Rent stabilization at Gateway Plaza expires today (Tuesday, June 30). Despite more than two years of behind-the-scenes negotiations between the Battery Park City Authority (BPCA) and the LeFrak Organization (which operates the complex), no agreement has been announced that will extend affordability protections at Battery Park City’s largest residential complex.
Negotiations are ongoing, and may yield such an agreement soon. In a recent statement, the BPCA said that, “the Authority and the owners of the Gateway residential complex remain committed to the extension of a limitation on rent increases for the pre-June 30th, 2009 tenants who reside in the complex. The proposed agreements may not be signed until after the current June 30th, 2020 expiration, but please be assured that the shared understanding is that they be retroactive back to that date and both parties are working diligently.”
How this can be squared with the fact that Gateway tenants whose leases are up for renewal have been receiving unregulated, market-rate increases (in some cases amounting to thousands of dollars per month) since mid-April remains unclear. What does seem clear is that multiple tenants who moved out in April, May, and June because they could not bear the uncertainty of whether and when the rent stabilization agreement would be extended, and under what terms, will receive no benefit at all. Their lives have been permanently disrupted, and the LeFrak Organization will receive a permanent, ongoing windfall from each apartment that has reverted to unlimited rent increases during that gap. That noted, some interim protection may be provided by the recent settlement of a recent class-action lawsuit, which requires Gateway’s landlords to limit rent increases for current tenants to five percent (starting tomorrow, July 1), for a period of two years. For a hypothetical tenant currently paying $2,833 per month (or $34,000 per year), this would result in a benefit of $340 per year, according to documents on file with the court.
Another caveat contained in the BPCA’s statement is similarly troubling. The phrase “for the pre-June 30th, 2009 tenants who reside in the complex” effectively abandons a goal embraced by the Gateway Plaza Tenants Association (GPTA), Community Board 1 (CB1) and multiple elected officials for the last two years. This coalition called for any new rent stabilization regime to protect all current and future Gateway tenants for the life of the new agreement. This would have marked a return to the long-standing status quo, under which all apartments in the complex were protected for the life of such an agreement. This precedent was followed by a series of agreements, starting in 1987, and continuing with successor agreements in 1995 and 2005.
That universality was eliminated in in the 2009 agreement, which protected only tenants living in Gateway as of the date that agreement went into effect. Since then, churn and attrition among tenants have resulted in roughly two-thirds of Gateway households receiving no affordability protections at all.
Almost exactly one year ago, in a letter addressed both to BPCA president Benjamin Jones and Richard LeFrak, the chairman and chief executive officer of the LeFrak Organization, U.S. Congressman Jerry Nadler, State Senator Brian Kavanagh, State Assembly member Yuh-Line Niou, Manhattan Borough President Gale Brewer, and City Council member Margaret Chin urged, “a prompt conclusion to the negotiations, and that you finalize a deal that renews and strengthens the existing agreement.”
The letter went on to observe that, “since 1987, rent stabilization agreements for Gateway Plaza have helped Battery Park City to grow into a dynamic community where middle-class families can lay down roots and thrive. As rents in Lower Manhattan have climbed to levels that most New Yorkers cannot afford, the rent stabilization agreement at Gateway Plaza has become increasingly important in ensuring that residents are not displaced and the community remains stable and economically diverse.”
The elected officials also noted that Gateway rents (in apartments not protected by rent-stabilization) are being marketed at higher prices than those prevailing in the surrounding area. “According to the latest available data from the NYU Furman Center,” the letter said, “the 2017 median rent for studios and one-bedroom units within the community district is $2,595 a month. Meanwhile, Gateway Plaza’s market-rate units are listed online for over $4,000 a month for a one-bedroom unit and over $6,000 for a two-bedroom unit.”
The elected officials went on to demand that the affordability agreement expiring today not only to be extended, but also expanded: “We strongly believe any new agreement should extend to all Gateway Plaza residents, not just those still covered under the 2009 agreement.”
The BPCA’s negotiations with the LeFrak Organization are made possible by the fact that the landlord is itself a tenant, merely leasing the ground on which the buildings sit, in exchange for annual rent payments to the Authority, which owns the land. This enables the BPCA to offer LeFrak concessions on its ground rent payments, in exchange for agreeing to affordability protections for tenants.
AS GPTA board member Jeff Galloway explained at a July, 2019 meeting of CB1, “Gateway Plaza is uniquely situated in that it is governed by a private agreement that provides rent stabilization benefits to its residents.” This circumstance arises from that fact that, “Gateway Plaza was financed with taxpayer subsidies,” when it was built in the late 1970s and early 1980s, he recounted. This financing, in turn, required that the landlord offer affordability protections to residents. “The tenants sued to enforce those protections in the 1980s,” he recalled, which led to the first in a series of legal agreements that limits rent increases at Gateway.
