Trust fund dilletante brats take advantage of affordable housing tax break

Bloomberg

 If you have a modest income but access to lots and lots of cash, New York City has an apartment ownership program that’s right up your alley. Even if it wasn’t meant for you at all.

 The changes at the building in Brooklyn’s Williamsburg neighborhood began in 2009, when a guitar shop owner whose father was a renowned art appraiser purchased a four-bedroom apartment. His mom lent him the money. Then came a writer who borrowed from her mother, a psychologist. A movie production manager and her partner, a photo director, bought their unit with a loan from her father, a physician in Maryland. A flurry of additional purchases without mortgages followed, including by a Shakespearean actress whose father lives in a terraced penthouse overlooking Central Park and a fashion designer whose father is a gynecologist in California.

Similar colonies of young people with creative sensibilities and well-off parents have taken root in Williamsburg for years, but the gentrification of this particular six-story building on South 2nd Street had a surprising set of enablers: the taxpayers of New York. It’s one of about 1,000 properties across the city that receive a special property tax break created to make homeownership affordable for low-income people. The building had income restrictions, and these buyers met them. At the same time, they had access to a lot of cash, which they used to score their units at well below market prices. Never mind their wealth or their parents’; the tax break doesn’t require any limit on assets or preclude gifts.

The children of America’s wealthy are quietly sewing up deals like this in some of New York’s most desirable neighborhoods, in buildings known as Housing Development Fund Corporation cooperatives, or HDFCs. These buildings were at one time in financial (and often physical) distress, and many are still shunned by conventional mortgage underwriters—hence the need for buyers to pay cash. Many are no longer cheap, because the agreements that once limited resale prices have expired. But even at prices that can crest well above $1 million, they’re discounted to the market, because of the income limit on buyers and the lack of available financing in some cases. And the taxes can be remarkably low. On South 2nd Street, the owners enjoy annual property tax discounts of roughly 70%.

The tax break was designed to be simple—too simple, as it turns out. The program sets a maximum taxable value for every HDFC unit across the city. This year it’s $11,079, in a market where the median price for a home has risen to $770,000. Because of this system, half the aggregate tax benefit will go to the top 20% of eligible buildings by value. Struggling buildings in poorer areas, meanwhile, will get no benefit at all. Their values are too low for the tax break to have any effect, and because of their HDFC status, they don’t get an abatement that most market-rate co-ops receive. Dozens have been foreclosed on in recent years for unpaid taxes.

In short, because of inadequate rules, poor design, and decades of lax oversight, these low-income tax subsidies are being scooped up by the well-to-do. “They’re just gaming the system,” says Penny Gurstein, an expert on affordable housing who directs the Housing Research Collaborative at the University of British Columbia. “This is now just being used as a playground for the rich.”

Across the U.S., studies have shown that local property tax systems, which raise more than $500 billion annually, are deeply unfair, favoring the wealthy and systematically applying higher effective tax rates to lower-valued properties. New York’s outcomes are among the most unequal. But even in a system shot through with inequalities, the exploitation of the HDFC program by affluent bargain hunters stands out.

HDFC sales are infrequent, and not all of them go for big-dollar prices. Nonetheless, it happens often enough that the city’s Department of Housing Preservation and Development acknowledges that “strong reforms are needed.” The agency made a run at that in 2016 but failed in the face of what a spokesman called “strong objections from many HDFC co-ops and their elected representatives.” Since then, the most desirable HDFC apartments, swept along by the forces of the New York real estate market, have only drifted further beyond the reach of the people they were set up for.

An HDFC cooperative exists, per New York state law, “exclusively to develop a housing project for persons of low income.” That doesn’t stop some HDFC buildings from advertising how lax they are about enforcing income limits. Bloomberg Businessweek found dozens of listings dating to 2010 that failed to mention income restrictions for the building or plainly said there were none. A four-bedroom unit at 238 W. 106th St. was listed this year for $1.85 million and advertised as having “no income restrictions,” despite city records showing it benefits from the exemption for low-income housing. The building’s HDFC status lowered its taxable value this year by $3.6 million and cuts its owners’ tax bill by more than $400,000. A building manager at ABC Realty, which manages the building, told Bloomberg Businessweek she would inform the brokers that “they need to be compliant.”

