A Superior Court judge has told a group of statewide tenant advocacy groups that their lawsuit against Hoboken’s largest affordable housing developer should be heard elsewhere.
Judge Maurice Gallipoli decided in state Superior Court Thursday that the suit, which is intended to strike down an agreement between the state government and Applied Housing of Hoboken, should be heard in the appellate division of the Superior Court rather than the law division. The tenant advocacy groups who filed the lawsuit said they considered Thursday’s result “mildly disappointing,” while Applied considered it a victory.
The lawsuit, filed in September, concerns a difference of opinion about a state agreement that governs how much of a profit Applied Housing can make on 967 of its low- and middle-income housing units in town. The agreement also covers how current tenants pay for their rents and mandates that low-income tenants should be sought for any available apartments.
The state and Applied Housing hammered out the agreement in 1998 because Applied had paid off a 40-year mortgage with the federal government, releasing the company from its federal mandate to continue taking low-income tenants. Regulatory authority fell to the state. Applied and the state took steps to protect current low-income tenants while allowing Applied to make a greater profit in order to maintain the buildings.
The 1998 agreement states that Applied should always look for new low-income tenants with federal rent vouchers to replace low-income tenants who move out. It also moved the partnerships owning the 967 units from the restrictive profit law under which they were formed in the 1970s to the provisions of a law passed in the 1990s that allows them to make a greater profit.
The agreement also allowed Applied to significantly raise some of its rents, but at the same time, Applied made a separate agreement with the federal government that provided the low-income tenants living in those units with “enhanced” rent vouchers to make up the bulk of the money.
From Applied’s and the state’s standpoint, it was a good deal: Current tenants were allowed to stay, most new tenants would be low-income, and the company could have more money to fix up the units. Additionally, Applied, which is also building hundreds of market-rate units on the waterfront, was able to duck the politically sticky situation of losing low-income tenants. After the agreement was signed, Applied, which has a good reputation in town for maintaining its housing, took out $18 million in loans for rehabilitation of the buildings.
But the non-profit groups that filed the suit, including the New Jersey Tenants’ Organization and the Greater Newark HUD Tenants’ Coalition, had concerns.
They said that the law under which the Applied partnerships were formed does not allow the company to increase its profit structure. They also said that if the company does make a greater profit, the extra money should go back into affordable housing.
The groups also are concerned because, if an Applied apartment becomes vacant and the company can’t find a low-income tenant with a voucher within 30 days, they can rent the unit at a regular market-rate rent for the duration of the market tenant’s stay. Applied maintains that this situation is the exception rather than the rule, because there are many low-income tenants with federal vouchers waiting in Hoboken and throughout the state to move into buildings like Applied’s. Besides, Applied says, without the agreement, Applied would not have to take new low-income tenants.
However, the prospect of Applied failing to find a low-income vouchered tenant is not impossible. So far, for every four apartments that have been opening up in these buildings, Applied has taken one regular high-paying tenant for every three low- or moderate-income tenants. (When such a tenant moves out, Applied must search again for a vouchered tenant.)
According to the agreement, no matter what happens, Applied must always keep at least 20 percent of its housing for low-income and very-low-income tenants.
The tenant advocates say they are concerned about the slow loss of affordable housing. However, they have been unable to give an estimate of how many units might stay affordable should the agreement be struck down, and they have been unable to say whether they could ensure that any particular number would have to stay affordable at all. Instead, they have maintained only that the original law under which the partnerships were formed states that Applied should continue its mission to provide affordable housing.
For this reason, some local politicians and Applied tenants have expressed concern that striking down the agreement could put existing tenants in jeopardy.
What Thursday’s result means
Judge Gallipoli’s decision means that the case has automatically been moved to the Superior Court’s appellate division, to be heard at a date that has not yet been determined.
David Broderick, an attorney for the statewide tenant organizations who filed the suit, said last week that he considered the decision to be “mildly disappointing,” but not a major setback.
“There’s possibly a long road ahead,” Broderick said. “There was no factual record developed, so the appellate division in our view would not be able to sensibly review [the state Department of Community Affairs’] actions because there is no record about what DCA took into account, no standards for entering into these agreements.”
Broderick said he would like to have settlement talks with Applied .
Ira Karasick, an attorney for the Applied Companies, and George Imperial, an attorney working on behalf of Applied’s tenant’s association (but who is being paid for by Applied), said that they believe the case was moved to the appellate division because the judge considered the lawsuit to be an appeal of a state action.
“We were pleased because we think that the focus of this case – and I think the judge recognized this – is not on anything that Applied did,” Karasick said Thursday. “The focus on the case is what the state did when they agreed to enter into regulatory agreements. All Applied really did was act in accordance with an agreement with the state agency that regulates them. If the appellate court finds that the DCA acted correctly, there may be no case. The [filers of the suit] wanted it looked at as a private company doing something wrong, and the court didn’t really agree with that.”
The request for the case to be heard in a different court had been filed by Applied and by the state’s Department of Community Affairs.
Karasick and Imperial said that they may argue that the tenant-advocacy groups waited too long to file the suit, especially since Applied took out large loans for maintenance work based on the agreement. They also might file a motion to dismiss the case based on procedural matters.
For more detailed breakdown of the agreement and the suit, read last week’s cover story on the matter at the Reporter’s website, www.hobokenreporter.com.
Let’s talk
David Broderick, an attorney for the tenant advocacy groups who have filed a lawsuit against Applied Housing, said last week that his side would like to sit down with Applied President Joseph Barry (who was an owner of this newspaper until December of 1999) and his lawyers and work out a compromise. “We’d like to discuss some type of settlement if they’re willing to do so,” Broderick said Thursday. “We stand ready, willing and able to talk to Applied about a settlement.”
Broderick’s side actually had had unsuccessful settlement talks with Barry’s side before they filed the suit. When asked what has changed since then, Broderick said, “I think because now we’re in a litigation posture, I think it serves everybody, including the tenants in these projects, so that there’s no lingering uncertainty.”
Ira Karasick, an attorney for Applied Housing, said that he had heard “rumblings” of new settlement talks, and that his side would also like to settle the matter. But he said that in the past, the tenant advocates seemed more focused on taking away the profit than on possible concessions from Applied regarding the number or management of the affordable housing units.
“If the concerns that they have are aimed at preserving affordable housing,” Karasick said, “then there’s probably room to talk. There does seem to be some interest floating around, I have to tell you that.”