'Systemic' Fraud Threatens New York's Rent-Stabilized Housing

Like other big cities facing affordable housing crises, New York is steadily losing its supply of rent-stabilized units to deregulation. And, Daniel Geiger writes for Crain's New York, systemic fraud may play a substantial role in that decline.

Recent audits by the city and class-action lawsuits against major landlords reveal a pattern of dubious renovation expenses that enable property owners to raise prices on rent-stabilized apartments, Geiger reports. Over the past 26 years, around 167,000 rent-stabilized units—that officials know of—have been deregulated, fraudulently or not, through programs that allow for rent increases. "That's roughly 50,000 units more than Mayor Bill de Blasio's signature affordable-housing initiative aims to create over 12 years," Geiger notes.

In New York, laws permitting landlords to cover major repair costs by raising rents above regulated levels were enacted in the 1970s to encourage property maintenance. But most cities don't have systematic or proactive enforcement, relying on tenant complaints and lawsuits to bring violations to light. As a result, fraud is rampant: “Loopholes and lax oversight practically invite owners to pull units out of regulation," Geiger writes. Or as one attorney put it: "You have to be nuts not to be breaking the law, because the chances of getting caught are so slim."