Villager: Pols: Focus on banks behind ‘predatory’ landlords

State Senator Brad Hoylman, left, and Assemblymember Harvey Epstein, to the right of him, denounced predatory lending in front of 504 E. 12th St., the offices of the Kushner Companies’ realty management firm, Westminster City Living, on Sun, June 3.

BY SYDNEY PEREIRA | State legislators introduced a bill aimed at banks that give loans to landlords whose business model is to kick out current tenants — most often rent-regulated ones.

The bill — introduced by Assemblymember Harvey Epstein and state Senator Brad Hoylman — pinpoints one of the key issues fueling unaffordability and tenant harassment by examining the loans that allow landlords to buy up huge portfolios of buildings. The legislation would direct the state’s Department of Financial Services to conduct a study of financial institutions, examining what factors banks and other lending institutions consider when reviewing loan applications.

“This is an issue that really hasn’t risen to the state level at this point,” said Holyman, who represents District 27, covering much of the Village, East Village, Stuyvesant Town, Chelsea, Midtown and Hell’s Kitchen. “So this is the first legislation of its kind, but we think it’s urgently needed,” he said. “We need the data on this issue in order to try to address the problem.”

Some of the most notorious landlords on the Lower East Side who have been linked to this behavior are Steve Croman and Jared Kushner, who have been accused of harassing tenants through dangerous and sometimes illegal construction. And when rent-regulated tenants move out, the profits landlords reap from the building increase as a result of the rent hikes they can institute. Croman, Kushner and other owners have been accused of harassing tenants through construction, refusing to upkeep their buildings, and offering manipulative buyouts that tenants and advocates say are practically worthless compared to what a rent-regulated apartment is worth over the long term.

“Croman has been on the worst-landlord list since the 1990s,” Hoylman said. “We gotta put the brakes on these bad lending practices.”

The state-level legislation Epstein and Hoylman are advocating would ideally expose the root of the issue by spotlighting the banks that give loans to landlords whose tactics often appear to be aimed at pushing out rent-stabilized tenants. This study — should the measure pass the Assembly and Senate, and get the go-ahead from Governor Andrew Cuomo — would determine the factors banks consider when handing out loans to landlords to buy up large portfolios of buildings.

If the bill becomes law, D.F.S. would examine two key factors: debt-service coverage ratio and capitalization rate. Debt-service coverage ratio refers to how much cash the loan recipient already has available to pay back debt. Capitalization rate refers to how much an investment is worth based on the income the property could generate.

The legislation applies to both residential and commercial tenants. Other buildings criteria the study would analyze include future construction and improvements to units; how many vacant, market-rate or rent-regulated units are in a building; and if there is a history of tenant harassment and hazardous conditions, to name a few.

Epstein and Hoylman announced the joint legislation at a rally in front of the offices of the Kushner Companies’ realty management firm, Westminster City Living, on Sun., June 3.

“This legislation will bring us closer to stopping the practice of predatory equity before it starts the cycle of tenant harassment and displacement that has become all too familiar in our city,” Epstein said in a statement. “Bad-actor landlords and scheming financiers should take note: your days of destabilizing our neighborhoods with your shady business practices are numbered.”

The recently elected assemblymember has spent his entire career working on housing issues, most recently as a tenant member on the Rent Guidelines Board for five years. Last month, he and his colleagues in the Assembly passed sweeping legislation addressing other underlying causes of tenant harassment, displacement and unit deregulation.

“Hopefully, they’ll take them up in the state Senate soon,” Epstein said last month at another rally with tenants about conditions at two of Steve Croman’s buildings, 159 Stanton St. and 141 Ridge St. Tenants at the latter building have been without cooking gas for nine months.

The package of legislation passed in the Assembly in mid-May would prevent landlords from increasing rent by 20 percent each time a rent-regulated unit becomes vacant; repeal rules that allow deregulation of units if they become vacant and could rent for more than $2,733; and protect tenants from construction as harassment, among other measures aimed to help tenants.

“The Senate has fallen behind the Assembly on a whole range of issues, but protecting tenants is certainly one of them,” Hoylman said. “The chairman of the Housing Committee in the Senate [Senator Betty Little of District 45] lives closer to Montreal than Manhattan,” he noted.

New York City tenants, Hoylman added, simply are not in many Upstate politicians’ frame of reference.

Until the politically deadlocked Senate is remedied, not much can pass, however. The state Senate currently has 31 Democrats, 31 Republicans and one Democrat who has caucused with the Republicans since he was elected, Simcha Felder, who represents Brooklyn’s Borough Park and Midwood.

“But come November,” Hoylman said, “there could be a new narrative for the state Senate and that’s what I’m looking forward to.”