This week, a federal judge approved the $451 million sale of residential properties owned by the now-bankrupt Pinnacle Group, despite objections by New York City’s new mayor, Zohran Mamdani, and state Attorney General Letitia James. The sale of more than 5,000 rent-stabilized units to Summit Properties Ltd., another large NYC landlord, had become a flashpoint in the affordable housing conversation: The deal was moving the units from one company that had long faced accusations of mismanagement and neglect to a company that has faced similar accusations. The situation had prompted Mamdani and James to attempt to intervene in the bankruptcy proceeding, asking unsuccessfully for the judge to delay the sale to allow them and tenant groups to find a different buyer.
The decision by Judge David S. Jones of Federal Bankruptcy Court is being framed as an early loss for Mamdani. But I think it can be an opportunity in some ways. The judge allowed the sale to move forward largely on Summit’s assurances that it had the cash and capability to address many of the existing deficiencies, including mold and a lack of heat in many apartments. Summit Chief Executive Officer Zohar Levy testified before the court that the company had a plan to address half of reported violations within the first 60 days, drawing on $10 million set aside for repairs, a commitment the city took partial credit for. It strikes me that here’s a chance for the administration to prove that the city will expect landlords to expeditiously fulfill such promises and take quick and concrete enforcement action if they don’t.
It’s not uncommon for the public to find out a landlord or management company’s horrific record of violations only after a contentious sale like this or a tragedy. In one of the most infamous cases, the Twin Parks development in the Bronx had 18 open violations at the time of a deadly blaze in 2022 that killed 17 people and displaced 140 residents, and a total of 174 violations in the two years since a consortium had taken it over.
The condition of existing units is a dimension of the affordable housing conversation that tends to fall by the wayside as we focus (with good reason) on the creation and preservation of affordable homes. There are likely thousands of buildings around the city that have similar litanies of building violations, including some classified as actively hazardous. City Council Housing Committee Chair Pierina Ana Sanchez has for years been banging the drum on official lethargy in following through on identified violations; the city might respond quickly to complaints by sending out inspectors who issue fines and violations, but that doesn’t necessarily mean the fines or fixes happen quickly. The violations can range from faulty fire doors or broken elevators to mold or infestations. The Adams administration tried to address this in part by relying much more heavily on a program known as the Alternative Enforcement Program, in which the city hired contractors itself to make repairs and then billed the landlords. This has run into some obstacles, including, bizarrely, at publicly owned New York City Housing Authority properties that are now under private management.
I frankly don’t have a better solution for holding persistently bad landlords truly accountable for fixing severe issues with their residential properties, but it does seem like the Mamdani team sees this as a significant issue worth active focus. A couple of weeks into his mayoralty, his administration announced the Housing Preservation and Development’s Anti-Harassment Unit’s largest-ever settlement with a landlord: A&E Real Estate, one of the largest landlords in the city, agreed to pay $2.1 million, resolve some 4,000 violations and stop tenant harassment. Obviously, this was something where almost all of the negotiation must have happened under the Adams administration, but I wouldn’t be surprised if Mamdani taking over provided the final push for the company’s lawyers to pull the trigger on a settlement, realizing that they were not going to get any more favorable terms. This is momentum that Mamdani can build on, demonstrating that his housing push isn’t just about creating more housing and freezing rents but keeping existing housing livable as well.
We have a tendency to talk about landlords in the city as some monolithic, amorphous group, but the reality is that there are a lot of them, of different sizes and with distinct characteristics. By all accounts, Pinnacle found itself in bankruptcy as a result of taking on immense debt with the expectation that it could continue the relatively predatory practices it had followed before changes in 2019 to state housing laws made things like pushing out tenants, raising rents arbitrarily and removing apartments from rent stabilization unlawful. It’s not that the company could not have remained profitable, but it had banked its growth on its ability to maneuver in ways that were detrimental to tenants indefinitely.
Yet as I’ve noted before in discussing Mamdani’s proposal for a multiyear freeze for stabilized rents, it is true that some smaller landlords in particular are facing an untenable financial situation. They’re being squeezed by escalating costs for everything from fuel to labor while facing a far more constrained ability to raise rents as a result of the 2019 state housing laws. A rent freeze for multiple years would probably drive some of them underwater, which is not only bad for them but for their tenants. Cash-strapped landlords are less likely to be able to make repairs or even keep buildings in daily working order. That kind of squeeze could also leave them unable to pay fines. It could even drive up rents for market-rate units: A lot of landlords own both types of apartments, and they might well try to make up for losses in rent-stabilized buildings by tapping others for more revenue.
Perhaps what Mamdani’s people can figure out is a more nuanced approach to housing regulation. Having had a few conversations with the Rent Guidelines Board over the years, I’ve come away with the conviction that it’s kind of nonsensical to have a single rule and a single set of rent targets for every landlord and manager of rent-stabilized properties in the city. Some can afford freezes, some can’t. It makes sense to have a heavy enforcement approach to some — as the city did with A&E and as it might do with Summit — but potentially not others, who haven’t taken on speculative debt and are legitimately having trouble covering operational costs with regular tenant revenues.
I think Mamdani’s team should probably be watching Summit with a stick in one hand, ready to bring legal action if the company fails to address the myriad issues in the Pinnacle properties it’s acquiring. But a carrot will probably be a more effective method in other cases, perhaps with the city providing cash infusions for repairs in exchange for some level of additional oversight or longer-term commitments around affordability. A lot of arrangements are possible, and it’s clear that a crisis as deep as NYC’s housing shortage needs a range of approaches.
