The new owner of the Manhattan mega-complex Stuyvesant Town and Peter Cooper Village, in a move that will be closely watched by apartment owners and renters alike, has hired a private detective to seek out violators of rent stabilization rules, sources said.
Since purchasing the 11,000-plus-unit residential complex in October, owner Tishman Speyer has been ratcheting up pressure on such tenants in what is likely an effort to convert the units to market rate apartments and thereby bring in greater cash flow, residents say.
The hiring of the private detective, Fred Knapp, whom the New York Times once dubbed the “scourge of illegal tenants,” speaks to a broader pressure on landlords across the city to drop affordable units and extract market rate rents. With a booming real estate market, mounting debt from high-priced purchases, and increasing property taxes, building owners have more incentive than ever to shed such units, which can bring in but a fraction of the market value. Housing advocacy groups said they see yesterday’s $1.3 billion sale of Brooklyn’s Starrett City affordable-housing complex as a case in point of this trend, as the buyers indicated they intend to leave the Mitchell-Lama affordable housing program — a move that housing advocates and elected officials have denounced.
Stuyvesant Town’s decision to bring in Mr. Knapp, who vigorously tracks tenants’ trail of public documents, according to a 1988 New York Times profile, is by no means unprecedented, with private investigators involved in similar work reporting seeing a surge in business over the past few years. The move by the complex to bring in Mr. Knapp and his services can be seen as indicative of the pressures a strong housing market puts on developers and landlords with affordable units in their portfolio. After many of the tenants are caught subletting their rent-stabilized apartments or using the units as townhomes while residing elsewhere, they are evicted, leaving landlords the opportunity to renovate the apartments to bring up the values, often shedding them of their regulated status. By paying huge sums in deals for apartments with affordable units — Tishman Speyer paid previous owner MetLife $5.4 billion for Stuyvesant Town and neighboring Peter Cooper Village in October — buyers are socked with large debt, and look for ways to raise more cash. The chairman of the real estate practice at the law firm Greenberg Traurig, Robert Ivanhoe, said there is a “greater urgency” to create income growth from rents today when landlords are paying these higher prices to acquire properties.
“The only way they will see that growth is to get those illegal tenants out. Given the frothiness of the market, it is something owners are compelled to do, and it is a legal thing to do,” Mr. Ivanhoe said.
The president of the Real Estate Board of New York, Steven Spinola, echoed Mr. Ivanhoe, saying landlords are simply responding to violations within their units.
“Everybody should be motivated to find people who are doing things illegally,” Mr. Spinola said. “Tishman Speyer isn’t doing anything illegal or inappropriate. It is possible some tenants are. Should we be defending the tenants? I don’t get it.”
Housing groups contend that the escalated efforts to remove such tenants inevitably entangle nonviolators, many of whom do not have the resources to hire an attorney and fight the charges by the landlords. In addition, the push to oust such tenants further adds to the loss of affordable units citywide.
“Over the past 12 years, these landlords have just abused rent guidelines and requirements,” the executive director of the New York ACORN’s affordable housing group, Bertha Lewis, said. “They’re using everything they can to haul people into court to invalidate leases.”
Ms. Lewis said that due to the high price paid in the Starrett City deal, she is extremely worried that the new owners will be driven to similar measures.
At Stuyvesant Town, tenants said they have noticed an increased push by the owners to invalidate leases of illegal stabilized renters. The president of the Stuyvesant Town tenant’s association, Alvin Doyle, said Tishman Speyer has boosted the number of notices of nonrenewal handed out since buying the property, often accusing the tenants of living elsewhere.
“The nonrenewal letters are upsetting, they’re disconcerting, and they’re annoying to residents who are bona fide tenants,” Mr. Doyle, who made clear he does not support true violators of rent regulations, said.
Council Member Daniel Garodnick, who represents the area, said his office has received a noticeable increase in calls regarding Tishman Speyer’s efforts against alleged illegal tenants, which poses a concern for the innocent residents who are accused.
“The issue here is a potential overreach of the pursuit of tenants — who may be in their apartments with full rights under the law,” he said.
A Tishman Speyer spokesman said the move was nothing out of the ordinary for landlords.
“As is standard practice at apartment buildings throughout the city, we are working with legal counsel to assist us in coping with illegal tenancy,” the spokesman stated via e-mail.
In a call placed to Tishman Speyer yesterday evening, Mr. Knapp, the private detective, declined to comment.
A tenant lawyer in Manhattan, Samuel Himmelstein, said he has more than 100 clients from Stuyvesant Town. “I deal with Stuy Town and their lawyers literally every day,” he said. “I’m sensing that they’re going to go after people more aggressively.”
Mr. Himmelstein stressed that the move to push out rent-stabilized tenants was not a new trend, though the level of effort appears to have increased.
“The myth that Stuy Town was not aggressively pursing cases like this for the past 10 years is just that — it’s a myth,” he said.
A private detective who does work similar to Mr. Knapp for landlords, Nicholas Himonidis, said he has seen a huge growth in business in the past two or three years.
“If you’re looking at a unit that is susceptible of becoming unstabilized, the difference between market and stabilized rent has become so dramatic,” that it increasingly makes financial sense to pay the $1,000 to $2,500 that he often charges, Mr. Himonidis said.
On top of losing traditional rent-stabilized units — through vacancies both natural and coerced — the city is seeing a significant decline in the number of units in the Mitchell-Lama affordable-housing program, such as Starrett City. For Mitchell-Lama buildings in neighborhoods that are increasing in land value, the incentive for landlords and co-op tenants to opt out of the program, which is permitted 20 years after the structure is first occupied, is becoming increasingly tempting.
Since the buildings first began dropping out of the program in the 1980s, the city has lost more than 30,000 such units, many of which become rent stabilized. The decline has escalated in recent years, especially for state-run units where there are fewer incentives in place to keep the building in the program, when compared with the city’s units.
The forces working against affordable housing face off with mayor Michael Bloomberg’s ambitious effort to build 92,000 new affordable units by 2013, leaving housing advocates such as Ms. Lewis of ACORN wondering whether the total affordable housing portfolio will expand much at all.
However, local and state politicians are pushing a range of further action, including expanding incentives to keep buildings in Mitchell-Lama and pegging the monthly rent at which an apartment loses its affordability status — currently set at $2,000 — to inflation, as Governor Spitzer suggested in his campaign.
So long as the market is strong with current regulations in place, though, private investigators such as Mr. Himonidis say there will likely be work to do.
“What I can tell you is that if you have a tenant paying rent stabilized rent and its only stabilized because it’s grandfathered,” he said, “then of course there’s tremendous incentive” to crack down on violations.