A bill proposed by state lawmakers seeks to prevent skyrocketing rental costs for 25,000 co-op apartment dwellers in buildings with ground leases — including some in Manhattan’s wealthiest neighborhoods.
Most co-ops own the building and the land underneath it.
But there are about 100 co-op buildings throughout the city that have ground leases because someone else owns the land underneath the property — including the 324-unit Carnegie House on “Billionaire’s Row” — at 100 West 57th Street.
When the building’s lease is set to expire, an appraiser evaluates the land’s value, which is then used to negotiate a rent increase between the landowner and the co-ops.
The landowner could demand a big increase when the lease expires, correlating with higher market value of the building. Or negotiate a steep sale price for the land.
As The Post previously reported, the lease at the Carnegie House expires in March 2025, and the new landowner not involved in crafting the current lease said the rent should be based on what they paid for the building, quadruple the previous valuation.
Some old-time co-op tenants say they couldn’t afford such a steep price, and the end of the ground lease makes it difficult to sell the apartments.
The legislation introduced by Sen. Liz Krueger (D-Manhattan) and Assemblywoman Linda Rosenthal (D-Manhattan) would limit mass spikes in annual lease payments, much like limiting hikes for rent-stabilized apartments.
For shareholders in co-op buildings, higher costs would be paid through monthly and annual rental costs that support the buildings.
“Apartments in ground lease buildings are generally priced 20-30% below market value, leading some to believe that they are buying an affordable home. However, residents in buildings with ground leases pay higher than average monthly maintenance fees, and often face steep rent hikes once the ground lease expires,” Krueger and Rosenthal said in their memo in support of the bill.
“Some residents have difficulty selling their home, especially near the end of a ground lease term, since purchasing an apartment with an expiring ground lease is too risky for potential homebuyers,” they said.
They said it’s important to prevent homeowners from facing foreclosure and possible bankruptcy.
“This legislation will protect residents from exorbitant increases and ensure they receive a fair deal when negotiating rent increases once the ground lease expires,” the lawmakers said.
There’s heavy lobbying on both sides of the issue.
The Real Estate Board of New York and landowners are fighting to block it, claiming its limitations on increases in leases is a handout to well-to-do-co apartment owners.
“This bill is an unconstitutional solution in search of a problem. It is simply bad public policy to give a legislative handout to the millionaire co-op owners who bought their homes at cut prices years ago with full knowledge of these ground lease arrangements,” said Zachary Steinberg, REBNY’s senior vice president of policy.
Krueger disputed the claim that her bill is a bailout for the wealthy.
“Very few of these co-ops are owned by millionaires. Legal memos show this bill is constitutional,” the senator, who represents the Upper East Side and much of the West Side around Central Park.
The Ground Lease Coop Coalition (GLCC) will hold a press conference and advocacy rally in Albany on Tuesday, arguing the legislation will protect mostly middle class and working class apartment owners.
They mention co-op buildings that would benefit from the legislation include the 168-unit Sheepshead Terrace in Brooklyn, whose lease expires in 2052; and the Murray Hill Coop in Flushing and the 72-unit Shoreview in Far Rockaway, both Queens buildings whose lease expires in 2053.
Some critics wondered why the co-op landlease issue did not come up as part of the affordable housing package deal that was approved as part of the state budget adopted last month.