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Inside Kushner’s Murky Relationship with Rent Stabilization

The Real Deal

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Jared Kushner’s habit of not properly filling out paperwork began years before his tenure at the White House.

In exchange for receiving a lucrative tax break on a rental building in Williamsburg, Kushner’s real estate firm was legally required to register the apartments as rent stabilized with a state agency. It did the first year. But the next year, it registered just five apartments. Then it failed to register any of the units.

That caught the attention of the state’s Homes and Community Renewal agency, which sent a warning letter to Kushner Companies last month. You haven’t complied with the legal requirements of the 421a tax exemption, it said, and you must register all rent-stabilized apartments at 50 North 1st Street.

The 421a program, which was recently reborn as “Affordable New York,” is supposed to incentivize residential construction by dramatically reducing a building’s property taxes. In exchange for receiving the tax break, owners are required to register all units as rent stabilized. But landlords across New York City have failed to register thousands of apartments in 421a buildings, creating a potential for abuse and illegal rent increases for tenants who may be unaware of the protections offered by stabilization laws.

Kushner‘s 50 North 1st Street is one of those buildings.

The firm bought the 46-unit Williamsburg property in 2013 from Largo Investments and Kevin Maloney’s Property Markets Group for $34 million. According to an analysis of public records by The Real Deal, Kushner registered all 46 units as rent-stabilized in 2014, as required by law. But in 2015, the firm registered just five units. As with many other properties across its vast New York City rental portfolio, Kushner did not report that any of the apartments were stabilized in 2016, according to tax records last month from the city’s Department of Finance, which derives its rent-stabilization count from what owners report to the HCR.

The 25-year tax break exempted Kushner from $1.2 million in property taxes in just the past two years.

Kushner, which Jared resigned from in January, denies that it hasn’t complied with the legal requirements of the 421a program at 50 North 1st Street. Any oversights, it says, were purely procedural.

“As is common with a change of ownership, there is often administrative clean-up and reconciliation that must occur,” Emily Wolf, Kushner’s general counsel, said in a statement. “However, paperwork aside, all 46 apartments have been and will continue to be regulated by the rent stabilization and 421-a guidelines.”

But the response leaves questions unanswered. Kushner claims that last year, it simply made a mistake when it filed the required paperwork with HCR six to seven months late. But the year prior, the company registered just five of the building’s apartments – and that was in 2015, more than a year after it bought the building.

When pressed, Kushner declined further comment and insisted the building was in compliance. The company said that filings this year will show the units’ correct status, but wouldn’t share any documents or figures with TRD, noting the records are not currently public information. This year’s filings will become public on tax records in mid 2018.

TRD dug further into Kushner’s history with rent-stabilization and obtained two rental histories from tenants at 50 North 1st Street. Rent histories list, among other details, the regulation status and legal rents of the apartment in question. One of the apartments shows no registration in 2015 and another unit reported no registration in 2015 or 2016. Since TRD contacted Kushner for this story, and less than a month after HCR sent the firm its warning letter, the former apartment was retroactively registered for 2016 with a filing date earlier this month.

It should be noted that both tenants have stabilized leases, which suggests Kushner has treated the apartments as stabilized even if the company did not properly register the units. TRD did not find any evidence that company has collected rents above the legal limit.

Kushner — whose former CEO Jared has been dogged for omitting assets on financial disclosure forms and for leaving foreign contacts off national security clearance forms — acquired a big chunk of its New York rental portfolio in 2013 when it went on a $262 million buying spree. Its acquisitions have mostly been in the East Village, but it’s also picked up buildings in other parts of Manhattan, as well as Brooklyn and Queens.

Kushner tenants in the East Village have alleged since as early as 2014 that the company, through its property management arm Westminster Management, has tried to push them out of their rent-stabilized and market-rate apartments, according to tenant organizer Brandon Kielbasa, organizing director of Cooper Square Committee. And a May investigation by the New York Times and ProPublica found that a company subsidiary — JK2 Westminster LLC — went to great lengths to extract money from largely poor tenants in Maryland, filing hundreds of lawsuits, many on questionable grounds.

The Kushner rental portfolio in New York City now includes over 1,300 units across 57 properties. Recent tax records show that Kushner reported owning 339 stabilized units in 2016, down from 601 reported across the portfolio in 2015.

Since 2012, the company has dropped a total of 253 apartments from rent stabilization, according to a TRD analysis of the tax records. The company contests this total, arguing that a majority of the losses reflect late filings from last year that caused many recent records to show zero registered units. (If the company’s claims are correct, the actual number of dropped stabilized apartments would be around 50 units.)

