Ruling Against Blackstone May Extend Rent Control Across NYC

A New York State Supreme Court justice has ruled against Blackstone in a tenant lawsuit seeking to prevent the firm from ending rent stabilization for 6,200 units at Stuyvesant Town-Peter Cooper Village, Manhattan’s largest apartment complex—a decision that may impact the rent control status of up to 431,000 apartments throughout NYC.

In a decision made public on Thursday, Justice Robert Reed said a state rent reform law enacted in 2019 prevents the deregulation of units at the massive apartment complex, which was purchased by Blackstone in 2015 for $5.3B and encompasses 110 buildings with more than 11,000 units.

Justice Reed also rejected Blackstone’s argument that the expiration of tax breaks it was receiving under NYC’s J-51 incentive program allowed the company to end rent regulation for those units—a ruling that may impact the rent control status of up to 431K units in NYC whose owners have been receiving J-51 benefits.

The decades-old J-51 incentive—which expired in June of last year—provided NYC landlords with a tax exemption for making building-wide improvements, with the stipulation that the renovated units be placed in rent stabilization for the period the benefits were received.

Under a city-negotiated agreement with landlords that was reached before the 2019 law was enacted, NYC reportedly was willing to lift the rent regulation from units covered by J-51 when the benefits expired, but it was unclear whether the 2019 law would permit that to happen.

Some legal experts are suggesting that Reed’s ruling has eliminated a path for deregulation of J-51 program units throughout the city—estimated by city officials to total 431K—and therefore could make rent control permanent in those units.

Two years ago, the Stuyvesant Town-Peter Cooper Tenants Association filed a lawsuit asking the court to declare that the apartment complex is protected under the state’s 2019 Housing Stability & Tenant Protection Act. Blackstone, named as a defendant in the lawsuit, argued in court that the expiration of a 2012 settlement between tenants and the property’s previous owners permitted the firm to deregulate the units.

The company, which wanted to deregulate 6,200 apartments at the complex, known as Stuy Town, also cited agreements with the city which it said permitted the units to be taken out of regulation once the owner stopped receiving J-51 benefits.

Justice Reed said in his ruling that Blackstone’s arguments were “based on a misconception of the law.” Reed said the Stuyvesant Town-Peter Cooper Village apartments had always been rent-stabilized and that Blackstone never acquired the rights to remove the protections.

Reed also noted that the 2019 law applies to the property despite being enacted several years after Blackstone acquired the apartment complex. Reed said the 2012 settlement between the tenants and Tishman did not “preclude the applications of future rent and eviction protections,” and in fact contained specific language preparing for the application of future rent laws.

One of the reforms of the 2019 state rent law eliminated luxury decontrol, a policy that had allowed regulation of units to be lifted after they surpassed a high-rent threshold. Between 1994 and 2019, more than 6,000 apartments in the city—most of them in Manhattan—were converted to market-rate through the luxury decontrol provision.

In a statement issued after the judge’s ruling was published, Blackstone suggested the matter was moot because the company didn’t actually raise rents at the complex above the stabilization level.

“We have not issued a single rent increase above those legally allowed under rent stabilization, so this ruling has no impact on our tenants,” a company spokesperson said.

The sprawling Stuyvesant Town-Peter Cooper Village complex, built in the 1940s by MetLife as housing for WWII residents, covers a rectangular swath of the East Side of Manhattan stretching from Avenue C to First Avenue and 14^th St. to 23^rd St.

MetLife sold the complex in 2006 to Tishman Speyer and BlackRock, who handed the property back to lenders during the financial crisis in 2008.