Warehousing and

Frankensteining
How a loophole in the 2019 Housing Stability
and Tenant Protection Act (HSTPA) is radically
eroding affordable housing in New York City

A report with case studies by the

Coalition to End Apartment Warehousing

November 15, 2022

Coalition to
end
apartment
warehousing
Introduction

W
ith passage of the 2019 Housing
Stability and Tenant Protection Warehousing: The practice of
Act, New York State ended most a landlord intentionally keeping
deregulation of rent stabilized apartments apartments empty and off the
and limited rent increases for individual rental market, often in the hope
rent stabilized units. However, in the of deregulating the unit through
absence of Division of Homes and Frankensteining or waiting for
Community Renewal (DHCR) regulations New York State laws to change in
implementing the 2019 law, landlords the landlord’s favor. These often-
have taken advantage of one loophole neglected empty apartments can
to raise rents and reduce the number endanger remaining tenants, exposing
of rent stabilized units, undermining the them to cold air, vermin, intruders, gas
intent of the law to preserve and protect leaks, fire risk, lead, and mold. The
affordable housing.* That loophole is result is more tenants driven out of
known as “Frankensteining”: substantially their homes.
reconfiguring, dividing, or combining a
rent stabilized unit with other space (all Frankensteining: The practice of
or part of another apartment, hallway, or
combining a rent stabilized apartment
other common space) to create a new
with an adjoining apartment or
apartment — sometimes unregulated.
common space in an effort to boost
the allowable rent or to deregulate the
Landlords have traditionally set a new
apartment completely.
rent for a newly-created apartment. The
2019 law left to DHCR regulation both
what that new rent could be in combined
stabilized apartments and what the status
and rent would be when a landlord combined a rent-regulated unit with space that was
not rent-regulated. Landlords have leapt into the breach and the rent on these units has
often sky-rocketed.

* In this report we refer to “affordable” housing and “regulated” (rent stabilized or rent controlled) housing
together for efficiency. In reality, not all regulated housing is affordable, but that status does provide
protection to tenants.

Please note that the numbers in this document come from the New York City Rent Guidelines Board and
whoownswhat.justfix.org unless otherwise cited.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 2

Landlords are combining lots of units
Building owners and real estate professionals acknowledge that the widest remaining
loophole under the 2019 law that allows them to achieve big increases in stabilized
rents is by warehousing and then combining (Frankensteining) apartments. In another
tactic to avoid the law’s strictures, some owners are simply warehousing vacant
apartments in anticipation that Albany will weaken the law — so owners are holding
between 61,000 and 88,000 rent regulated homes off the market during an extreme
affordable housing crisis. But the warehousing of apartments — whether in hopes of
Frankensteining them or waiting for laws
to change — can bring problems: these
often-neglected empty apartments can Building owners are holding
endanger remaining tenants, exposing
between 61,000 and 88,000
them to cold air, vermin, intruders, gas
leaks, fire risk, lead, and mold. The result is
rent regulated homes off the
more tenants driven out of their homes. market during an extreme
affordable housing crisis.
Landlords can Frankenstein units when
there are adjoining vacancies (including
vertically) and by taking common area space. In order to have adjoining vacancies,
owners warehouse empty rent stabilized apartments, and sometimes create those
vacancies. Landlords have offered market-rate tenants short leases or induced them
to switch apartments. Tenants in adjoining units (including above or below) are then
pressured to leave. Tenant buyouts, and “construction as harassment” (creating unsafe
and undesirable conditions through renovation and construction work) are common
tools landlords use to empty rent stabilized apartments.

The result of warehousing and Frankensteining

is fewer affordable rent stabilized apartments
available to rent during the worst housing and
homelessness crisis since the Great Depression.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 3

Effects of warehousing on a building

January 2022 views provided by tenants of

the inside of warehoused apartments and
of the mailbox area at 331 East 14th Street
in New York City. Out of a total of 24 units
in this building, 14 are warehoused, posing
a threat to the health and well-being of
neighbors.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 4

CASE STUDIES
CASE STUDY 1
225 East 26 Street, New York, NY 10010

I
n 2019, the landlord began warehousing
Since the warehousing
apartments in this building; they tried to
get market rate tenants to leave through
and Frankensteining in this
exorbitant rent increases of 20% and more, building began, 44% of the
and offering small buyouts to rent stabilized affordable rent stabilized
tenants. They also used a now-shuttered units have been lost.
private detective firm to make what tenants
experienced as harassing phone calls meant
to intimidate them into leaving their rent stabilized apartments. (That firm, Tenant
Tracers, was forced to close in 2021 after owner Mitchell Kossoff embezzled close to
$15 million from his clients’ escrow accounts; he has since been sentenced to serve
up to 13½ years in prison for fraud and grand larceny.) The next step was what tenants
felt was a policy of “construction as harassment” — creating a detrimental, unsafe, and
unlivable environment that forced several rent stabilized tenants to leave their homes
against their desire, as documented
by numerous hazardous violations
and and conditions.

