From the developer that brought you the divisive Domino Sugar Development comes another affordable housing kerfluffle: Two Trees Management's property at 125 Court Street in Brooklyn Heights overcharged tenants in its affordable units for years and has continued to reap millions in tax benefits to which it is not entitled, ProPublica reports.
The investigation reveals that in 2004 the firm applied for 421-a tax benefits, a subsidy for developers who agree to rent 20 percent of their units to families making the area median income (approximately $50,000 for a couple), which would put the "affordable" rent at roughly $1,260 a month. Two Trees then proceeded to overcharge most of the tenants in its 64 affordable units (as well as 47 tenants in market-rate units—whose rent increases had improperly exceeded the amount set by the Rent Guidelines Board), at an estimated total of $368,000.
When regulators intervened in 2011, the developer repaid tenants $300,000 plus interest, and corrected its rents in 2013 after the Department of Housing Preservation and Development (HPD) threatened to stop processing its final 421-a application.
Throughout all of this, the property has continued to receive more than $10 million in 421-a tax benefits, though to this day it does not have a certificate of its eligibility for that program. ProPublica ran these findings by five lawyers, all of whom deemed Two Trees' actions illegal and three of whom called the city's enforcement (or lack thereof) "toothless."
In a statement from BerlinRosen, the PR firm that represents Two Trees, the developer defended its commitment to affordable housing:
“Two Trees has proudly participated in the 421-a program, meeting our commitments to deliver integrated affordable housing in some of the city’s finest luxury rental buildings - including 64 affordable units at 125 Court Street that would otherwise not exist. When Two Trees discovered accidental overcharges - averaging about 4% and affecting less than a quarter of tenants - we moved to address them, providing full refunds with interest to all affected tenants for every overcharge.”
Still, it remains unclear why 125 Court Street still does not have a final certificate of 421-a eligibility, given that it continues to receive massive tax cuts on that basis. Jeremy Soffin, a spokesperson at BerlinRosen, called this an "administrative oversight."
"We’re working with HPD to get the final certificate," Soffin told Gothamist. "The point is that the benefits that they promised through 421-a are being delivered...There are 64 affordable units that have been in this building throughout."
Applying for 421-a benefits is a two-stage process: developers receive three years of tax breaks during construction, but must reapply to get final, post-construction benefits. Two Trees applied for this second stage in 2004 and has received benefits ever since, but—as confirmed by city officials that ProPublica interviewed—it never officially qualified for those benefits. Indeed, the property is not listed on HPD's list of 421-a exempt properties.
Officials at HPD told ProPublica that an updated 421-a law will prevent properties from receiving benefits until they have actually qualified. What a concept!