Residents of NYC co-op facing 450% rent hike say they could lose their homes amid market 'craziness' — how a once-beneficial ownership quirk hurt them

The shock stems from a little-known feature of their ownership structure: a long-term ground lease. And it’s a time bomb that could explode under thousands of other New Yorkers.

A 450% increase — and a fight for survival

In most real estate deals, you own your home and the land beneath it. But some co-op buildings sit on land leased from another party, and tenants can build on and improve the property.

This was originally a way to make housing affordable in pricey areas. Buyers paid less upfront but covered the cost of the land over time through rent. Many of these leases last for decades, and terms are renegotiated at regular intervals. If a lease expires, a landlord may be able to take ownership of any structures.

Several Carnegie House residents told The Journal they were aware of the ground lease when purchasing their apartments, but were advised by attorneys that costs were unlikely to jump significantly. However, values in the surrounding area have since spiked, and in 2014 the land was sold for $261 million to an entity tied to real estate tycoons Rubin Schron and David Werner.

Residents hoped for a manageable rent increase when the lease reset in 2025. But after negotiations broke down, an independent arbitration panel announced a ruling on July 18 that would raise the co-op’s annual ground rent from $4.36 million to around $24 million — a 450% increase.

Hirsch, who serves as co-op board president, called the ruling “basically death,” per The Journal. He and the board are exploring their legal options.

If the lease tenants — which include the owners of the building’s retail and garage spaces — can’t pay the new rent, the building could go into default and residents would lose all equity in their homes, the co-op board told The Journal. If the ground lease is terminated, those with mortgages may also be stuck owing the bank, despite no longer owning their units.

The human cost

Lou and Barb Grumet, both in their 80s and living on fixed pensions, bought their Carnegie House apartment in 2011 for around $780,000. They chose the building for its accessibility and proximity to hospitals. Now, their monthly costs are expected to leap from $3,700 to $9,000.

“We were going to live here till we die,” Lou told The Journal. “No one dreamed of the craziness that’s happened here.”

Some residents believe the landowners want exactly that: to push them out and make way for a new supertall skyscraper. A spokesperson for the landowners told The Journal there were no redevelopment plans, saying residents knew the risks and got a discount when they bought in.

Still, warning signs have been flashing for years. After the 2014 sale, major banks stopped issuing mortgages in the building. Prices have tanked. One unit that sold for $535,000 in 2015 was listed for $189,000, reports The Journal.

Carnegie House isn’t alone. According to the Ground Lease Coop Coalition, more than 25,000 New Yorkers live in co-ops with similar land arrangements. Many of those leases are nearing expiration or scheduled resets, meaning other buildings could soon face similar rent spikes and financial chaos.