When income limits are enforced, the rules can be as complex and unintuitive as everything else about New York City real estate. Depending on its governing documents, a building will set the limit by various methods. One looks like this: Take the annual common charges for the unit, plus the estimated annual utilities, and multiply that by six (or seven if the buyer’s family is big enough). Then add 6% of the seller’s original purchase price. That’s your income ceiling. Some buildings keep it simpler—and perhaps get to a higher number—by using a percentage of the area median income, or AMI, for the New York metropolitan area. Buildings that are committed to low-income ownership might set the limit at 80% of AMI, which matches the city’s definition of low-income. But an HDFC can go as high as 165% of AMI. This year that translates to $137,940 for a single person and $196,845 for a family of four.

For buildings with high prices and tight income caps, gifting is just about the only way a qualified person can buy some of these apartments, especially if an all-cash deal is necessary. The upshot is that a child of well-to-do parents is something of a perfect buyer.

Judge orders circumcision on luxury tower development

New York Times

 In an extraordinary ruling, a State Supreme Court judge has ordered the developers of a nearly completed 668-foot condo tower on the Upper West Side to remove as many as 20 or more floors from the top of the building.

The decision is a major victory for community groups who opposed the project on the grounds that the developers used a zoning loophole to create the tallest building on the West Side north of 61st Street. A lawyer representing the project said the developers would appeal the decision.

Justice W. Franc Perry ordered on Thursday that the Department of Buildings revoke the building permit for the tower at 200 Amsterdam Avenue near West 69th Street and remove all floors that exceed the zoning limit. Exactly how many floors might need to be deconstructed has yet to be determined, but under one interpretation of the law, the building might have to remove 20 floors or more from the 52-story tower to conform to the regulation.

“We’re elated,” said Olive Freud, the president of the Committee for Environmentally Sound Development, one of the community groups that brought the suit.

“The developers knew that they were building at their own peril,” said Richard D. Emery, a lawyer representing the community groups that challenged the project before the foundation was even completed. Mr. Emery said this decision sent a warning to other developers who proceed with construction in spite of pending litigation.

The question at the heart of the suit was whether the developers had abused zoning rules to justify the project’s size.

It is common for developers to purchase the unused development rights of adjacent buildings to add height and bulk to their project. But in this case opponents of the project argued that the developers, SJP Properties and Mitsui Fudosan America, created a “gerrymandered,” highly unusual 39-sided zoning lot to take advantage of the development rights from a number of tenuously connected lots. Without this technique, the tower might have been little more than 20 stories tall, instead of the nearly finished 52-story tower that now stands.

The decision also sets an important precedent, said Elizabeth Goldstein, the president of the Municipal Art Society of New York, one of the advocacy groups that brought the suit against the project.

“The way this zoning lot was constructed has been invalidated, and that is extremely important,” Ms. Goldstein said, adding that the decision would deter other developers from attempting similar strategies.

Scott Mollen, a lawyer with the firm Herrick, Feinstein, which is representing the project, said the ruling contradicted earlier decisions from the Department of Buildings and the Board of Standards and Appeals that were based on a long-established zoning interpretation. SJP, one of the developers, said they would “appeal this decision vigorously.”

Elected officials and their donors doing business with the city exploit campaign finance loophole.

NY Daily News

A glaring loophole in New York’s campaign finance rules allows people doing business with the city to steer thousands to candidates for office despite limits on how much they can personally donate.

The glitch means lobbyists, developers and others who stand to profit from government action can curry favor with current and future decision-makers — and skirt donation limits ― by bundling donations from their wealthy pals and sending them to candidates for city office.

Twelve people who have city business, prohibiting them from giving more than a few hundred bucks themselves, have already bundled $112,405 in donations for 2021 candidates, an analysis by The Daily News found.

Anyone considered to be doing business with the city — like lobbyists and those with municipal contracts — can’t give more than $400 to any one candidate for mayor, public advocate and comptroller. They’re barred from giving over $320 to candidates for borough president and $250 for pols running for City Council.

