Tenants strike against public pension fund–backed landlord

More than 50 tenants of an apartment complex at the northeast corner of Central Park huddled under umbrellas on Saturday to announce a rent strike, taking aim at a landlord financially backed by New York city and state pension funds.

The 600-unit development, the Heritage, previously called Schomburg Plaza, is part of a group of five apartment complexes that exited the federally funded affordable housing program called Mitchell-Lama and ended up in the hands of new owners seeking to charge market rates.

Yet even as rents have increased, tenants charge that improvements to their buildings have been substandard, with complaints that include mold, peeling lead paint, vermin, roaches, poor insulation, deficient heating, broken front doors, destitute security, broken pipes and faulty windows that have led to leaks in many apartments.

“We are having a lot of maintenance issues,” said Faheem Abdul-Razzaaq, president of the tenants’ association at the Heritage at Schomburg Plaza. “We are going through a string of elevator breakdowns and people are getting stuck in the elevators every other day and the fire department has to come and get them out.”

What’s more, a temporary fix that kept middle-income tenants in their apartments at affordable rents is set to expire, leaving many on the brink of displacement.

The buildings, containing nearly 4,000 apartments, are owned by Putnam Holding Company LLC, a partnership between Urban American Management and the City Investment Fund. Putnam purchased the affordable housing complexes in 2007 for $918 million, more than $620 million higher than the selling price when the buildings left Mitchell-Lama in 2005.

Residents of an apartment complex at the northeast corner of Central Park announced they're withholding rent until repairs to their apartments are completed. Photo: Max Saffer

Residents of an apartment complex at the northeast corner of Central Park announced they’re withholding rent until repairs to their apartments are completed. Photo: Max Saffer

Among the investors in the City Investment Fund are four pension plans for city workers and the New York State Retirement System. Since 2004, the city has invested nearly $444 million and state added more than $145 million in retiree pension dollars into City Investment Fund.

The Real Deal reported this week that the federally sponsored housing finance enterprise Fannie Mae is also an investor in the complexes.

Abdul-Razzaaq explained in an interview: “We are striking because of poor maintenance, our elevators are malfunctioning, the lack of insulation in the walls, and the windows. But most importantly we are striking for Schomburg and the Putnam portfolio to remain affordable.”

State Sen. Bill Perkins, who has an apartment in one of the two Heritage towers, is a former president of the tenants’ association and spoke at the rally.

“We have a serious situation here, and the only way it is going to change is if we have a rent strike,” he shouted through a megaphone to his constituents and neighbors.

Abdul-Razzaaq said that he set up an escrow account in order to collect rent from participating tenants and that they intend to withhold the money from the landlord until repairs are made. In New York tenants can legally withhold rent in order to press for repairs, as long as those funds are held in escrow.

“This is just the beginning,” said U.S. Rep. Charles Rangel to the tenants gathered at the rally. “I am here, in the rain, to show my support of those people suffering over the years with their rents going up and the lack of heat.”

Representatives for the owner say it has made serious efforts to keep the buildings in good repair.

“Since we purchased this property in 2007,” wrote Joe DePlasco, a spokesperson for Urban American Management, in a prepared statement distributed at the rally, “we have invested over $14 million to improve infrastructure, common spaces, security, heating, landscaping, and apartment renovations to both free market and subsidized units.

“We are working aggressively to address any elevator issues as we continue to upgrade them and are reviewing architectural plans to resolve issues with lobby doors,” continued DePlasco. “We also expect to replace the windows in all 600 apartments within the next two or three years.”

Doryne Isley, the Putnam Portfolio building manager for Urban American, attended the rally. “You always want to hear what their complaints are and we take this seriously,” she told The New York World from under her dripping Urban American baseball cap. “We are not doing everything they want as quickly as they want, but we are doing everything.”

Abdul-Razzaaq disputed Isley’s account. “There is mold, there is no insulation in the apartments, and the front door is broken and people are coming into the building and doing drugs,” he said. “They say, ‘We are going to fix your windows,’ or ‘We are going to fix the door,’ but it’s been two years and nothing. They just continue to string us along.”

The Heritage tenants aren’t alone in their predicament.

In June, middle-income tenants at the River Crossing, formerly Metro-North, on First Ave., in East Harlem, are also set to lose their rent discounts negotiated when the development left Mitchell-Lama. And residents at Riverside Park Community on Broadway in Manhattanville, which has 1,200 apartments, are also considering a rent strike, says tenants’ association president Alicia Barksdale.

“We are all having the same issues and Urban American is responsible for these issues now,” said Barksdale. “I applaud Schomburg for this rent strike and hopefully 3333 Broadway will follow behind, as well as, the other three developments.”

The tenant strike comes as Mayor Bill de Blasio prepares to use city workers’ pension funds as a tool to promote affordable housing. On his campaign website, de Blasio committed to direct $1 billion in pension funds to create 11,000 affordable units, and said of the pension dollars committed under previous administrations: “Those investments have earned a solid return, put New Yorkers to work, and helped refurbish thousands of affordable homes across the city.”

Mayor de Blasio’s office and that of state comptroller Thomas DiNapoli did not respond to multiple requests for comment.

The office of City Comptroller, Scott Stringer, which manages the city pension funds’ investments, said in an emailed statement: “As this is an active investment, the office will not be able to comment at this time.”

