Victory for New York City Tenants: State Supreme Court Strikes Down 'Poor Tax' Against Low Income Tenants

In a major victory for New York City's rent stabilized tenants, New York State Supreme Court Justice Emily Jane Goodman struck down a 2008 supplemental adjustment imposed by the Rent Guidelines Board (RGB), which has been characterized as a "poor tax" against low-income tenants who have lived in an apartment for more than six years and pay less than $1,000 a month in rent.

On June 19, 2008, the RGB adopted the 2008 Apartment and Loft Law #40, a supplemental adjustment for a new sub-class of housing accommodations.

The RGB plan provided for renewal increases of 4.5 and 8.5 percent for one-and two-year renewal increases respectively. It also provided for a supplemental increase applicable to persons who have lived in an apartment for more than six years and pay less than $1,000 in rent. These tenants were required to pay increases of no less than $45 or $85 for one-and two-year renewals, resulting in a higher percentage increase than what is allowed under current RGB guidelines.

With the support of Speaker Quinn and the City Council, The Legal Aid Society and Legal Services of New York City filed a lawsuit in September 2008 against the RGB, charging that it had exceeded its statutory authority. Justice Goodman vacated the portion of Order #40 which provides for the supplemental increase, declaring that the RGB does not have the authority to create a new class of housing accommodations and/or create rent adjustments not specifically authorized by the legislature.Justice Goodman also granted the motion of the New York City Council to file a memorandum of law as an amicus curiae in further support of the lawsuit.

"The creation of this 'poor tax' was a direct attack by the Rent Guidelines Board on low income tenants - the very New Yorkers hit hardest by the current recession," said New York City Council Speaker Christine Quinn. "The City Council was proud to work with the Legal Aid Society and Legal Services of New York to help take this unjust burden off of tenants. I applaud Justice Goodman for recognizing that the Board penalized tenants for failing to move in a city where affordable housing is scarce, and finding that the Board exceeded its authority under City and State housing laws."

"In a time when New Yorkers are struggling more than ever, the Rent Guidelines Board exceeded its authority by punishing New Yorkers for remaining in their homes and neighborhoods and for being poor," said Ellen Davidson, a staff attorney in The Legal Aid Society's Civil Law Reform Unit. "This decision is a major victory for all rent stabilized tenants in New York City."

"As the RGB's power is in doubt, a court should not permit a quasi-legislative agency, with a nine member board, appointed by the Mayor of New York, to perform a function designated to the legislative body, which enacted the RSL (New York City Rent Stabilization Law)," Justice Goodman wrote in the opinion dated January 20.

One of the major plaintiffs, Paul Hertgen, who has lived in the same Staten Island apartment for 18 years, praised Justice Goodman for "helping to save our homes." Mr. Hertgen, a union truck driver, was laid off from his job recently. He was the primary caregiver to his wife, who lost her battle with cancer in January 2007.

"For years, the Rent Guidelines Board has been raising rents to unaffordable levels and ignoring their responsibility to tenants under the rent stabilization law," said Maggie Russell-Ciardi of the New York StateTenants & Neighbors Coalition, one of the plaintiffs in the case. "This year, when they penalized some of our city's lowest income tenants for staying in the affordable housing they so desperately need, they went too far. Finally the courts have woken up to their outrageous acts."

Attorneys handling the case include: Afua Atta-Mensah and Ellen Davidson, staff attorneys with The Legal Aid Society; Judith Goldiner, Supervising Attorney in the Society's Civil Law Reform Unit; and John C.Gray, Edward Josephson and Rachel Hannaford of South Brooklyn Legal Services, Inc.

Read the full decision (PDF).

New York Tonight
NY1 New York
January 25th, 2010 8:00 – 8:30 PM

Lewis Dodley, Anchor: Good evening, I’m Lewis Dodley. Thousands of New Yorkers living in rent-stabilized apartments could see a refund after a court’s ruling today. Our Natasha Ghoneim joins us now from the East Village with more. Natasha?

Natasha Ghoneim, Reporter: Lewis, this ruling impacts 300,000 tenants, and they could receive 36 million dollars in their pockets in back rent money. That’s according to an attorney I spoke with with Legal Aid, and she says that 36 million dollar figure is a conservative amount, and it only applies to one of the two years impacted by this ruling. Now, the New York State Supreme Court ruled that in 2008, the Rent Guidelines Board exceeded its authority and acted illegally when it implemented increases for about 300,000 tenants. For tenants paying less than a thousand dollars a month, and who have lived in their apartments for six or more years, the Rent Guidelines Board implemented supplemental increases. Renters were required to pay forty-five dollars extra a month for a one-year lease, or eighty-five dollars a month extra for a two-year lease. Legal Aid says this was to insure low-income renters would pay more than if they were simply paying based on a straight percentage. Now, um, all of the tenants, uh, impacted by this, uh, say that this is good news. The Legal Aid attorney I spoke to says the increases are really an attempt to push out people who couldn’t afford to move. Now tenants could actually get money back in their pockets.

Ellen Davidson, The Legal Aid Society: What is more astounding that in a time of extreme economic crisis, that the Board’s response to the economic crisis was to come down hard on tenants.

Natasha Ghoneim: The outgoing chairman of the Rent Guidelines Board says that they will appeal and he is confident that the Board’s decision will be upheld. Now, I spoke to a landlord who owns a building in the East Village. He calls this ruling crazy. He says that he was present during discussions at the Rent Guidelines Board, and he says the legal council at that time advised its members that this was legal. I also spoke to, again, as I said before, an attorney with Legal Aid; she says there is actually a legal precedent on their side. She says it stems from a case in 2008 in Nassau County. We don’t know how soon this will go into effect, because keep in mind, this still has to weave its way through the appeal process. So, um, stay tuned is really the best answer at this point. In the East Village, I’m Natasha Ghoneim, New York One. Back to you, Lewis.

Lewis Dodley: Thanks, Natasha.