Brooklyn Supreme Court at 360 Adams St. Photo: Rick Kopstein

Formerly homeless tenants who were placed in private apartments as part of a controversial program that the New York City government is in the process of shutting down are not protected by the state's rent-stabilization laws, a state court judge in Brooklyn found.

The ruling is both a win for property owners across the city who own the nearly 1,800 units  used to shelter the homeless, and a blow for legal service providers who are fighting to establish tenant rights for thousands of cluster-site residents.

Acting Brooklyn Supreme Court Justice Peter Sweeney ruled that residents provided units through the city's cluster-site program, in which the Department of Homeless Services pays nonprofits to find transitional housing for the homeless in the private market, are not considered tenants under the state's Rent Stabilization Code, and thus are not entitled to be provided with leases in their name or rent stabilization protections.

Sweeney granted summary judgment to dismiss consolidated lawsuits filed on behalf of 60 formerly homeless families living in seven buildings in Brooklyn who alleged that their landlords conspired with nonprofit service providers to create an “illusory tenancy” that deprived them of rights that they should be given through the Rent Stabilization Code.   

According to the judge's ruling, the city entered into a contract with nonprofit service provider We Always Care, which directed homeless people to the buildings. However, that contract was never registered with the city comptroller, which is required for the city to pay up under the contract.

After the city stopped paying We Always Care for its services, landlord Clark Wilson filed eviction proceedings against the cluster-site residents. The residents of 60 Clarkson Ave., one of Wilson's properties, fired back in 2015 with their lawsuit that argued that they should be classified as tenants.  

Nativ Winiarsky, a partner at Kucker & Bruh and an attorney for Wilson, said the cluster-site residents should instead be considered licensees under the law, rather than tenants.

Winiarsky said that if the attorneys from the Legal Aid Society and Paul, Weiss, Rifkind, Wharton & Garrison who represent the cluster-site residents had prevailed in their argument, “one could well imagine” that no landlord in the city would ever agree to take in another homeless family.

“Landlords throughout the city who house these thousands of homeless families can breathe a sigh of relief,” Winiarsky said.

Winiarsky and lawyers for We Always Care have filed a motion in the case arguing that the contract between the city and the service provider was binding, that the Department of Homeless Services prevented the comptroller from registering the contract and that the city owes $12.9 million to We Always Care.  

Judith Goldiner, attorney-in-charge of Legal Aid's civil law reform office, said the plaintiffs' attorneys are appealing Sweeney's ruling.

“We think the judge decided this wrongly,” she said. She said that, in addition to city funds, cluster-site landlords also get rent money through residents' housing vouchers, and that residents with jobs pay 30 percent of their income for rent.

The New York Legal Assistance Group also appeared for the tenants.  

The cluster site, or scatter site, program began in 2000 during the administration of Mayor Rudolph Giuliani. Because cluster sites tend to be in far-flung areas of the city and the buildings in decrepit shape, city leaders were largely able to avoid backlash from those living near the sites and increasingly relied on the program to house the homeless.

The units were not subject to rent-increase caps and rents charged to the city began to skyrocket. According to a 2015 report from the city's Department of Investigation, the average monthly rent for cluster-program apartments was $2,451, while rents in the neighborhoods around them ranged from $500 to $1,200.

The DOI's report also detailed dangerous living conditions at the cluster-sites—extensive vermin infestations, blocked exits and rampant fire code violations were found in 25 cluster sites during a year-long investigation.  

Mayor Bill de Blasio has pledged to wind down the cluster-site program by 2021 and to convert former sites into affordable housing.  

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