Yet that doesn’t stop them from bundling hundreds of fat checks.

"Some donors circumvent NYC's doing business contribution limits by bundling contributions from others, which can result in more influence than giving contributions directly,” said Alex Camarda, a senior policy adviser at good-government group Reinvent Albany.

So far, Bronx Borough President Ruben Diaz Jr. leads 2021 candidates in bundled cash from the conflicted donors, collecting $49,700 from two people with city business as of July 11, the end of the most recent filing period.

He’s followed by Councilman Rafael Salamanca, Jr., with $14,525 from bundlers with city business, 
Brooklyn Borough President Eric Adams with $12,040, and Comptroller Scott Stringer with $10,800.

 The amount of bundled cash from those with municipal business is likely to skyrocket in the next two years before the 2021 election, when term limits open 41 of the city’s 59 elected positions that more than 500 candidates are expected to run for.

During the last wide-open election in 2013, a whopping $1.7 million was bundled and given to candidates for mayor, public advocate, comptroller, borough president and city council from 93 people doing business with the city at the time, according to a Daily News analysis of campaign filings.

Another $875,098 was bundled by 70 people with city business during the 2017 election, The News found.

Landlords continue to inflate rents based on dubious reconstruction costs and city loopholes

Crain's New York

In the fall of 2013, when apartment 1E at 171 W. 81st St. was vacated, the owner did what landlords have done with tens of thousands of other rent-regulated units in the city. Stellar Management claimed it had spent a bundle on renovations, which—combined with the 20% rent increase permitted when a tenant leaves—allowed it to push the $647 regulated monthly rent above $2,500—to the threshold at the time to make it a market-rate unit. A few months later Stellar rented the Upper West Side pad to massage therapist Jonathan Saballos for $3,300 a month.


It seemed like a routine example of the steady exodus of such units from the city's pool of about 900,000 rent-regulated apartments. Except that in January, after Saballos lost his roommate and then his job and was taken to housing court by Stellar for failing to pay rent, a judge ruled that apartment 1E shouldn't have been deregulated at all.

In the written ruling, Judge Sabrina Kraus of Manhattan Civil Court determined that Stellar had inflated its renovation costs of more than $71,600 by almost $45,000—including $3,500 for a bathtub that was never installed—and had overcharged Saballos at least $41,193. The judge ordered the owner of the 20-unit building to pay triple damages—$123,578—and place the apartment back into regulation with a monthly rent of $1,524.

Housing advocates say such episodes are common in a system where loopholes and lax oversight practically invite owners to pull units out of regulation. A review of several lawsuits against Stellar reveals how expensive or dubious renovations enabled the owner to convert rents to market-rate.

"The city or the state doesn't even know how many illegally deregulated apartments are out there, because they're only really examined when cases like this come up in court," said Mark Hess, an attorney who represented Saballos in the eviction proceeding. "Stellar thought it was going to be business as usual and they were going to throw my client out of his apartment. Instead we called them out."

Stellar is appealing and will not comment on ongoing litigation, said a spokeswoman for the company, which owns roughly 100 buildings, most of which are in the city.

Allegations of abuses by landlords are not new. In one high-profile case last year, the Associated Press reported, the family business of White House adviser Jared Kushner failed to disclose rent-regulated units in buildings it owned, then began disruptive renovations that some of those tenants saw as an effort to push them out. Kushner Cos. blamed a third-party document preparer for the erroneous filing and said its renovations were proper, but the episode led to a fine, a lawsuit by tenants and City Council legislation to deter harassment by construction.

Less focus, however, has been given to the method used in Saballos' case, which may have allowed landlords to improperly deregulate tens of thousands of city apartments—and even more of them legally.

 

"Stilt building" loophole to be eliminated

From Crains:

The city is on schedule to regulate so-called excessive mechanical voids by the end of the year, dealing a blow to developers who use a quirk in the building code to boost the height of their luxury apartment towers.

