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Influential Brooklyn developer illegally raised rents despite tax break, lawsuit claims

David Brand

Published Oct 30, 2026 at 11:43 a.m. ET

Modified Oct 30, 2026 at 12:43 p.m. ET

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300 Ashland Place in Fort Greene, Brooklyn

David Brand

Published Oct 30, 2026 at 11:43 a.m. ET

Modified Oct 30, 2026 at 12:43 p.m. ET

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The influential, multibillion-dollar real estate firm Two Trees won a rare concession in this year’s state budget when lawmakers extended an expired tax break program to cover exactly one project: the company’s latest waterfront development in Williamsburg.

Now, a new class-action lawsuit accuses the developer of swindling the public by skirting rules that govern that same tax break program and illegally raising rents at one of its buildings in Fort Greene.

The complaint over rent increases at 300 Ashland Place is the latest such litigation filed by the law firm Newman Ferrara in coordination with the nonprofit Housing Rights Initiative. In recent years, the two have teamed up to target the leasing practices of some of the city’s largest landlords and most politically connected developers, including A&E Real Estate, private equity giant Blackstone and the real estate firm owned by former New York Gov. Elliot Spitzer.

The lawsuit filed Friday focuses on what Housing Rights Initiative Executive Director Aaron Carr called a frequently flouted aspect of state tax and rent stabilization rules.

In exchange for the valuable property tax break known as 421a, landlords must keep apartments — even high-cost, luxury units — rent-stabilized and adhere to state rent regulations that limit rent increases to a percentage set by a city panel. The lawsuit claims Two Trees violated the law when the company applied increases to the full “legal rent” of apartments when tenants renewed their leases, rather than the discounted “preferential rent” that tenants initially agreed to pay.

The lawsuit lays out a sleight-of-hand tactic, citing the example of a 20th-floor apartment in the Fort Greene building.

The legal rent for the apartment is $3,990, according to a listing included in the complaint. Two Trees advertised the unit with two months free, effectively bringing the monthly price down to $3,325. But when it came time to renew the lease, the company applied a rent increase to the $3,990 figure rather than the lower “preferential rent.” Such an increase would amount to a potential 20% rent hike, the lawsuit states.

Carr said a hike that high on the stabilized unit, and six others included in the complaint, violates state law given that the city’s Rent Guidelines Board has not approved an increase higher than 3.25% since 2021. Two Trees, the lawsuit claims, used the tactic to increase rents by more $30 million over the past five years.

“When landlords pocket taxpayer subsidies while legally overcharging tenants, they are cheating the public twice,” he said in an interview. “Once through the rent they steal, and again through the tax dollars they collect.”

In a written statement, Two Trees Managing Director David Lombino called the lawsuit “entirely without merit.”

“Frivolous litigation like this drives up the already extraordinary cost of building and operating housing in New York City,” he said. “Ultimately, those costs are borne by all New Yorkers, making it even harder to address our housing shortage. We intend to vigorously defend against these claims.”

The 379-unit complex opened in 2016 and features apartments priced up to $7,455 in the case of a two-bedroom leased in July. A 26th-floor one-bedroom available earlier this month was listed on the building website for $4,925.

Carr said property owners frequently advertise concessions to attract tenants before increasing their rent at renewal.

“So the landlord can wait for the rental market to heat up before pulling the concession or simply eliminate it at the first renewal, knowing that once a tenant has moved in the severe housing shortage makes it incredibly difficult and expensive to move again,” he said.

Housing Rights Initiative's investigations and frequent litigation have made it a thorn in the side of real estate firms and their allies, who say the organization and its attorneys have honed in on a technicality to squeeze landlords.

Seth Glasser, a partner at real estate investment firm Marcus Millichap, likened the overcharge complaint to annoying penalties assessed to tennis players who step just over the line when serving.

“These are foot faults.” said Glasser, who hosts an industry-focused podcast. “The penalty is so much worse than the infraction.”

A rendering of the planned River Ring housing complex in Brooklyn.

Courtesy of Two Trees Management

Two Trees owns and manages more than 4,000 apartments in a portfolio worth $4 billion, according to its website. The company is constructing another 1,200-unit project called River Ring on the Williamsburg waterfront. In May, state lawmakers extended the 421a program to cover the project, even though the developers will not finish construction by a 2031 tax break deadline.

The 421a exemption requires the city to levy taxes on properties at a lower amount based on their assessed value before a development project adds new apartments, amenities and other improvements, leading to millions of dollars in savings over a period of at least 25 years. Lawmakers let the program expire in 2022 amid disputes over whether the tax break incentivized housing affordable to low-income New Yorkers**.** In 2024, Gov. Kathy Hochul and legislators approved a new tax break with deeper affordability and higher wage requirements derided by developers as too costly.

Councilmember Crystal Hudson represents the Brooklyn district that includes Fort Greene, where the Ashland Place building is located. She said she helped notify tenants of the Housing Rights Initiative investigation by sending mailers to residents.

“Everyone has to be held to the same standard,” Hudson said. “It’s intentionally confusing to potential tenants and they often think it's a great deal to take up front.”

But, she said, the arrangement can come back to hurt them financially in the long run.

Hudson criticized the state’s housing agency, the Division of Homes and Community Renewal, for not enforcing the tax break rules and instead leaving the job to a nonprofit watchdog and a private law firm.

Division of Homes and Community Renewal spokesperson Charni Sochet declined to comment on ongoing litigation.

Sochet said the agency is “committed to protecting the rights of rent-regulated tenants by enforcing and administering state law as enacted and as interpreted by courts.”

This story has been updated with more information.

Tagged

brooklyn

housing

new york city

David Brand

David is a reporter covering housing for Gothamist and WNYC. Got a tip? Email [email protected] or Signal 908-310-3960.

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