The Grumets and their neighbors aren’t just dealing with the rising cost of living plaguing all Big Apple citizens — they’re also caught in a battle over the dirt their building sits on. Carnegie House is one of just about 100 co-ops with the rare arrangement in which the land beneath them has a different owner.
Billionaire real estate investors Rubin Schron and David Werner, the owners of Carnegie House’s ground lease, are demanding to raise the building’s annual rent from $4 million to a staggering $25 million. The current lease resets in March, and without a deal, the co-op could be bankrupt.
Richard Hirsch, president of the building’s co-op board, put it bluntly to Crains: “We’re not billionaires, we’re thousand-aires.”
And if the residents can’t strike a deal, they’ll lose their equity and potentially face unaffordable rents as tenants rather than owners.
While the ground-lease owners are willing to negotiate, their offers — like a 10% discount for tenants if the rent exceeds $25 million and a fund for lower-income residents — feel like a slap in the face to the people living in the 324-unit building.
“We’re not talking about a 10% increase in annual rent; we’re talking about a 6-fold increase that would likely displace the majority of us from our homes,” Hirsch told The Post. “The landowners continue to show us that they are not interested in finding a compromise that keeps residents in their homes; their goal is to force us out of our homes to maximize their profit.”
“Rather than engaging in good-faith discussions, the landowners have pursued a strategy of gamesmanship — merely giving the appearance of negotiation while working to drive Carnegie House into insolvency,” Hirsch said.
“They’re living practically rent-free on Billionaires’ Row,” Schron said, brushing off concerns from the residents, some of whom are retirees. He believes their rent should reflect the soaring market value of the land, thanks to the construction of super-luxury towers nearby.
But Carnegie House’s residents aren’t backing down.
They’ve filed a lawsuit and rallied support from politicians like State Senator Liz Krueger, who’s called the situation a “clear hole” in New York’s housing protection laws.
“A ground lease co-op is like a Treasury Bond to a landowner: They just get a guaranteed regular check for the land rent and have no responsibility for any of the upkeep, property taxes, maintenance, management, etc,” Hirsch said. “Our landowners bought a Treasury Bond and want to treat us like a tech stock with a windfall return.”
Krueger and others argue that this battle is a warning for all co-op buildings with ground leases, which have become more common in the city since the 1980s.
There are an estimated 65 to 100 co-ops across the city facing similar battles.
For now, Carnegie House has bought some time, winning a temporary delay on arbitration, but the fight is far from over.
As residents prepare for what could be a financial disaster, they are left wondering how much longer they’ll be able to call this piece of prime Manhattan real estate home.
“Regarding the approximately 100 other ground lease co-ops that exist across the city, we’re just the first one in the barrel going over Niagara Falls,’” Hirsch told The Post.
Some state lawmakers are already siding with the residents.
In May, lawmakers proposed a bill to prevent steep rent hikes for 25,000 co-op apartment owners in buildings with ground leases, including some in Manhattan’s wealthiest neighborhoods like Carnegie House.
The new bill, introduced by Sen. Liz Krueger and Assemblywoman Linda Rosenthal, would limit these increases, similar to rent-stabilized apartments. The legislation aims to protect co-op owners, many of whom are middle or working-class, from potential foreclosure and bankruptcy.
However, the Real Estate Board of New York and landowners oppose the bill, claiming it unfairly benefits wealthy homeowners. Proponents argue the bill is necessary to safeguard affordable housing, while critics suggest it should have been included in the state’s recent housing package.
“We’re not wealthy people,” Barbara Grumet said.