Over about 2 years, the number of

occupied units fell from 89 (2018)
to 45 (2020), at which point the
Frankensteining began. As of now, the
Frankensteining program is complete
and the building is basically fully
occupied.

Heavy construction dust floating

in the air in a hallway of 225
East 26 Street — something
often experienced during the
Frankensteining of this building for
the more than a year of construction
work during the pandemic lockdown.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 5

Since the warehousing and Frankensteining in this building began, 44% of the
affordable rent stabilized units have been lost.

Before Warehousing/Frankensteining

■ Total number of units in 2019: 89

■ Total number of units listed as rent stabilized as of 2019: 89

After Warehousing/Frankensteining

■ Total number of units as of 2022: 72 (reduced by 17 units by Frankensteining)

■ Total number of units listed as rent stabilized in 2020: 50 (a loss of 39 units)

Notes

■ The numbers of rent stabilized units are taken from the Displacement Alert
Portal and are the latest available.
■ The total number of units listed on Department of Buildings (DOB)
websites still reflects that there are 89 units in the building because with
Frankensteining, the reported number of units in the Certificate of Occupancy
doesn’t actually change: “The New York City Charter was amended by
Local Law 77 of 1968 to eliminate the necessity of obtaining a Certificate of
Occupancy where the alteration only consists of combining apartments to
create larger residential units, resulting in the reduction of the total number
of legal dwelling units in the building, and the bulk of the building is not being
increased.” See also this article in Brick Underground.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 6

CASE STUDY 2
Park West Village: 3 Buildings
784, 788, and 792 Columbus Avenue
New York, NY 10025

F
or almost three decades, all of the 2,500 apartments in the 7 buildings of Park West
Village had rents affordable for working people with modest incomes, like teachers,
librarians, and postal workers. Today, fewer than a quarter of the apartments still
have affordable rents. Since the 4 buildings between Columbus Avenue and Central
Park West were converted to condominiums, only about 150 of the 1,650 apartments
in those buildings remain rent stabilized. Therefore, the figures below concern only
the three remaining rental buildings — 784, 788, and 792 Columbus Avenue — and are
based on records maintained by the Park West Village Tenants Association. Despite
the legal requirement, the landlords have stopped registering the apartments, so public
information is not available.

Park West Village: 3 Buildings: Summary

784 Columbus Ave 788 Columbus Ave 792 Columbus Ave TOTALS

Total Apartments

Initial units total 288 288 288 864

Current total 283 286 279 848

Rent stabilized (RS) Apartments

Initial RS units total 288 288 288 864

Current total 127 128 119 374

TOTAL RENT STABILIZED UNITS LOST 490

Warehoused Apartments

Total warehoused units 13 27 39 79

RS units warehoused 3 13 14 30

Frankensteining

Frankensteined units 2 1 4 6

Units in progress 0 10 12 22

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 7

Some examples of Frankensteining in these buildings

The Frankensteining in these buildings involves combining two apartments to create

one new single apartment — and in almost every case, one or both of the combined
apartments was a rent stabilized unit.

788 Columbus Avenue

■ Apartments 6E (rent stabilized) and 6F (market rate) are currently in the

process of being Frankensteined. Apartment 6E has been warehoused since
2018; prior to being warehoused, the apartment was illegally deregulated
with a documented rent stabilized rent of $1,282. The new incoming tenant
successfully challenged the deregulation and the apartment was returned
to Rent Stabilization. The tenant then accepted a buyout and vacated the
apartment.

■ Also undergoing Frankensteining are apartments 10A and 10B: both are
rent stabilized, and have been warehoused since 2020. The rent on each
apartment was under $1,200 per month.

792 Columbus Avenue

■ Apartment s 70 and 7P (now 7OP) were both rent stabilized and were
combined in 2022. While their individual rents are unknown, one can
reasonably speculate that the rent on each apartment would not have
exceeded $1,500 per month, as both had been long-term rent stabilized
tenants. The combined apartment rented recently for $13,500 per month.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 8

CASE STUDY 3
Stellar Management: Five buildings

I
n the names of its individual officers, Stellar Management owns various types of
residential buildings. The company took a number of large Mitchell-Lama rental
buildings such as Central Park Gardens out of that program; several became rent
stabilized since they were built before 1974. Stellar also converted the Windermere
residential hotel into a regular apartment house. In addition, Stellar has purchased a
number of older buildings such as 3505 Broadway.

Stellar Management’s portfolio of 79 buildings in 2020 showed a net loss of 648 rent
stabilized units since 2007, representing 8.2% of the portfolio. In each building
mentioned below, between 6 and 17 units are warehoused, and several have
been Frankensteined.

