A landlord is abusing the state’s polarizing 421-a affordable housing tax break at its recently completed residential project in Jamaica, a new lawsuit claims.
Midtown-based developer Shorewood Real Estate Group has received millions of dollars in benefits from the program at its multifamily project known as 1 Archer Ave. despite not following its rules, according to the lawsuit, which was filed on behalf of tenants in the building Friday in New York County Supreme Court. It essentially accuses the firm and its CEO S. Lawrence Davis of manipulating the use of concessions, or months of free rent, to get around 421-a’s requirements.
Under the 2016 amended version of the tax break, apartments with rents under a certain threshold were still entitled to rent-stabilization protections, while apartments with rents above the threshold were not, the suit explains. In 2023, when Shorewood finished its Archer Avenue project, this threshold was about $2,952, according to the lawsuit.
When tenant and plaintiff Vimal Rampaul moved in, Shorewood listed his rent at $2,955 per month, just over the threshold, which Shorewood said disqualified him from receiving any rent-stabilization benefits, according to the suit. However, Shorewood did not factor in the two free months of rent it offered Rampaul when he moved in, which made his actual rent roughly $2,533, well below the threshold, the lawsuit claims.
Shorewood disguised this lower rent by saying that the two free months it offered Rampaul were part of what it called an early occupancy agreement, which also required him to waive all of his rights to a rent-stabilized apartment in order to occupy the unit, according to the lawsuit. The company did this same practice at more than 100 units in the building “solely to evade the requirements of the rent-regulations,” the lawsuit says.
The suit accuses Shorewood of violating New York’s rent stabilization laws and asks for an unspecified amount of money in damages. Newman Ferrara attorneys Lucas Ferrara and Roger Sachar filed the suit following an investigation from the housing watchdog group Housing Rights Initiative. The lawyers and watchdog group frequently work together on cases involving alleged 421-a violations, including ones that accuse landlords of manipulating rent concessions to get around the laws.
“The state of New York has granted landlords like Shorewood incredibly lucrative tax breaks in exchange for providing rent stabilized leases,” said Michael Shank, organizing director at Housing Rights Initiative. “By failing to hold up their end of the bargain, these unscrupulous landlords are defrauding not just their tenants, but every taxpayer in the state.”
The suit names Davis himself as a defendant largely because a judge already rebuked Shorewood last year in a separate case for the practices laid out in the 421-a lawsuit, according to Housing Rights Initiative and court documents.
“A judge yelled at them for doing this,” Sachar said. “A judge told them, ‘You can’t use these license agreements,’ and they don’t care.”
The controversial 421-a program provided developers with a tax break if they designated at least 30% of residential units in their projects as affordable. It expired in June 2022 and was replaced in last year’s state budget with the comparable program 485-x. Last year’s budget also included an extension of the completion deadline for projects already in 421-a.
“This case brings fuzzy math into focus and reinforces the need for zealous oversight of those who benefit from taxpayer largesse,” said Ferrara, who also works as an adjunct professor at New York Law School.
Shorewood purchased the Archer Avenue site in 2018 for about $19 million, property records show. The 23-story, 318,000-square-foot building includes 315 apartments — 95 affordable and 220 market-rate — along with 179 parking spots and 22,000 square feet of ground-floor retail space, according to Shorewood’s website. It has seven available apartments ranging from $2,415 per month for a one-bedroom to $3,995 per month for a two-bedroom, according to StreetEasy.
Shorewood’s other projects include a 233-unit residential development at 1100 Myrtle Ave. in Bedford-Stuyvesant and a 164-unit residential development at 34-20 Junction Blvd. in Jackson Heights. The company also recently bought 350 Grand Concourse in Mott Haven for $28.5 million, where it appears to be planning a mixed-use project. It did not respond to a request for comment on the 421-a lawsuit by press time.
