By David Brand
Landlords will no longer be allowed to pass the cost of repairs and renovations on to their rent regulated tenants if new legislation announced by two Queens lawmakers passes in Albany.
Assemblymember Brian Barnwell and state Sen. Michael Gianaris have renewed their push to eliminate the Major Capital Improvement (MCI) program and said they plan to reintroduce their bill this legislative session.
“The Major Capital Improvement program is responsible for hundreds of millions of dollars in rent increases on rent regulated tenants,” Barnwell said at a rally in Manhattan Friday. “It is unacceptable that we maintain a program pushing middle- to low-income New Yorkers out of their homes while allowing landlords to continue to make monstrous profits.”
When building owners make certain improvements or enhancements to a building with rent-stabilized or regulated apartments, they can apply to the New York State Division of Housing and Community Renewal (DHCR) to raise rents based on a percentage of the cost.
Tenants advocates dispute the program because they say renters ultimately bear the cost of projects they have no say in — and which can be easily falsified or left unfinished.
The Real Estate Board of New York (REBNY), a landlord and real estate trade group, opposes Gianaris and Barnwell’s proposed legislation. REBNY President John H. Banks said the MCI program enables property owners to spend billions of dollars improving the city’s housing stock while creating tens of thousands of jobs for people who make repairs.
“This legislation in no way addresses the affordable housing crisis or offers a path forward for creating new housing units for New York City residents, who desperately need better access to sustainable, affordable housing,” Banks said in a statement. “Nor does it recognize that over the past decade, the incremental costs of operating and maintaining a building have increased by more than twice the rate of rent increases allowed by the Rent Guidelines Board. Building owners need to make capital investments in the city’s rental housing.”
Once the monthly rent at a rent-regulated apartment rises above $2,700 per month, landlords can petition to the DHCR to increase the rent to market rate. The provision gives landlords a powerful incentive to pursue MCIs, even if it means incurring a significant upfront cost.
The MCI program was introduced in the 1970s to encourage landlords to make improvements at their buildings. But it has been rife with problems for decades.
“Increases of twice and sometimes three times the base annual increases allowed under rent regulations are being passed along under the Major Capital Improvement, or M.C.I., program, in part because state processing is slow and retroactivity, at least temporarily, adds to the tenant's burden,” the New York Times reported in 1989.
With the help of complicit contractors, landlords can also fudge the numbers or flat out lie about MCIs.
Nearly 30 years after reporting on the lack of regarding MCIs, the Times last year exposed another form of MCI fraud perpetrated by a famous Queens landlord: Fred Trump.
In 1992, Trump formed All County Building Supply & Maintenance to function as a third-party agent buying equipment a low rate and selling it back to other Trump-owned companies at an exorbitant price. The technique enabled him to jack up rents at his many apartment units, the Times reported last year.
In one example reported by the Times, Trump negotiated a 10 percent discount on 60 boilers that he purchased from an industrial boiler company through All Country.
All County then “sold” the boilers to another Trump-owned company for 20 to 25 percent more money. The increase enabled Trump to add hundreds of thousands of dollars to the cost of the boilers, an increase he passed on to tenants.
After the formation of All County, the Trumps claimed more than $30 million in capital improvements to justify rent increases for thousands of apartments in the rent-stabilized buildings they owned throughout the city the Times reported.
Short of an in-depth New York Times investigation, that type of fraud can be hard to prove, Queens Legal Services Housing Unit Director Anne Ascher told the Eagle last year.
“Generally, to challenge an MCI, you need a smoking gun,” Ascher said. “You have to challenge the work itself and we can’t do that by saying, ‘It doesn’t look good.’ You need an engineer or architect to assess it and challenge it. That makes it basically impossible.”
Gianaris said his bill would eliminate the risk of shady landlord behavior and prevent displacement.
“Too many tenants are priced out of their homes because of MCIs whose only improvement seems to be the landlord’s bottom line,” Gianaris said. “All New Yorkers deserve high quality, affordable homes and our proposal brings us closer to that goal by ensuring repairs are made without burdening tenants with unreasonable costs.”
Several organizations have united as the No More MCIs Coalition to support the senate and assembly bills. The coalition includes Queens groups Woodside On the Move, Catholic Migration Service and Miktown Center along with CASA and Northwest Bronx Community and Clergy Coalition in the Bronx and CAAAV and Good Old Lower East Side in Manhattan.
“These MCIs has been affecting the community heavily since 1969,” said tenant leader Nilda Rivera, part of the No More MCIs campaign. “Cosmopolitan tenants along with Woodside On The Move started to fight these ridiculous rent increases in 2017. It’s time for the abolishing of the MCIs for all tenants and taking away the power from all greedy landlords.”