A bill introduced by Sen. Liz Krueger and Assemblywoman Linda Rosenthal aims to prevent a sharp increase in rental costs for around 25,000 co-op apartment dwellers in buildings with ground leases in New York City. Many co-op buildings in the city own both the building and the land underneath it, but about 100 buildings have ground leases where the land underneath is owned by someone else. When the lease is set to expire, the land’s value is appraised and used to negotiate a rent increase between the landowner and the co-op.
One such building with a ground lease is the 324-unit Carnegie House on 100 West 57th Street. The current lease at Carnegie House expires in March 2025, and the new landowner has indicated a desire to quadruple the previous valuation when determining the rent. This could result in a significant increase in rental costs for the tenants, making it difficult for them to afford and potentially impacting their ability to sell their apartments.
The proposed legislation seeks to limit the sharp spikes in annual lease payments for co-op buildings with ground leases, similar to how rent increases are limited for rent-stabilized apartments. The bill aims to prevent homeowners from facing foreclosure or bankruptcy due to exorbitant increases in rent once the ground lease expires. Supporters of the bill argue that residents in buildings with ground leases already pay higher maintenance fees and face steep rent hikes when the lease ends.
The Real Estate Board of New York and landowners are lobbying against the bill, claiming that it is a handout to wealthy co-op owners. However, proponents of the legislation argue that it will mostly benefit middle-class and working-class apartment owners who may struggle with sudden increases in rental costs. They also point out that most co-op owners are not millionaires and that legal memos show the bill is constitutional. There will be a press conference and advocacy rally in Albany to support the bill and ensure that it protects co-op owners from unfair rent increases.
Some examples of co-op buildings that would benefit from the legislation include the Sheepshead Terrace in Brooklyn, the Murray Hill Coop in Flushing, and the Shoreview in Far Rockaway. Critics have raised questions as to why the co-op land lease issue was not addressed as part of the recent affordable housing package deal approved as part of the state budget. Overall, the proposed bill aims to protect co-op apartment owners from financial hardship and ensure fair negotiations when ground leases expire.