Mechanical voids are essentially floors used to house the heavy equipment that powers a building's systems. However, by raising the ceilings of these spaces to dizzying heights, developers increasingly have been creating hollow pedestals upon which they can stack luxury apartments. Because these upper units can typically command better views than neighboring structures without large voids, they can be sold at premium prices to pay for the additional construction while still boosting profits. An apartment building proposed by Extell Development at 50 W. 66th St., for example, will have only 40 floors, yet it is slated to be 775 feet tall, according to a neighborhood group opposed to the plan.

Developers exploit low-income housing loophole

From the Wall Street Journal:

Consider the Low Income Housing Tax Credit, created by the 1986 tax reform. This $9 billion credit masquerades as an antipoverty program, but it mainly subsidizes developers, investors and the financial industry.

To stimulate low-income housing construction, the federal government allots a share of tax credits to the states, which dole them out to selected developers. The credits cover part of the construction costs of multifamily housing projects. The developers must cap rents for a share of the units, so the benefits of the tax credit are meant to flow to tenants in the form of lower rents. Yet the developers usually sell the credits to banks and investors, often using syndication companies as intermediaries. The investors, developers and middlemen—not poor families—end up grabbing most of the benefits.

Long overdue legislation

From AMNY:

The City Council passed a bill from Public Advocate Letitia James on Wednesday that offers better legal protection for pedestrians that are struck by drivers in the crosswalk.

The bill closes a loophole in city law and give walkers the right of way in a crosswalk when a countdown clock is in progress or when a red hand signal is flashing.

The previous law, which was established before the existence of countdown timers, only granted pedestrians the right to cross the street during a walk symbol.

“This brings our law as it relates to our city into the 21st century,” said James, who hosted a rally at City Hall Wednesday morning before the legislation passed. “It corrects a dangerous loophole that basically offered no legal liability for drivers. We wanted to provide pedestrians some protections under the law.”

Advocates say that the loophole had made it difficult for prosecutors to enforce the city’s “Right of Way” law, a Vision Zero measure passed two years ago that provides a criminal misdemeanor to any driver who strikes a pedestrian or cyclist who has the right of way to cross a street.

Management company taken to task

From the Queens Tribune:

Residents from across seven Flushing buildings gathered at St. George’s Episcopal Church to voice concerns over recent actions by New Jersey-based development company Treetop Development, which owns the buildings in question. The corporation has been exploiting loopholes to raise rents and drive low-income residents out of their apartments in order to begin gentrifying the area, the residents argued.

The meeting was organized by the Flushing Rezoning Community Alliance. Faith in New York, an interfaith organization, was also in attendance. Andrew Hausermann, the director of Organizing for Faith in New York, explained that the organization had heard many complaints from residents in the seven buildings, which Treetop purchased six months ago.

“This company, Treetop, has a bad history,” Hausermann said to the hundred or so residents in attendance. “They have a history of buying rent-stabilized units in neighborhoods that they say are soon upcoming neighborhoods, might be gentrifying neighborhoods, and they’ll buy these rent-stabilized buildings, run out the low-income tenants and then sell the buildings for a big profit.”

Hausermann also said that the company was accused of similar practices in Williamsburg and Harlem.

Among the chief complaints raised by residents is what they say is a loophole in New York State law that allows for permanent rent increases in rent-stabilized units. Landlords can implement these raises to fund construction projects called major capital improvements. These MCI increases are problematic, Hausermann explained, because even after the project is funded, the rent increase can remain in place, which could drive low-income tenants out. When the rent reaches a certain threshold, it eliminates the rent-stabilization designation, Hausermann said. These concerns have been raised in the wake of a high level of construction going on around the buildings.

One building in question, 132-40 Sanford Ave., received a stop-work order after Councilmember Peter Koo (D-Flushing) voiced concerns raised by constituents. A June stop-work order complaint on the Department of Buildings website said that workers were “removing asbestos without protection” and cited debris in the hallway. Another complaint from July said that work resumed at the site despite the stop-work order.

DeBlasio uses a loophole to pay for lawyers

From the Daily News:

City politicians aren't allowed to use their campaign cash to pay lawyers representing them in criminal matters, but Mayor de Blasio has found a way around this problem.

The mayor — now facing multiple investigations of his campaign fund-raising tactics — is using an obscure loophole in campaign finance laws to pay the lawyers defending him.

