.