We must end the preferential rent crisis

I was elected last year during a special election, in which I pledged not to accept campaign donations from real estate interests. The numerous small donations I received from hardworking tenants in my district is a direct result of the affordable housing crisis that is sweeping our city, squeezing one family after another out of the only community they have ever known.

This crisis is particularly ravaging to Brooklyn residents. My district encompasses Crown Heights, Wingate, East Flatbush, and Prospect Lefferts Gardens – some of Brooklyn’s most rapidly gentrifying neighborhoods. Every day my office hears from constituents who are pinching their pennies to maintain a decent quality of life for their families in the face of dwindling incomes and rapidly rising rents. While it may comfort some to imagine a nefarious actor preying on these people in moments of weakness, the unfortunate reality is that they have fallen victim to a gaping weakness in rent stabilization laws: preferential rent.

Arthur King is one such New Yorker. Having worked as a building super for many years, he was thrilled to retire to his rent-stabilized apartment in Crown Heights last year. Rent stabilization provides affordable housing to nearly 2.5 million working class, middle- and low-income New Yorkers. Mr. King was comfortable in his certainty that his rent-stabilized lease would protect him from the types of drastic rent increases that have contributed to homelessness in New York. Mr. King was looking forward to living out his retirement in peace. Unfortunately, just several months into retirement, his landlord revoked his “preferential rent,” rendering his rent-stabilized status ineffective. Now his monthly bill is rising from $550 to $2200 a month.

“Preferential Rent” occurs when a landlord rents out an apartment for less than the legally registered rent. In recent years, it has become a tool that landlords use to deregulate apartments. Here’s how it works. First, landlords take advantage of vacancies to jack up the registered rent far higher than the market dictates, and close to the deregulation threshold. Then, landlords use preferential rents to fill the units. After a year or two, or when the neighborhood is gentrified, the landlord can revoke the preferential rent and force the tenant to move. They are then able to get a 20 percent vacancy bonus, raising the registered rent once more. And so it goes, enabling property owners to churn unit after unit out of rent stabilization.

Mr. King’s story demonstrates that tenants paying preferential rents lack the security of a renewal lease offer at reasonable terms. Preferential rent also hides illegal rent increases and discourages tenants from enforcing their rights. When a tenant has a preferential rent, there is no incentive for them to ensure that the landlord is taking the correct increases on the legal rent; if the threat of removing a preferential rent is hanging over your head, it is difficult to imagine organizing a tenant association in your building or fighting for repairs.

Preferential rent was required to be offered for the duration of the tenancy, but the rules changed in 2003, making preferential rent temporary. Since then, its use in New York City has skyrocketed, and now accounts for 27 percent of the regulated stock. Despite court intervention and legal help, thousands of families throughout my district and hundreds of thousands across our city face rents that immediately double or triple. According to New York City’s Independent Budget Office, over four thousand families in my district are facing housing insecurity as a result. There are numerous recent examples of entire buildings filled with hardworking, decades-long residents being cleared out with only a few months’ notice.

Beyond my district, the city has over 250,000 individuals and families facing sudden housing stability crises thanks to preferential rent, at a time when Mayor Bill de Blasio hopes to construct or preserve 200,000 affordable units, using, in part, the recently expired 421-a tax credit.

As my colleagues in the New York state Legislature and I contemplate the renewal of 421-a, we must first consider a comprehensive housing plan that is built around the needs of working New Yorkers, and not shaped by the wants of landlords. But first things first: we need to strengthen rent regulation and reform preferential rent before this crisis destroys mine, and many other communities.

Diana Richardson is an Assemblywoman representing the 43rd District in Brooklyn.