Tenant advocates contend that as an investor in the City Investment Fund — which was established by Fisher Brothers, a real estate and private equity firm — the city should work to maintain affordability in the buildings. But the comptroller’s office has the responsibility to maximize profitability for its investors, who include some of the tenants on the brink of eviction.

Jackie Peters, a public school librarian, has lived in a four-bedroom apartment at River Crossing, on First Ave. in Manhattan, since 1987. Her family has been able to remain in its home because of an agreement struck when the buildings exited Mitchell-Lama. The rent is currently less than $2,400, roughly half market rate, but the terms of the deal are set to expire on June 1 and Urban American has indicated to tenants that the company will not be extending the agreement.

Peters, who is chair of the tenants’ association at River Crossing, is well aware that her own retirement savings as a city worker helped to finance the landlord that is now raising her rent.

“My own city pension fund has made my apartment unaffordable,” Peters said, her face cringing. “I thought I was going to live here the rest of my life.”


Pension Fund Politicking

The pension funds’ commitments to City Investment Fund were made when former city comptroller Bill Thompson, sat on the city funds’ boards of trustees and served as the custodian of funds. State Comptroller Alan Hevesi was the sole trustee of the state fund and would later go to prison for his role in a pay-to-play kickback scheme involving the state pension program.

The state delivered its stake in City Investment Fund with the help of a consultant, Bill White, according to an investigation by then–Attorney General Andrew Cuomo. White ultimately agreed to pay the state $1 million in order to end the investigation, which targeted unlicensed pension placement agents. Bill White did not respond to multiple requests for comment.

City records show that in 2002 and 2003, Howard J. Rubenstein received $22,000 from the Fisher Brothers investment firm to lobby Mayor Michael Bloomberg, Comptroller William Thompson, and Public Advocate Betsy Gotbaum, who controlled votes of pension trustees, seeking “approval of pension fund investment in the City Investment Fund.” Rubenstein and his son Steven also donated $26,200 to Thompson and $16,200 to Gotbaum between 2001 and 2006.

“Howard is a very close personal friend of mine,” said Gotbaum, who was a trustee of the New York City Employee Retirement System (NYCERS), one of the four city pension funds participating in the City Investment Fund. “I don’t ever remember Howard lobbying me about anything. If he wanted something he would pick up the phone and just say, ‘Can you do this?’ But he never asked me about NYCERS, ever, that I know.”

Fisher Brothers also contributed to Thompson’s campaigns for comptroller and then mayor, with more than $117,000 coming from principals, employees and family members. Gotbaum received $52,100 from company principals Arnold, Winston, Kenneth, and Richard Fisher, their spouses, and employees who identified themselves as working for Fisher Brothers.

Gotbaum acknowledged that she received the campaign donations, adding, “Of course, that was perfectly legal at that point.”

Since 2008, the city Campaign Finance Board has limited campaign contributions from individuals who do business with the city, including the pension funds, to no more than $400 per race.

Thompson, who is now in the private sector, said, “Contributions have never impacted any decision that was made. If you go back and you look at the structure of the New York City pension funds there are multiple trustees on multiple boards.”

After meeting with tenants, who raised questions about the Putnam deal, along with representatives of the Urban Homesteading Assistance Board and the Legal Aid Society at the end of 2007, Thompson announced in February 2008 a new pension fund opt out “principle,” under which the city pensions could decline to invest their funds into specific real estate deals that could hurt tenants’ welfare or housing affordability.

In a phone interview, Thompson said that even though the city’s pension fund investments were made into the City Investment Fund and not directly into the Putnam deal he felt “a responsibility to make sure that our money was, that New York City’s pension funds were being used correctly and not against tenants.”

According to the tenants and advocates involved, they ended their conversations with Thompson under the impression that he would stop delivering pension dollars to the City Investment Fund or step in to make sure the buildings were kept affordable and well maintained. But according to the fund’s 2008 investment records, the NYCERS board proceeded to invest an additional $23 million with the City Investment Fund and paid another $2.3 million in management fees. The state retirement fund added $13 million in 2008, with a $2.8 million payment for management fees.

In early 2012, tenants at the Putnam developments collectively filed a housing court case against Urban American Management seeking action on numerous housing code violations. The two sides settled when Urban American Management agreed to address the problems and extend, for two years, the period during which middle-income tenants could remain in River Crossing at affordable rates.

Abdul-Razzaaq said he felt the consequences of fighting Urban American Management in July 2012 when he began planning the annual Schomburg Plaza Family Day for the tenants and surrounding neighborhood held by his tenant association.

“Management told us that they would not sponsor family day because we had cost them $250,000 in legal fees,” Abdul-Razzaaq said, “and they were our biggest sponsor.” For the past two summers, since the action brought against Urban American Management by the tenants, there has been no family day.

“History tells us that if we don’t take an action such as a rent strike we won’t get what we want,” said Gina Smith, who was president of the Heritage’s tenant association when it was Schomburg, after Senator Perkins left the position when he was elected to the New York City Council.

“They only beautified the outside and the lobby area so that they could get high market rent tenants,” said Smith. “A lot of us live right next door to people with beautiful rehabbed apartments, but they are just as cold as we are and they wait for the same broken elevators that we do.”

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