Following an investigation by national housing watchdog group the Housing Rights Initiative (HRI), three class action lawsuits have been filed against New York City real estate companies for allegedly defrauding tenants by abusing the 412-a tax incentive program.
The 421-a program is a partial tax exemption that lowers property taxes and is granted to property developers who construct units that include affordable housing.
Atlas Capital Group, Heatherwood and Artimus Construction – the real estate companies being sued – were apparently receiving tens of millions of dollars worth of 421-a benefits for developing their buildings. Conditionally under 421-a, 100% of the units developed were required to be rent stabilized.
However, the landlords allegedly cheated NYC rent stabilization laws by maximizing rent increases as well as falsely registering rental rates of apartments at inflated and illegal prices.
“The 421-a program costs taxpayers $1.7 billion a year, which is larger than the entire budget of the City of Denver,” said Aaron Carr, founder and executive director of Housing Rights Initiative in a statement on Oct. 12. “The fact that the New York State government continues to defer its tax enforcement obligations to an organization that has a fraction of a fraction of a fraction of their budget is not just an unmitigated tragedy, it is a full blown scandal.”
According to HRI, thousands of current and former tenants at 54 Noll Street, Brooklyn, NY, 27-03 42nd Road Long Island City, NY, and 260 West 26th Street New York, NY – the buildings affected by the lawsuits – may be entitled to tens of millions of dollars in damages. Legally, tenants being overcharged on rent are entitled to properly stabilized leases, rent refunds and rent reduction.
amNew York is awaiting comment from Newman Ferrara LLP, the law firm that filed the three lawsuits.