The following information comes from whoownswhat.justfix.org and from records

kept by the Central Park Gardens Tenants’ Association; by the Windermere Tenant
Association; by the 3505 Broadway tenant group; by the Embassy Tenant Association;
and by individuals who prefer to go unnamed residing in the buildings cited. Unless cited
to the “Who Owns What in NYC” website, the data is given on information and belief.

1. Central Park Gardens: 50 West 97th Street, New York, NY 10025

Warehousing began in 2015, Frankensteining in 2018

The Rent Act of 2015 set the deregulation threshold based on the last stabilized
tenant’s rent, rather than including rent increases for post-vacancy improvements.
Because tenants had worked to keep the Mitchell-Lama (ML) rents low in this building,
the rent stabilized rents on leaving the ML program were also comparatively low, fitting
for a building with many low- and moderate-income tenants. As a result, no rent
stabilized apartment in the building met the deregulation threshold of a monthly
rent of $2,700 when the apartment was vacated. So Stellar Management began
warehousing vacant apartments in 2015.

The first apartment warehoused that year, 14F, was used as a storage area for paint and
construction supplies. That unit remains warehoused — 7 years later.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 9

Frankensteining has reduced the number of units from 247 to 245.

Timeline overview:

■ 1969—2017: Residential units in building: 247

■ 2005: Building left Mitchell-Lama: 238 occupied units became rent stabilized
■ 2022: Residential units in building: 245
■ 2022: rent stabilized units occupied: 169, down from 236
■ 2022: Warehoused rent stabilized units: 12
■ 2022: Frankensteined units: 2

In 2018, Stellar Management combined apartments 14K and 14L, both of which had
been rent stabilized at below the deregulation amount. Apartment 14K was vacated
in 2014 and warehoused until 14L was vacated in 2017. In 2018, the newly combined
apartment 14KL was advertised at a monthly rent of $7,595. It’s not clear if rent
stabilized leases have been offered.

In 2021, Stellar Management combined the rent stabilized apartment 3N with market
rate apartment 2N, creating a new unit called 2W. The original rent stabilized rent for 3N
was roughly $650 at the time the last RS tenant vacated it. The last monthly rent for 2N
was roughly $5,000 just before the unit was combined with 3N. Apartment 2W was
first rented in April 2022 after being advertised at the rent of $9,875 according to
Street Easy. It is not clear if rent stabilized leases have been offered.

2. Windermere: 666 West End Avenue, New York, NY 10025

In 2017, Stellar Management converted the Windermere, built in 1927, from a residential
hotel to a regular residential building. It had at least 293 rent stabilized units in 2007,
according to JustFix’s Who Owns What in NYC. Currently there are only 186 rent
stabilized units.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 10

Frankensteining has reduced the number of units.

■ 2007: Total units in building: 293

■ 2018 rent stabilized units: 188
■ 2022: rent stabilized units: 186
■ 2022: rent stabilized units occupied: 162
■ 2022 Warehoused rent stabilized units: 12
■ 2022: Frankensteined units: at least 6. It is not clear if rent stabilized leases
were offered.

In the last few years, Stellar created 4 extremely high-rent apartments from 6 rent
stabilized units:

■ Apt 2KL: 2BR, 2-bath; currently listed for $7,395; created from 2K (previous
stabilized rent: $1,390) and 2L (previous stabilized rent $1,625).
■ Apt. 4NO: 2BR, 2-bath; rented for $7,595 recently; created from 4N (previous
stabilized rent: $1,100) and 4P (previous stabilized rent: $419).
■ Apt. 21HJ: 2BR, 2-bath; rented for $7,000; created from 21H (previous
stabilized rent: $780) and 21J (previous stabilized rent: $1530).
■ Apt. 3TV: 2BR, 2-bath; currently listed for $6,400; created from 3T (“high rent
vacancy,” previous rent unknown) and 3V (previous stabilized rent: $934).

(As an aside, this building was the subject of a lawsuit won by the tenant concerning
inflated and incorrect individual apartment improvements claimed in order to
improperly deregulate at least one apartment. See also Amwest Realty Associates, LLC,
involving a similar issue in another Stellar Management building.)

3. 3505 Broadway (aka 3501-3507 Broadway), New York, NY 10031

■ 2018: Total units: 43 residential, 4 commercial

■ 2018: rent stabilized units: 18
■ 2022: rent stabilized units: 20
■ 2022: rent stabilized units occupied: 14
■ 2022: Warehoused (rent stabilized and formerly Rent Controlled): 6
■ 2022: Frankensteined: 3-5 See below.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 11

Stellar Management purchased this building on January 31, 2018. Of the 20 rent
stabilized units listed in 2020, a tenant in the building reports:

■ Six have been warehoused since the 2019 HSTPA, including some in various
conditions of renovation. Two of those six were Rent Controlled before they
became vacant.
■ Three other apartments seem to have been illegally demolished and
renovated, rented out in 2019 after HSTPA as “one person-one room.”
■ Two other apartments were apparently illegally demolished and renovated
after HSTPA as “one person-one room” but maintained their original
perimeters.
■ Four of the vacant apartments share walls and are therefore available for
Frankensteining.