Rent-stabilization laws limit rent increases and offer protections to tenants living in over 1 million stabilized apartments citywide.

It’s not clear why the figures in Kushner-owned buildings declined, but experts told TRD that the state and city’s record keeping and tracking systems are less than stellar and could account for some of the discrepancies.

Each year, owners register stabilized apartments with the state’s HCR between April 1 and July 31, and the numbers reflect the building’s stabilized unit count on April 1.

The 421a tax exemption process involves multiple steps and filing requirements with HCR, as well as the city’s DOF and Department of Housing Preservation and Development (HPD). Paul Korngold, of the law firm Tuchnan Korngold, Weiss, Liebman & Gelles, said HPD is partially to blame for delays in issuing the necessary paperwork. However, “any delays at HPD should not have a bearing on the requirements to register the rents with the HCR,” he said.

When it comes to noncompliance in 421a buildings, owners are sometimes unfairly blamed, according to Korngold. “Various agencies are investigating some owners for alleged rent overcharges” even though “most owners obey the law,” he said. As a result, noncompliant owners give the rest a bad reputation, Korngold said, but added that HCR has been effective in addressing overcharge complaints from tenants.

HCR’s website explains that the agency “may impose a penalty of up to $250 upon owners for each knowing violation of the Rent Regulations,” a paltry sum for many New York City landlords, who can generate thousands of dollars from each rent overcharge. But failure to comply with 421a registration can lead to more significant penalties, according to a source familiar with the compliance process. If caught, a rule-breaker may have to pay back taxes for the years it was not in compliance. Generally speaking, the city tries to work with owners who have failed to register units and ultimately reduce penalties, the source said.

Following a series of reports by ProPublica that called out landlords who had improperly boosted rents in 421a building, state and city lawmakers have given the issue increased attention. In December, Mayor Bill de Blasio announced that the city was sending noncompliance letters to landlords owning more than 37,000 apartments regulated in 421a buildings, threatening to suspend their tax benefits.

The 421a program, which cost the city an estimated $1.4 billion in forgone tax revenue in FY 2017, has been the subject of state lobbying efforts by the real estate industry for decades. Through what’s known as the “LLC loophole,” developers can donate through the limited liability companies that legally own each of their buildings and obscure their role in the process.

A joint investigation by TRD and ProPublica found that 421a developers donated $21 million to state candidates and committeessince 2000, roughly a quarter of all donations from the industry during this time. Gov. Andrew Cuomo received the most donations — $4.2 million over the course of his runs for governor and attorney general.

Considered the bible of New York City real estate, The Real Deal has become mandatory reading for everyone in the industry. Since 2003, TRD has provided up-to-the-minute industry news and in-depth reports and profiles in our 65,000-circulation monthly magazine and on TheRealDeal.com, which receives more than 1 million unique visitors per month. Our content is available across multiple platforms, including a mobile app available to iPhone, iPad and Android users alike.

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GOP

Republican Block Investigation into NRA’s Illegal Russian Donations

Polipace Staff

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Late last week, the two Republican FEC commissioners blocked an investigation into whether Russians used the National Rifle Association (NRA) to pump millions of dollars into the effort to help Donald Trump get elected in 2016.

Early last year, McClatchy DC reported that the FBI was investigating whether Russian banker Alexander Torshin, who has close ties to Russian President Vladimir Putin, had illegally donated large sums to the NRA to get Trump elected.

In March, the FEC launched a preliminary investigation into the matter. Now, however, the commission’s Republicans have blocked the agency from investigating further.

“This is an abandonment of the Commission’s basic duty to investigate wrongdoing, and is contrary to law,” commented FEC chairwoman Ellen Weintraub in a statement.

“All our lawyers had to do was pick up the phone, call the FBI, and ask: Are you, in fact, investigating the Respondents for the violations alleged? But when I suggested that the Commission instruct OGC to do so, the Republican commissioners refused,” Weintraub wrote. “We still do not know the answer to this foundational, eminently knowable, question.”

Her Republican colleagues rejected the accusations. Commissioner Caroline Hunter told Newsweek that Weintraub’s “statement is long on conjecture and short on the evidence and the law.”

“Some allegations are too serious to ignore,” Weintraub stated, “Too serious to simply take Respondents’ denials at face value. Too serious to play games with.”


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GOP

By voice and vote, Communications Workers censure Trump’s racism

Polipace Staff

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By voice and by vote, in statements from leaders and members and in a blistering resolution, the Communications Workers convention strongly censured GOP President Donald Trump’s racism.

