This was the year that New York bit back against big real estate.
First, a slate of Democratic candidates declared that they would not take money from real estate developers. They swept into state office last fall, displacing incumbents who were friendly to the industry.
Then in February, Queens officials, bucking the mayor and governor, scuttled Amazon’s plan to open a huge headquarters there, snubbing the promise of 25,000 jobs.
In June, the new Democratic majority in Albany passed historic protections for renters, reversing decades of a Republican-controlled Senate chipping away at these laws.
Real estate had for so long seemed invincible. And then, suddenly, it wasn’t.
“It’s a brave new world,” said Jay Martin, executive director of the Community Housing Improvement Program, or CHIP, a trade group for 4,000 building owners and managers.
“The Socialist Democrats who pushed that agenda are emboldened,” he said. “They believe that was the first step, and they’re not going to stop. And if we simply take a breather and think they couldn’t possibly make things any worse, that’s exactly what’s going to happen.”
This is a story of how the city’s most fearsome industry overestimated its power and got kicked in the teeth by voters and legislators who suddenly don’t want their money.
The reversal gets right to the city’s core: taxes from real estate provide more than half of the city’s budget. Now billionaire powerhouses are trying to learn tactics of grass-roots groups, and progressive outsiders, after decades in the wilderness, are learning how to be a majority.
In Washington, every battle involves the polarizing subject of President Trump. In New York, it is all about real estate.
So is the power of real estate diminished in New York? Maybe.
Some context: For years, the real estate industry and lawmakers in Albany were remarkably in sync.
Since 2000, the industry has poured more than $100 million into state-level elections in New York, according to the National Institute on Money in Politics, including $19 million alone to Gov. Andrew M. Cuomo.
State and city lawmakers, in turn, rezoned neighborhoods for ever-taller buildings, cut protections for renters and subsidized residents of luxury towers. Since 1994, New York City has seen a net decline of nearly 150,000 rent stabilized apartments, either through deregulation or conversion to co-ops or private use.
Liz Krueger, a Democratic state senator who has fought the industry, estimated that one tax subsidy, for development projects that include a percentage of lower-priced rental apartments, is now costing the city as much as $4 billion a year in lost tax revenue.
“Real estate on many levels has been more powerful than local government or state government,” she said.
All that changed last fall, when Democrats took control of the State Senate, displacing both Republicans and members of the Independent Democratic Caucus, a group of Democrats — heavily supported by real estate — who voted with Republicans on relaxing rent regulations.
“They were fighting tooth-and-nail for the interests of their donors,” said Michael Gianaris, deputy majority leader in the Senate, who came to prominence pushing the campaign against Amazon. Mr. Gianaris, who in the past had received more than $250,000 from real estate interests, announced that neither he nor the Democratic Senate Campaign Committee would still accept their money.
“I thought it was important to make a statement,” Mr. Gianaris said. “This new majority doesn’t operate that way, and I don’t operate that way.”
The new majority passed laws blocking landlords from deregulating apartments or passing along most costs of improvements to tenants. Just as significant, the lawmakers closed an election loophole that had enabled developers to funnel almost unlimited contributions to politicians through multiple limited liability corporations.
As the bills moved through the legislature, a group of top developers, including Douglas Durst, Richard LeFrak and William C. Rudin — some of Governor Cuomo’s biggest donors — called the governor directly to intervene.
“They thought the governor would step in and negotiate a compromise,” said Joe Strasburg, president of the Rent Stabilization Association, a landlords’ group that opposes expanded protections for renters.
The governor did not.
Instead, the progressive wave that swept Alexandria Ocasio-Cortez into the United States Congress was now hitting the city’s most powerful industry, the people who literally make New York.
Tenant activists, who had labored for decades against impossible odds, suddenly found their voice in the majority. The industry had badly underestimated the momentum against it, and now it was scrambling to regroup.
“Now you have a very monotone, ideological, left-leaning government, and they’ve dramatically moved against all the real estate interests,” said Gary Barnett, the head of Extell Development, whose portfolio features a number of controversial buildings, including the supertall One57, where a penthouse apartment recently sold for $100 million.
“It’s a cheap headline for any politician to get up and say, ‘I’m not going to take money from real estate people,’ because we can’t take our buildings and go somewhere else,” Mr. Barnett said. “We are the guys you can hit without consequence, except there’s going to be really serious consequences.”