He’s taking advantage of the fact that while city law mandates donations for primary and general elections can only be used for lawyers handling non-criminal matters related to a campaign, funds raised for run-off elections face no such restriction.

That’s because run-offs fall under state law, not city law, and the state allows campaign funds to pay for criminal defense lawyers. Convicted Albany leaders Sheldon Silver and Dean Skelos both took advantage of that this year.

Loophole for developers in zoning plan

From Crains:

A de Blasio administration proposal requiring developers to include affordable apartments in their market-rate projects includes a legislative escape hatch that critics say would let builders too easily dodge the mandate.

The mandatory inclusionary housing policy is meeting opposition as it moves through the public-review process. Should the City Council approve it, developers would be required to devote up to a third of new projects' apartments in the city's affordable-housing program if the value of their property is increased by the city allowing more floor space or a change of use.

The proposal, which aims to shift the burden of building affordable housing to the private sector, also includes a passage describing when mandatory inclusionary housing isn't actually mandatory. If developers believe that the affordable housing would prevent them from making a reasonable profit, they can appeal and have the requirements reduced or eliminated.

And on top of this, people are asking where the Environmental Impact Statement is for this plan.

Senate Republicans halt anti-tweeding bill

From Gotham Gazette:

On Tuesday the state Assembly passed a bill to close the controversial LLC loophole at the center of the federal corruption cases against former Assembly Speaker Sheldon Silver and former Senate Majority Leader Dean Skelos. Both men - a Democrat and a Republican, respectively - were recently arrested and subsequently stepped down from their powerful leadership posts. Later in the evening Tuesday, the Senate’s version of the bill to close the loophole that allows money to flow unfettered into campaign accounts appeared to be dispatched by Senate Republicans in a bit of behind-the-scenes maneuvering.

The LLC loophole that allows individuals and corporations to donate unlimited amounts of cash to legislators has been treated by many as a political hot potato all year. It gained attention when Glenwood Management and its principle, Leonard Litwin, were connected to the Silver indictment. Litwin is the state’s largest campaign donor thanks to the many LLCs he controls and his tendency to donate large sums to politicians at all levels of state government and in both major parties. The issue flared up again after Litwin and his company appeared in the federal complaint against Skelos.

According to a study by Common Cause NY, Glenwood Management has given $12.8 million in political donations from 2005 to 2014, but only 10 percent of those donations actually came directly from Litwin or his companies. The rest of the donations were made by LLCs registered to Glenwood or listed at its address.

In April, Sen. Daniel Squadron, a New York City Democrat, used a parliamentary maneuver called “Motion for Committee Consideration” to force the Elections Committee to consider the bill. In an apparent move designed to avoid controversy, Republican Senators voted to move the bill out of committee without recommendation. Instead of being sent to the floor for a vote it was sent to the Corporations Committee. Squadron told Gotham Gazette at the time it appeared the Republicans had “used a loophole to kill an attempt to stop a loophole” because the Corporations Committee rarely meets.

No more free legal rides for crooked pols

From the Queens Gazette:

Describing himself as “outraged” that public funds totalling more than $2 million were used to pay an ex-state senator’s legal bill recently, state Senator Michael Gianaris has introduced legislation to end the arrangement.

“It is sadly typical in the upside-down world of Albany that public financing for campaign committees only exists for those accused of crimes,” Gianaris stated as he introduced his legislation over-riding the existing law.

The Astoria lawmaker added: “This multimillion dollar payout is a glaring example of the desperate need to reform New York State election law, and we need to close this loophole immediately.”

Gianaris (D–Western Queens) said that just last week, the attorney general’s office was forced by statute to approve reimbursing former state Senator Joseph Bruno’s “long dormant” campaign committee to the tune of $1.51 million for legal fees accrued in defense of corruption and bribery charges.

In addition, Gianaris recounted, the state must reimburse a legal defense fund Bruno created in 2009 for an additional $564,547.

As of now, state employees are entitled to reimbursement for legal defense if the charges in question arose from their official duties and are subsequently dropped or the accused is acquitted.

