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Plans to merge dozens of apartments at two Upper East Side buildings—Yorkshire Towers (305 East 86th Street) and Lexington Towers (160 East 88th Street)—have been abandoned following changes to state housing rules that restrict landlords from converting rent-stabilized units into market-rate ones, Crain’s New York Business reports.
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The buildings were purchased by Chetrit Group and Stellar Management in 2014. The ownership duo had intended to combine 28 apartments across the two towers, reducing the overall unit count by 15. This would have included the elimination of four rent-stabilized apartments, according to credit-rating agency DBRS Morningstar.
Under a previously legal strategy, Chetrit and Stellar planned to combine vacant stabilized units with neighboring market-rate ones—allowing them to set higher rents on the newly merged apartments. But a 2023 rule from the state’s Division of Housing and Community Renewal cut off that pathway. Now, when a stabilized unit is merged with any other unit, the resulting apartment must remain stabilized, with its rent calculated from the combined legal rents of the original units.
“This change eliminated the economic benefit of combining a stabilized and nonstabilized apartment,” Stuart Saft of Holland & Knight told Crain’s.
According to DBRS Morningstar, the owners have since halted their renovation and combination strategy, citing the shift in regulations. The buildings carry over $700 million in debt, and while a supplemental reserve fund was not replenished as required, the owners have reportedly submitted a workout proposal.
The buildings’ halted renovations included upgrades to older units that still feature original finishes like white appliances and wood cabinetry. Rent-stabilized units at Yorkshire Towers currently average $2,500 per month, while market-rate units often exceed $4,000.
Tenant advocates say the change is doing what it was designed to. “This is preserving apartments and keeping rents down,” Cea Weaver of Housing Justice for All told Crain’s.
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