The day the rent laws passed, the president of the Real Estate Board of New York, the industry’s main lobbying arm, declared it “a disaster for the city’s future.”
It was time for a different tack.
Two weeks later the president of REBNY, John H. Banks, stepped down, replaced by his No. 2, James Whelan. In and out of city government, Mr. Whelan had facilitated development in Coney Island and industrial Queens, and led the Hudson Yards Coalition, a group of developers and unions that tried (and failed) to build a stadium on Manhattan’s West Side.
“Jim Whelan is a bridge builder who has a history of working with strange bedfellows,” said John Raskin, head of Riders Alliance, a transit group, who has worked both with and against Mr. Whelan.
In late June, days before Mr. Whelan officially started as president of REBNY, he helped organize a demonstration in Lower Manhattan to protest a proposed cap on fees for rental agents. On a sweltering afternoon, hundreds of agents descended on City Hall carrying signs opposing the bills, with 40 signing up to testify inside.
It was a shift in tactics for an organization that has relied on money and relationships to influence officials — so unfamiliar that the board held conference calls to advise members on how to dress and what to expect.
“This was like civic engagement 101,” said Reggie Thomas, the board’s head of government affairs. “It had never happened before.”
Kenneth K. Fisher, a lawyer and lobbyist for the industry, said the new tactics were necessary in the current political climate.
“When I was a young lawyer, you could fit all of the decision makers in the city, from the local political boss to the union leader to the president of Chase Manhattan Bank, in the ballroom of the New York Hilton,” he said. “And today you couldn’t fit them all in the Javits Center. Power has become decentralized, just as communications have become decentralized. And it takes a different way of presenting public policies in order to convince more people that you’ve got the right answer.”
That was how the activists outmaneuvered the industry on the rent laws, he suggested, despite all the industry’s money. “They had a very carefully mapped-out campaign of identifying landlords that they thought they could scapegoat,” Mr. Fisher said, “and they would make some announcement, follow up with rallies and protests, so that there was a new story every few weeks to build momentum for what they were going to be advancing up in Albany. I could see it.
“It took the industry by surprise. It created a political environment where so many moderate Democrats were unwilling to stand up.”
At a recent interview in REBNY’s office, Mr. Whelan dismissed the idea that New York had turned against big real estate. “I think it’s a popular sentiment among some voters in some segments of the city,” he said.
He pointed to several polls in particular that showed that New Yorkers favored Amazon’s move to Queens, even with big taxpayer subsidies.
But the industry had not done enough to show the economic impact of the new regulations, Mr. Whelan said — that they would hit not just the billionaires of big real estate, but also the smaller property owners who run older buildings on slim margins. He predicted doom within five years. “Nearly a quarter of a million units,” he said, “are going to be in financial distress.”
One of his first moves was to announce a partnership with the powerful Building and Construction Trades Council of Greater New York, a coalition of unions that often sides with the industry. The agreement puts a blue-collar face on development and simultaneously tries to paint progressive lawmakers and tenants groups as opponents of organized labor.
“I understand advocating on the part of tenants,” said Gary LaBarbera, president of the labor council. “Many of our members are tenants. But at the same time part of that advocating should be about building more affordable housing for New York City. And if the development community is not building, then our members are not working.”
At a recent gathering of lawmakers and lobbyists in Puerto Rico, Mr. Whelan worked the room wearing a T-shirt — not as a high roller in a suit, but a guy from Queens who calls people “chief” and calls himself a “son of immigrants.”
Mr. Gianaris, who was also at the gathering, said that he noticed the real estate lobbyists, but that they did not reach out to him.
“I’m last on their list,” he said.
“I think they’re trying to find their way in a new environment where grass-roots advocacy is more powerful and important than it’s ever been. The old way of doing business for them is no longer applicable in the new Senate.”
While the industry was shoring up its public image, it also took to the courts. In July, the Rent Stabilization Association, Community Housing Improvement Program and seven building owners sued the city’s Rent Guidelines Board to block the new rent regulations as unconstitutional. The RSA hired a data research firm to make its case that the regulations have slowed construction, reducing tax revenues and jobs.