Senator Gianaris’ bill would change current law so that neither campaign committees nor legal defense funds would be eligible for reimbursement, thus preventing any future payouts similar to the Bruno case.

Gianaris said the proposed bill would also require that any legal defense funds raised be utilized in full before any public reimbursement takes place, in order to insure that public funds are protected. Gianaris has long been a leading advocate for ethics reform and election law reform in particular, and believes this loophole needs to be closed immediately.

No more anonymous attack ads

From the Epoch Times:

During the 2013 City Council elections, there was more money spent on independent mailers than all of the candidates’ expenditures combined. A glaring loophole in the campaign finance law led to negative ads that were at times attacks on candidates' personal lives, backgrounds, or beliefs, councilmembers said Wednesday before a committee hearing on legislation to ban these ads.

“We want candidates to own up to what they’re saying,” said councilmember Dan Garodnick, who is introducing a bill that will require every ad or communication paid for or authorized by a candidate to disclose that information.

Councilmember Brad Lander is introducing another bill that will require all independent ads and communications relating to local elections to make clear it is funded by an outside group, and include the name of the organization’s owner, CEO, and top three donors. While many of the ads were hostile, the only information voters had about where the information was coming from was the vague and positive sounding organization names, Lander said.

Why should he follow his own rules?

From The Real Deal:

Governor Andrew Cuomo has become the biggest beneficiary of a loophole in New York State’s campaign finance regulations that allows businesses and individuals to donate large amounts of money to politicians. The lion’s share of the donations appears to be coming from real estate developers.

The loophole in question allows limited liability companies, or LLCs, to give up to $150,000 a year to candidates and political committees. In comparison, the ceiling for corporations is $5,000.

Because developers typically establish an LLC for individual properties, they are able to easily take advantage of the loophole, according to a new report by ProPublica.

The data shows Governor Cuomo has raised $6.2 million from LLCs since he took office in 2011. That’s more than double the amount Eliot Spitzer and David Patterson received from LLCs in their combined four years in office, reports ProPublica.

Governor Cuomo’s top real estate donor is Glenwood Management, with $800,000 contributed through 19 LLCs, according to ProPublica.

The report also cites two donations from Extell Development worth $100,000. Those gifts came two days before the governor signed legislation that awarded Extell and four other developers tax breaks for projects, including Extell’s One57.

DeBlasio would be Bloomberg 2.0

From the Wall Street Journal:

Bill de Blasio has risen to the top of the polls assailing the Bloomberg administration, but if elected he could pursue even more aggressive policies than his predecessor on a crucial issue: creating densely packed new residential towers through land-use decisions.

Mr. de Blasio, the city's public advocate, would push for mandatory affordable housing and fewer tax breaks for developers. But he wouldn't differ from Mr. Bloomberg on a fundamental premise that building significant amounts of new housing is a top way to spur economic growth and control housing costs.

Mr. de Blasio's pro-development policies have helped allay fears in the real-estate industry that perhaps the most liberal Democrat in the race would, as mayor, be a fearsome opponent on big developments.

For some, however, Mr. de Blasio's support for new high-rise towers—even with more affordable housing—is dissonant with his campaign's theme of easing income inequality. As a City Council member in the Park Slope section of Brooklyn, Mr. de Blasio was a strong supporter of the three major Bloomberg-backed development projects, including the project known as Atlantic Yards, which critics say has hastened gentrification and helped deepen the economic divide in that area.

Some liberal community groups said they feel betrayed. "The whole thing is a joke to us that people are looking at this guy as if he cares about the community," said Marlene Donnelly, a member of Friends and Residents of Greater Gowanus, a group that pushed to get the Gowanus Canal designated a Superfund site—a goal Mr. de Blasio unsuccessfully opposed. "I don't find any step of the way that he's actually been on our side here."

Mr. de Blasio has met with developers, and his campaign has received some $460,000 in contributions from real-estate interests, including developers, brokers, architects and construction firms, according to a Wall Street Journal analysis.