4. Embassy House: 301 East 47th Street, New York, NY 10017

■ 1961: Built with 250 residential units plus 1 Super’s apartment

■ 2018: rent stabilized units: 69
■ 2021: rent stabilized units: 67
■ 2022: rent stabilized units: 63
■ 2022: at least 9 units Frankensteined
■ 2022: at least 2 warehoused

Stellar Management has been Frankensteining adjacent units and some rent stabilized
apartments have been warehoused recently due to the passing of the long-time
tenants. Based on recent history, any rent stabilized apartments that become available
will probably be combined with either the adjacent one or the one above or below, or
they will be warehoused.

The New York City Housing Preservation and Development website reports there are
110 open violations in the building. HPD has issued 26 class A violations, 75 class B
violations, and 9 class C violations in this building as of November 2022.

As an aside, a former rent stabilized tenant is a party in Mahmood v. Riverside 1975

Associates, LLC, Index. No. 157260/2019, New York Supreme Court, challenging the

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 12

improper deregulation of empartments at Embassy House along with other related
properties.

5. Highbridge House: 1131 Ogden Avenue, Bronx, NY 10452

■ 2007: Total units in building: 400

■ 2007: rent stabilized units: 370
■ 2019 rent stabilized units: 363
■ 2020 rent stabilized units (Stellar Management appears to have registered all
400).
■ 2020: Warehoused units: 17

While warehousing 17 apartments, Stellar Management has apparently not combined

any in this former Mitchell-Lama building, now primarily rent stabilized. Interestingly,
Stellar registered only 363 of the 400 units as rent stabilized in 2019, but now registers
all 400 as stabilized.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 13

Pending Solutions
The Housing Stability and Tenant Protection Act of 2019 was passed to protect tenants
from many of the problems they faced in the years leading up to 2019, including the loss
of affordable housing. That statute barred taking vacant or high-rent apartments out of
rent stabilization, and capped rent increases for Individual Apartment Improvements
(IAIs) and Major Capital Improvements (MCIs) to 2% a year. That left only one
comparatively easy option for landlords who wanted a big rent increase: combining
units. In early 2020, as the practice began to be more widely used, DHCR said the
agency would address the problem of Frankensteining. But two years have passed,
with devastating effects on the affordable housing the law was designed to protect.
Currently there are no ways for tenants to challenge these combinations, and no
recourse if new rents are excessive.

DHCR has now proposed that the rent of a new combined apartment be no more
than the previous stabilized rent(s) increased or decreased by the same percentage
as the size of the apartment, plus the roughly $85 Individual Apartment Improvement
increase for each stabilized unit). That would efficiently remove the landlord incentive
to Frankenstein going forward and comply with the goal of the 2019 HSTPA ­— Section
2521.1(m).

Recommendations
With its proposed revisions to the regulations, DHCR is taking a good first step to
stem the ongoing loss of affordable housing through Frankensteining. More steps are
needed:

■ To facilitate city and state policy-making and for transparency, DHCR should
share its data on warehoused rent stabilized units.

■ The Frankenstein loophole should be closed retroactive to June 15, 2019,

the date the HSTPA passed, and take effect immediately. Apartments that
have already been combined with new first rents between the passage of the
law and now should be subject to the new rules. If the rules are not applied
retroactively, then common space that is combined into new units should
count as common area floor space taken from rent stabilized tenants and
should be calculated into reduced rents for those affected tenants.

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 14

Conclusion
Given the crisis of homelessness and the tens of thousands of people who need
affordable housing in New York City, it is imperative that existing units of rent-
regulated housing be available for rent and their number not further eroded through
Frankensteining.

Contact
For more information, contact the Coalition to End Apartment Warehousing at
endapartmentwarehousing@gmail.com or visit endwarehousing.org.

November 3, 2022: Members of United Neighbors Organization (UNO), Los Sures, Goddard Riverside,
St. Nick’s Alliance, and more joined Council Members Carlina Rivera, Gale Brewer, Pierina Sanchez, Eric
Bottcher, Lincoln Restler, and Shahana Hanif, and Assembly Member Linda Rosenthal at press conference
on Intro. 195. Attorney Sam Chiera also spoke about the substance of the bill.  PHOTO: NEW YORK CITY COUNCIL

Warehousing and Frankensteining | Coalition to End Apartment Warehousing page 15