Loophole or Lifeline? Kingston Developer’s Bid to Bypass Rent Law Sparks Statewide Concern

KINGSTON, NY – A high-stakes legal and housing policy battle is unfolding in the Hudson Valley, with potential ripple effects far beyond. At the center of the controversy is Stony Run, a 266-unit apartment complex on the edge of Kingston’s Uptown neighborhood, where a bold attempt by a developer to exempt the property from rent stabilization laws has ignited debate over the future of tenant protections in New York State.

In 2020, real estate investment firm Aker Companies bought Stony Run as part of an $81 million, four-property deal in Ulster County. Two years later, Kingston became the first city in the Hudson Valley to opt into the state’s Emergency Tenant Protection Act (ETPA) imposing rent stabilization on pre-1974 buildings with six or more units. This meant Stony Run, facing millions in necessary renovations, fell squarely under rent regulation.

Rather than challenge the law outright, Aker took a more novel path one critics now call a potential blueprint for evading rent regulation statewide.

The Nonprofit Gambit

In collaboration with Kingston Mayor Steven Noble, Aker entered into a regulatory agreement that effectively shifted Stony Run’s ownership from a for-profit LLC to a nonprofit housing development fund corporation (HDFC). Under Kingston’s 2021 rent law, nonprofit-owned properties are exempt from rent stabilization.

Mayor Noble praised the move as a pragmatic solution to save Kingston’s largest rental complex from foreclosure. “This is not a perfect deal,” he said. “But it’s a very good one.”

Under the agreement, Aker commits to providing “workforce housing” for tenants earning between 81% and 100% of the area median income for 40 years. Protections for current tenants remain but only as long as they stay. Once a tenant moves out, rent stabilization disappears for that unit.

Critics: A Regulatory Shell Game

Tenant advocates and legal experts argue the deal is smoke and mirrors. While the nonprofit HDFC now holds title, the for-profit entity Aker still collects the income, controls operations, and benefits from tax deductions, a setup they say fails the legal standard for charitable operation.

“This is a workaround, a strategy to shed rent regulation while keeping the profits flowing,” said Marcie Kobak, director of Legal Services of the Hudson Valley. “The real question is whether Stony Run is truly operated exclusively for charitable purposes.”

Legal experts not directly involved in the case agree. Louis Cholden-Brown, a New York City-based tenants’ rights attorney, said, “To legally qualify as exempt, a nonprofit must not funnel profits to a private company. That doesn’t appear to be the case here.”

Fannie Mae, the federal housing lender, has already approved $35.4 million in financing following the agreement which Aker used not only to renovate Stony Run but also to make new acquisitions, including a $70 million building near Boston and a $158 million community in New Jersey.

Precedent-Setting Stakes

Now, the New York State Office of Rent Administration must decide whether to approve the exemption. The outcome could set a statewide precedent, signaling to other landlords whether converting to a nonprofit shell is a viable strategy to sidestep rent stabilization.

“If the state approves this deal,” said Ellen Davidson of the Legal Aid Society, “we may see an exodus of properties from rent regulation not just in Kingston, but across the state.”

For residents of Stony Run many of whom were unaware of the deal until after it was approved by Kingston’s Common Council the uncertainty is palpable. With affordable housing already scarce in the region, the prospect of losing legal rent protections could push them into an unforgiving rental market.

The Bigger Picture

The case touches on larger issues: the blurred lines between public good and private profit in housing, the growing use of legal technicalities to escape regulation, and the pressures cities face to preserve affordability while attracting private investment.

Whether Aker’s maneuver is viewed as a creative solution to a complex financial dilemma or a cynical exploitation of a legal loophole depends on which side of the tenant-landlord divide you’re on.

But one thing is clear: what happens in Kingston won’t stay in Kingston. As cities across New York and beyond confront similar housing crises, the Stony Run case may become the test case for the next era of housing regulation or deregulation.