From New York Magazine:

Democratic mayoral front-runner Bill de Blasio has styled himself as a scourge of slumlords and a critic of the Bloomberg administration’s policies to shelter the homeless, assailing the “failure of the strategy” in his first policy statement as public advocate. But at a time when he was considered a long-shot candidate, De Blasio found financial support from an unlikely source: one of his most frequent targets, a former Bloomberg administration official who now runs a network of homeless shelters leased from some of the city’s most notorious landlords.

During 2011 and 2012, a small group of property owners and contractors who do business with the city’s Department of Homeless Services donated more than $35,000 to De Blasio’s campaign, according to records on file with the city and state campaign-finance boards. (See the full list at the bottom.) Most of the money came from landlords of single-room-occupancy hotels and slum apartment buildings that operate as shelters under the aegis of Housing Solutions USA, run by Robert Hess, formerly Mayor Bloomberg’s commissioner of homeless services. Though Hess’s organization is a nonprofit, the landlords he works with have reaped millions in public funds by turning their rundown properties into shelters, collecting sky-high rents from the city.

Hess has contributed just $400 to De Blasio, the maximum that campaign-finance law allows for contractors doing business with the city, but in May 2012 he held an intimate fund-raiser for the candidate at his Long Island City apartment. Among the handful of attendees were two hotel landlords who gave generously to De Blasio's campaign, including Alan Lapes, one of the largest and most controversial players in the for-profit shelter industry.

Hess declined to comment on the event when reached by phone yesterday. “That’s a personal matter,” he said. But other attendees described an informal living-room dialogue about De Blasio’s campaign and his plans to care for the city’s homeless population, which has risen to record levels under Bloomberg. Providing shelter beds can be lucrative for landlords — the city typically pays rents of more than $3,000 a month — and one attendee recalls that, prior to the event, Lapes was frank about his reasons for giving. “This is the guy who is going to win,” he recalls Lapes saying. “This is the guy to bet on.”

In February, after the Times reported that Lapes had exploited an obscure loophole in the city’s campaign-finance rules to give De Blasio twice the legal limit, the candidate returned nearly $15,000 in donations from the landlord and his wife. “I’ve just made the decision to return the money, and that’s all I have to say,” he told the Post. But the broader pattern of giving — which ramped up as Housing Solutions USA, formed only in 2011, was pressing forward with controversial multi-million-dollar city shelter contracts in Manhattan, Brooklyn, and the Bronx — has not previously been reported.

Time to close the air rights loophole

From The Real Deal:

A longtime city program that gives landmarked properties the ability to sell their air rights to developers across the street in a “kitty corner” transaction is woefully underused, and some industry insiders have been discussing plans for air rights reform. Eager to avoid getting tangled in expensive bureaucratic red tape, developers currently prefer to engage in as-of-right zoning lot merger transfers with these landmarked buildings, thereby rendering the city’s special provision for landmarks largely useless, insiders say.

Of the 353 arm’s length transfers of air rights in New York City between 2003 and 2011, 27 were from landmarked buildings, according to new research from the Furman Center for Real Estate and Urban Policy. But only two of these 27 transactions occurred through the landmark transfers program.

For the most part, landmark transfers are considered too complex, time-consuming and stifling to development to be a viable option for air rights transfers, the research, published last month in a New York University School of Law working paper shows. The recent Midtown East rezoning proposal has reignited the air rights debate, as landmarked properties including St. Patrick’s Cathedral have expressed the need for greater flexibility in the sale of their air rights, as The Real Deal previously reported.

The landmarks transfer program was created by the city in 1968 to compensate landmarked buildings for the potential financial losses stemming from the landmark preservation law, which severely restricts alterations to landmarks. It allowed the city to skirt the responsibility of directly compensating these buildings, instead giving them the right to sell their air rights to developers for potential projects.

Elisabeth de Bourbon, a spokeswoman for the city’s Landmark Preservation Commission, said that the program was “an important benefit, because it allows owners of landmark buildings to use development rights they may not be otherwise able to use on the landmarked property.” This, she added, “results in the restoration and continued maintenance of the landmark building.”

However, most air rights transfers involving landmarks happen through a zoning lot merger, which can occur without the city’s intervention and involves joining together two or more contiguous lots. Once the lots are merged, the development rights from all merging lots are combined and can be used freely within the property.