Trump’s “naked appeal to white supremacy” is “dividing the country in ways we haven’t seen in half a century and probably haven’t seen since the Civil War,” union President Chris Shelton declared during his keynote address on July 29 to the convention’s 2,000 delegates.

The blast at Trump was one of several highlights of opening day of the union convention, held in Las Vegas. Another was exhortations to build on past political momentum, and victories, in the run-up to the 2020 national election.

“It’s not just the president,” Shelton explained, after citing the need to beat Trump next year. “We also have to hold the (U.S.) House. And nationally, Senate races won’t be easy. But the road to a majority runs through North Carolina, Maine, Georgia, Arizona, and Colorado.”

Vulnerable GOP senators from those states, along with Majority Leader Mitch McConnell, R-Kent., and 16 other Republican senators, are up next year. Democrats hold 45 Senate seats, plus two Democratic-leaning independents, and are defending 12. A five-seat Democratic gain would turn over the Senate.

“We must do everything we can to win the Senate and ask American politicians to serve the American people again.”

And the union’s women’s committee – whose report noted a dearth of women in top posts at CWA, in unions and in politics — pledged to put a woman in the White House and add so many women into top ranks that CWA would have to set up “a men’s committee” to tackle their problems.

But Trump’s racism, especially his vitriolic “go back where you came from” attacks against progressive Reps. Alexandria Ocasio-Cortez of New York City, Rashida Tlaib of Detroit, Ayanna Pressley of Boston and Ilhan Omar of Minneapolis, were the focus of ire, and not just from Shelton.

“In times like these, we need to be united as a union and as a country,” said Diane Bailey of Local 4310 in Columbus, Ohio, during the brief discussion. “Division only works against us. We must not go backward; we can only move forward.”

“White nationalism is wrong. Racism is wrong,” declared Local 4123 President Charles Daniels of Pontiac, Mich. “The president of the United States telling four women of color to ‘go back where they came from’ is wrong.”

“We stand up to bullies and we have to stand up now because it is the president of the U.S., so it’s incumbent on us to say ‘no.’ As powerful as he is, it’s wrong,” Daniels said of Trump’s statements.

The resolution was in a similar vein.

After citing the Statue of Liberty’s poem by Emma Lazarus, the resolution said, “that is the America we believe in. Apparently, the president of the United States does not share that belief.”

The resolution says Trump’s attacks on the four first-year lawmakers, all women of color and all Democrats, are “offensive, demagogic, dangerous and racist.”  Trump’s language “poses a particular danger to Omar, given the barely hidden networks of armed white supremacists whose hatred of Muslims hardly needs to be stoked by” Trump.

Omar and Tlaib are the first two Muslim American women ever elected to Congress. Omar is a refugee from the Somalian civil war. Tlaib, Ocasio-Cortez, and Pressley are native-born.

CWA not only denounced Trump but demands other unions, legislatures and community groups do so, too. Earlier in July, the National Education Association, the nation’s largest union, did so. But CWA also demanded Trump’s GOP colleagues to “denounce his un-American rhetoric.”

“All too many have been silent in this controversy,” it notes. As a matter of fact, the number of elected GOPers nationwide – senators, representatives, and governors – who have blasted Trump’s racism can be counted on fewer than the fingers of two hands.

Though the delegates censured Trump, impeaching him did not come up in either in the convention resolutions committee or on the floor. That seemingly runs counter to continuing grass-roots sentiment among rank-and-file Democrats. But the party’s leaders, in Congress and in organized labor, either oppose the move (Congress) or are silent so far (labor).

The union’s denunciation of Trump “is about his racism, not necessarily his policies,” one speaker said, attempting to reassure those CWA members, and other workers, who voted for Trump in 2016.

“Real leaders unite us so we can move forward, build unity around the American dream and fulfill the bold promise of the Statue of Liberty: ‘Give me your tired, your poor, your huddled masses yearning to be free,’” quoted Shelton, a New Yorker and former New York Telephone lineman, whom delegates re-elected that afternoon by acclamation. They also re-elected Secretary-Treasurer Sara Steffens, a News Guild member, by acclamation to the union’s #2 post.

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Trump

Gallery: Inside Melania Trump’s Extreme Forced Plastic Surgery

Polipace Staff

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Melania Trump has opted for some major cosmetic procedures to stay looking young for the President (especially because Donald Trump reportedly had a scalp reduction to correct balding, and maintains his complexion with heavy-handed spray tans).

There have been so many, despite denials, that it’s often questioned whether FLOTUS is actually Melania Trump, or perhaps a new model that Trump had imported. However, most insiders have claimed that Melania was forced to have these extreme treatments, so much that she looks nothing like the original.

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