REBNY is hiring an organizer and has crunched data to warn that tax revenues from real estate sales are down. The Community Housing Improvement Program changed lobbyists and tactics.
“The lobbying strategy is different,” said Mr. Martin of CHIP. “It has to be different. This presumption that you just call up, you sit down with an elected official, you say, ‘This is what I need,’ and that’s it — that doesn’t work anymore. Everything needs a campaign behind it, it needs different voices, it needs tenants, it needs contractors who have been laid off.”
Mr. Strasburg of the Rent Stabilization Association said that Democratic lawmakers who used to work with him were now afraid to stand up against their ascendant progressive wing. “There are those that said to me, ‘I can’t take your money now, but after January 15 I can take your money.’ Why after January 15? Because it’s too late for anyone to make it an issue” in the 2020 elections, he said.
Mr. Strasburg said he refused to support lawmakers who did not stand up for the industry, even if they had in the past. One state senator who voted for the rent regulations asked for support against a primary challenge from the left, and Mr. Strasburg was flummoxed. “I said, ‘Why would we help you?’ He said, ‘Because they’re worse than I am.’ I said, ‘But at the end of the day you voted the way that they would vote. So what separates you from them in terms of bad?’”
REBNY has tried to cultivate more centrist Democrats — or at least those that haven’t sworn off real estate money — giving $84,500 to 14 Democratic state senators since the start of the year, compared to just $2,000 to Republican senators.
Some in the industry are focusing on 2021, when Mayor Bill de Blasio and most City Council members will be leaving office.
Kathryn Wylde, executive director of the Partnership for New York City, a business group, who considers the new laws “very damaging” for the city, said many developers and their advocates seemed to be still “licking their wounds.”
“The officials I’ve talked to say they’re getting an agenda from the pro-tenant side and are waiting to get one from the other side, but haven’t gotten anything substantive yet.”
In the meantime, progressives are looking to expand the new order. In October tenant advocacy groups posted a two-minute video targeting six Democratic state Senators from Long Island who receive hefty donations from real estate. All voted against the rent regulations in June, except for Todd Kaminsky, who voted for the bill but opposed other renter protections.
Andrea Stewart-Cousins, the State Senate majority leader, and Corey Johnson, the City Council speaker, are scheduled to headline a fund-raiser for the renters’ group Tenants PAC in December. The event is a regular stop for progressive lawmakers, but this comes in a year that Mr. Johnson, Mayor de Blasio and Governor Cuomo all skipped REBNY’s annual gala — a very rare occurrence.
Mr. Johnson joined Democrats who have refused to take money from real estate interests, even though he took them in the past. He has drawn criticism from tenants’ groups, which consider him too close to real estate, noting that he once worked for a developer. But if he runs for mayor and wins without financial or tacit support from developers, he will be the first New York mayor in memory to do so.
The next showdown may be over the empty storefronts that are proliferating in many neighborhoods. City Council members have proposed two bills to protect businesses from sudden rent hikes. The industry opposes both bills as interfering with owners’ rights to control their own property.
It’s an argument that lobbyists have been making — with great success — for 30 years, since the first such bill was proposed by Ruth Messinger, who was then a City Council member and later Manhattan Borough President.
But now momentum may be against them. “It’s about fairness and rights” for small business owners, many of them immigrants, said Ydanis Rodriguez, a sponsor of one of the bills. “Why now?” he asked. “The reason is that we’re already late moving this bill.”
So far, however, neither has come to a vote.
In the meantime, development pushes on, in nearly every corner of the city — despite a softening market, a glut of high-end properties and a pullout of Chinese investors, who had contributed to the high end boom. In Midtown Manhattan alone, 11 buildings that will reach 1,000 feet are either proposed or under construction. Construction spending in the city hit a record high last year.
As for the state senators who refused real estate money, they, too, are doing O.K. The Democratic Senate Campaign Committee has raised $1.7 million so far this year, compared with about $1 million in the same period in 2017, the last post-election year.
But power is fickle, and the source of the current unrest — the lack of affordable housing — remains the central story of New York right now. Developers need to build it, lawmakers need to subsidize it, community groups need to accept it.
The progressives won the battle of 2019, but there are many more battles to come. And maybe, at some point, some cooperation.
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