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Suit Threatens L+M Bid for 1,600 Apartments in Two Bridges

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L + M Ron Moelis (L + M, iStock, illustrated by Shea Monahan for real trading)

The developer’s fresh idea of ​​repairing a dilapidated Manhattan apartment can be ruined by some tenants.

This winter, L + M Development Partners signed a contract to purchase Knickerbockers Village, an affordable residential estate with 88 years of history in Two Bridges. Ron Moelis, one of New York’s largest developers of affordable homes, promises to bring new federal funding through Section 8 to pay for repairs and keep existing tenant rents low. Did.

The Tenant Association has agreed with L + M, but some Knickerbockers are not playing the ball.

In a lawsuit filed last week, dissident tenants are aiming to thwart the sale into a lesser-known program that has kept rents low for decades across the 12 buildings in development. Claims to violate.

Concerns about the newly formed Knickerbockers Village Tenants are suing the state’s Housing and Community Renewal Department, which signed a contract between L + M and the official Knickerbockers Village Tenant Association in February.

Behind the drama — and the L + M investment strategy — is a rare rent framework.

According to the proceedings, the state has set the rent for 1,590 apartments in Knickerbockers per room for almost 90 years. According to the L + M plan, the rent for the current tenant remains $ 264.34 per room. However, the developer fills the vacant unit in one of the three price ranges based on the income of the tenant occupying. It produces L + M profits but violates the state’s Private Housing Finance Act.

Their proceedings allege that the new pricing plan encourages L + M to replace residents with high-paying lessors. This is because 40% of the units are sent to households that earn up to 130% of the median income in the region. For a family of three, it’s about $ 156,000. An additional 40% for 100% of AMI households. The remaining 20% ​​is for low-income tenants.

Under the Housing Finance Act, which governs Knickerbockers Village, there is no limit to rent increases, but the state sets rents to cover the operating costs of development. Prior to the recent rise in inflation, the state estimated that rents could rise between 8% and 12% in each of the next two years.

This is lower than many New Yorkers face, but higher for Knickerbockers Village. The Tenant Association has concluded that L + M transactions are the only way to protect existing lessees from these increases.

ShiXing Yang, leader of the Tenant Association, said: “Many tenants couldn’t afford to raise such rents and didn’t want to relocate their existing tenants, so we continued to negotiate to find the best deal for our existing tenants.”

In the transaction they signed, L + M called for the rent of existing tenants to be frozen for three years and then raised to less than 2.5% annually until 2069, the property tax relief period granted in 2019. Was there.

An L + M spokesman said rents have risen 3.1% annually on average over the last two decades. Opponent tenants said the annual growth rate was 1.33 percent over 10 years.

The acquisition agreement claims that the project will require at least $ 50 million in repairs over the next five years. The plan secures a federal Section 8 voucher for 397 apartments in Knickerbockers. That’s a quarter of all units under development, and L + M can raise the rent for these units to $ 574 per room. Voucher tenants pay 30% of their income as rent and the remaining tabs are subsidized by the federal government. Injections offset tenant costs and help pay for repairs.

Isabel Reina Torres, a Knickerbockers resident for over 20 years and the leader of the litigating tenant, has challenged the need for vouchers.She is in development $ 3 million annual tax cut, Approved by the city council in 2019. This reduced the annual tax amount by almost 90%, hoping that the money would be spent on repairs.

Management has proposed raising rent by 13 percent to pay for repairs. Torres says tax cuts should release enough money for that.

“I’m worried they’re bringing in these project-based vouchers,” Torres said. “I don’t even know how project-based vouchers were a problem if the location was already affordable.”

The answer is that Section 8 adds revenue from Washington, not from tenants. L + M is using it to refurbish thousands of apartments in the New York City Housing Authority, which previously relied on unreliable federal subsidies, Section 9.

On her side, Torres also disagrees with the repair quote. “They say,’Oh, we need all these roofs. We need all these costs.” Absolutely not! “

The law does not explicitly state that rent must be assessed uniformly for each room. However, Torres has stated that the rule has been so interpreted for over 85 years and that switching to multiple rent zones violates that precedent.

In the proceedings, the group says its current owner, Cherry Green Property Corporation, has made two attempts to deregulate or rebuild Knickerbockers Village to dismantle its rent structure. In 2002, the owner tried to dissolve the owner, Knickerbockers Village Incorporated, but the judge ruled that the Private Housing Finance Act did not allow it. In 2017, the owner allegedly met with a tenant to discuss converting the project into a co-operative, but the state issued a cease and desist letter.

In their proceedings, tenants argue that the L + M acquisition plan would effectively circumvent the protection of private housing finance law without officially terminating the program. However, the terms of the acquisition specifically state that Knickerbockers Village will continue to comply with the law under the supervision of housing and community renewals. An L + M spokesman disagrees with the tenant’s claim.

“Our plan promises a permanent and affordable price under the supervision of ongoing housing and community renewals,” said a spokesman. “This is the exact opposite [of deregulation] An example of creativity and devising solutions with the Knickerbockers Village Tenant Association and housing and community renewals. “

The two bridges are a link between anti-development activities. Just a few blocks from Knickerbockers Village, L + M and the CIM Group planned to develop a 72-story, 1,300 unit. Spent years in proceedings It required the approval of the city council from the community activists who claimed it and two other projects. The Chetrit Group bought this site for $ 78 million During April.

Prior to taking office, the district’s new council member, Christopher Marte, opposed Soho. Rezoning And planning Replace the community garden There are 123 affordable homes for the elderly.

“I don’t trust L & M as an owner,” Marte said. Said to the village sun..

Homes and Community Renewal declined to comment because of the proceedings in dispute.

Tenants who oppose the L + M contract may be properly notified and represented by the officially elected Tenant Association, which withdrew their own proceedings when the agreement with L + M was reached. Say I couldn’t. He conducted his own door knock campaign and reported that more than half of the inhabitants were unaware that the sale was taking place.

“It’s unacceptable and shameful for the governor, the housing and community renewal department, and the elected officials who support the deal,” Torres said.

The official tenants’ union said they did everything they could to reach out to the residents, and while the deal wasn’t everything they wanted, it defeated the alternative.

“My Chinese isn’t very good, but we tried to explain as much as we could to protect them,” Yang said.

Another tenant’s union officer, Christina Chang, told Torres how to prevent her group from raising double-digit rents if she stopped selling. “What are they going to pull out of their hats?”

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