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2 Become 1: Landlords Combining Apartments To Avoid New York's Rent Stabilization Laws

New York City

The massive 2019 overhaul of the laws governing New York's rent-stabilized apartments left a loophole open, one that more city landlords are using to hike rents in their buildings.

The rent reform package passed by state lawmakers in 2019 seriously curtailed property owners’ ability to move stabilized apartments into the free market and reduced the amount they could raise rents based on building and apartment improvements.

But combining stabilized apartments to create larger units with higher rents is still legal, and it is a strategy being deployed at 15 East Village buildings that are owned by Madison Realty Capital, Gothamist reports.

“The law is, at best, unclear on this matter,” state Sen. Brian Kavanagh, chairman of the housing committee, told the publication. He attempted to introduce new legislation last year to stop the practice, but the bill died in committee.

A representative for the Division of Housing and Community Renewal told Gothamist the department is still developing rules to address the practice. Madison is far from the only landlord combining units — advocates told Gothamist the practice is happening on the Upper West Side, while Kavanagh said Lower East Side residents have raised alarm to him over the practice.

Specifically in the East Village, Madison has combined around 30 regulated apartments into larger units and permits have been issued for another 20 apartments to be adapted, Gothamist reported. The company last year bought a 15-building portfolio from Rafael Toledano, an East Village multifamily landlord who harassed tenants in an effort to raise rents and was banned from doing any real estate deals in the city for five years.

Madison paid $153M for the 15 East Village properties, according to The Real Deal. The year before, the company said it would give tenants $1M in rent credits once it took over the buildings.