Saying that the system is rife with fraud and creates an incentive for harassment, about 60 tenants and activists rallied in front of a Jared Kushner-owned building in the East Village on Friday to demand that the state pass two bills that would end landlords’ ability to charge tenants for the cost of renovations to rent-stabilized apartments.

Anthony Donovan, a longtime tenant of 120 East Fourth Street, told the rally that previous landlord Ben Shaoul, who emptied much of the building before selling it to Kushner, had had work going night and day seven days a week renovating vacant apartments, including jackhammering off the building’s concrete awning at 7 in the morning.

Shaoul then raised rents on those apartments to market rate, using the state law that allows permanent rent increases for individual apartment improvements, adding 1/40th to 1/60th of what the landlord claims they cost to the monthly rent.

But Donovan said it’s not about a single landlord, it’s “a system that supports criminal behavior.”

One of the nine bills in the “universal rent control” package pending in the state legislature would repeal the law allowing individual-apartment improvement increases. Another would repeal increases for building-wide major-capital improvements (MCIs—1/96thto 1/108thof claimed costs).

They are among the three bills in the package that the real-estate industry opposes most strongly, along with the one that would prohibit evictions without “good cause” in now-unregulated apartments. Meanwhile, the state's rent-regulation laws expire June 15.

The state Senate Democratic majority has endorsed all nine bills. Governor Andrew Cuomo, however, has said he would rather see increases for MCIs and apartment renovations made temporary. Landlords “should only be able to recoup their investment,” he told the Albany radio station WAMC June 6.

During an interview Friday morning with WAMC's Alan Chartock, Cuomo said he would be willing to extend the legislative session should Democrats be unable to come to an agreement on the approved package of bills in time.

“The Senate has to pass a new rent bill,” the governor said. “They have to stop talking and start voting.”

The Assembly Democratic majority included both repeal bills in its April rent-legislation package, but many in the tenant movement fear that Speaker Carl Heastie will backtrack.

Those increases are part of the way landlords over the last decade have been able to convert numerous buildings in the East Village and the Lower East Side from 80 to 90 percent rent-stabilized tenants to more than 90 percent unregulated, market-rate apartments, Cooper Square Committee organizer Brandon Kielbasa told Gothamist before the rally.

Combined with the vacancy-decontrol law that takes vacant apartments out of rent regulations once the rent exceeds about $2,775 a month, Kielbasa said, the current laws create a reward for driving tenants out, and enforcement against illegal rent overcharges is so weak that the state housing agency “doesn’t even ask to see receipts or audit until a tenant complains.”

Tenant activists call this business model “construction as harassment.” Once an apartment is vacant, the owner can raise the rents by renovating them—and if the way the work is done creates enough of a nuisance to drive out other rent-stabilized tenants, their apartments can be renovated too.

Kushner purchased most of the 30-plus East Village buildings he owns after the previous landlords had already driven out most of the rent-stabilized tenants. One exception was 170 East Second Street. After Kushner bought it in 2014, longtime tenant Mary Ann Siwek said, drilling went on all night. When she complained about her bathroom ceiling caving in, she added, she was offered $10,000 to move.

The building had been about three-fourths rent-stabilized tenants, she said. “Now, there’s maybe three of us left.”

“The Kushners are the poster child for why we need these nine bills,” Manhattan Borough President Gale Brewer said.

"Kushner Companies operates quality properties with the highest level of professionalism. Any accusations involving tenant harassment are false," a spokesperson for the company said. "There is good reason why most of Kushner properties operate at almost 100 percent occupancy."

At 336 West 17thStreet in Chelsea, said tenant Mikala Kuchera, landlord New York City Management has refused to renew any of the unregulated tenants’ leases. When she moved in in 2016, she said, the rent had been raised more than $600—more than $300 from the 20 percent vacancy surcharge enacted in 997, and about $300 more for unspecified renovations, despite the apartment having a rusty sink, an old refrigerator, and dust-caked windows. Renovation work in the building has gone on at all hours since last year, she said, and lead was found in construction dust.

Last year, NYC Management was selected by the state Attorney General’soffice to run more than 100 buildings owned by Steven Croman—the poster child for harassment as a business model—after he was jailed.

The real-estate industry says it supports “responsible rent reforms,” and that repealing increases for renovations isn’t one.

“Albany’s legislative proposals fail to create a single new affordable unit or improve housing vacancy rates for those households most in need,” Taxpayers for an Affordable New York, a coalition of landlord trade and lobbying groups including the Real Estate Board of New York and the Rent Stabilization Association, said in a statement. “If these proposals pass, owners of hundreds of thousands of units won’t be able to afford to invest in maintaining and improving their buildings. Moreover, the proposals will decrease the likelihood that new affordable units will be created in the future.”

Repeal advocates argue that the massive increases allowed are an incentive for abuse, particularly in neighborhoods where market rents are drastically higher than what longtime tenants pay. “This is not about modest investments to maintain apartments,” Association for Neighborhood Housing Development organizing director Emily Goldstein told the rally.

An ANHD report issued last month said the system of increases for individual apartment improvements is “not only open to rampant fraud, but fundamentally designed and legally used to drive speculation and displacement.”

“Even if the IAI loophole is used with no fraud, the formula allows a major, sudden, permanent increase in rent for a relatively small investment in the apartment,” the report added. That, it said, means buildings are bought and sold based on “what they could be worth if the current tenants are pushed out.”

“There is no enforcement. The books are cooked,” State Senator Brad Hoylman told Gothamist after the rally. “The landlord should have the incentive to invest in their property by virtue of the fact that they own it.”

Additional reporting by Elizabeth Kim.