“But those agreements had sunset clauses,” Mr. Galloway continued, “and this one ends in June, 2020. We have support from all of our local elected officials for extending it to at least 2040, and expanding it to all residents.”
At that meeting, CB1 voted to ratify a resolution that urged the Authority, “to set a high priority on preserving the affordability status of Gateway Plaza for a period coextensive with the benefits that [the landlord] may obtain in modification of its ground lease, and in any event ending no sooner than June 30, 2040 (the current end date of the Gateway ground lease) and returning the scope of the Stabilization Agreement to its original coverage of all tenants of Gateway.”
It appears that the LeFrak Organization could well afford to extend these protections. Court documents related to a recent class-action suit against the landlord estimate that LeFrak collected approximately $512 million in rent from Gateway residents during the period covered by the lawsuit, between April 2008 and the present. This appears to mean that LeFrak’s annual rent roll for Gateway Plaza is approximately $44.5 million. In spite of this lucrative cash flow, LeFrak pays to the BPCA a lower ground rent that any other residential developer in the community. At a time when other rental buildings and condominiums are struggling with much higher ground rents and face doubts about their continued viability, LeFrak is negotiating with the BPCA to make its ground lease provisions even more generous, in exchange for extending rent protections. This may raise fundamental questions of fairness, as renters and condominium owners elsewhere in the community face the prospect of being priced out of their homes.
If the landlord has dragged his feet during negotiations with the BCPA, however, he has been generous to New York State Governor Andrew Cuomo, who directly controls the BPCA. In 2019, Richard LeFrak personally contributed more than $59,000 to the Governor’s reelection campaign fund.
In addition to these issues, there are concerns about the process itself. All Gateway negotiations have occurred behind closed doors, with no public disclosure and no consultation with community leaders. At the April meeting of the BPCA’s board, Justine Cuccia (a co-founder of the grassroots organization Democracy for Battery Park City), cautioned the Authority’s directors and executives about the ongoing Gateway discussions, saying, “even if you announce a deal at this meeting, it is—in one sense—already too late. Tenants whose leases are now up for renewal are already preparing to move out. One community leader, who served for years as a PTA president at local schools, is packing up her belongings as I speak.”
“Announcing any deal between now and June 30 will give residents, tenants representatives, and community leaders no time to review the terms, or respond,” she continued. “You will be presenting everyone with a fait accompli. To avoid this dilemma, I propose that you declare an emergency and impose a standstill, ordering your tenants, the LeFrak Organization, to extend the current status quo for six months, until the end of this year.”
“LeFrak would doubtless challenge this in court,” Ms. Cuccia concluded. “But in view of the pandemic crisis, along with your status as a government agency and as LeFrak’s landlord, any judge would likely side with you. This would allow time not only to continue negotiating—which is very difficult in the midst of a crisis—but also for a transparent review of the terms contained in any eventual deal.” Not a single member of the BPCA’s board or management team said a word in response to this proposal, although the BPCA appears to have belatedly adopted it in part, by extending discussion past the June 30 deadline.
CB1 chair Anthony Notaro said, “Gateway Plaza has been a longtime bastion of housing affordability, which creates stable, family environments. To lose that would be tragic and from we all have heard, probably avoidable. Everyone supports our neighbors at Gateway and we encourage all parties to quickly culminate this new agreement that will protect as many residents as possible.”
In contrast to this situation, rent protections have been recently extended at multiple complexes comparable to Gateway. In Lower Manhattan, City Council member Margaret Chin last November negotiated a 50-year extension of caps on rent increases at Knickerbocker Village, a giant apartment complex in the Two Bridges neighborhood, which was built by a public-private partnership in the 1930s.
In August, 2018, Governor Cuomo announced that he had negotiated a 30-year extension of affordability protections at the Westview apartment complex on Roosevelt Island. And in April of this year, City and State officials announced a deal to extend rent protections at Co-Op City, in the Bronx, for 30 years.
Knickerbocker Village, Roosevelt Island and Co-Op City were (like Gateway Plaza) built by the State of New York, as part of public-private partnerships, and were conceived as bulwarks of affordability.
Whether Governor Cuomo will take as much interest in Gateway Plaza as he has in affordability elsewhere remains to be seen.
(Editor’s Note: Ms. Cuccia is related to the reporter who wrote this story.)
Matthew Fenton
