Law Would Close ‘Kushner Loophole’ After Developer Is Fined For Fudging Building Applications

Council Member Ritchie Torres is introducing legislation to prevent landlords from lying in paperwork to the City about the number of rent-regulated apartments in their buildings, he announced at a press conference today.

The bill aims to crack down on what’s known as the “Kushner loophole” — landlords falsely stating in construction permit applications that a building does not contain occupied rent-regulated units. (Buildings with rent-regulated tenants are subject to stricter construction oversight.) A study by Housing Rights Initiative found that Kushner Cos. filed at least 80 false permit applications in dozens of buildings, according to an Associated Press report. Many of those buildings are in the East Village.

“The city can longer afford to stand by passively while developers like Kushner Cos. plays Russian roulette with the safety of New Yorkers living in affordable housing in periods of construction,” Torres said.

The legislation would require an audit of a property owner’s entire real estate portfolio if they submit a false certification. The department will also be required to refer cases of falsified construction applications to other agencies, including the District Attorney’s office for criminal prosecution, Torres said at the conference.

The city’s Plan/Work Application requires property owners to indicate whether an occupied building contains rent-stabilized tenants; a Housing Rights Initiative report released today shows that on more than 10,000 applications in a 2.5-year period, landlords checked “no” when they should have checked “yes” — up to 3% of the total filed, according to the buildings department.

Thirteen East Village buildings owned by Kushner Cos. have pending violations for false certifications on the section of the Plan/Work Application that asks about rent-stabilized tenants: 170 East 2nd St, 174 East 2nd St, 195 East 4th St, 199 East 4th St, 170 Avenue A, 211 Avenue A, 331 East 9th St, 333 East 9th St, 335 East 9th St, 435 East 9th St, 438 East 13th St, 440 East 13th St, and 504 East 12th St.

There are dozens of Yelp reviews about Westminster City Living, a property management company owned by the Kushners. The most recent was a 5-star review from a broker who works with Westminster posted on August 25th, the day after news broke that regulators fined Kushner Companies for false construction work applications. There are 14 reviews with four or five stars on the Yelp page, and 53 one-star reviews. Posts from this past summer state that management was slow to respond or unresponsive to complaints of leaking ceilings, sludge, and a cockroach infestation. Multiple reviewers wrote that the company lost their deposit or security checks.

“There is mold, damage to the walls and ceiling, and we can no longer keep up with diverting the water. I am terrified for our health and the health of our pet,” a post from August states.

A poster wrote in July that construction began on a building next door two weeks after they moved in, blocking sunlight from the main living areas.

Tenant advocates say the false paperwork allows landlords to use disruptive construction to drive out rent-stabilized tenants, which owners have incentive to do in hot real estate markets with high market rents.

Kushner Companies did not return requests for comment before press time.