Federal court sides with real estate interests over mayor’s tenant protection effort in early housing setback
New York City Mayor Zohran Mamdani suffered an early setback in his housing agenda when a federal bankruptcy judge rejected his administration’s request to delay the auction of 5,100 rent-stabilized apartments owned by Pinnacle Group. Hours after taking office on January 1, Mamdani had pledged to intervene in the bankruptcy proceedings to protect tenants from what he characterized as poor conditions and rent-stabilized housing destruction. But on Thursday, January 9, U.S. Bankruptcy Court Judge David Jones denied the city’s motion for a 30-day delay, allowing the sale to proceed.
The Pinnacle Situation and Tenant Conditions
Pinnacle Group, owned by billionaire Joel Wiener, operates 83 apartment buildings across New York City with approximately 5,100 rent-stabilized apartments. The landlord has been “responsible for more than 5,000 housing violations and 14,000 complaints”, according to the mayor’s office. Tenants have documented serious maintenance failures including mold blooms, crumbling ceilings, rat infestations and monthslong elevator outages.
Mamdani’s Early Action on Housing
Hours after his inauguration, Mamdani appeared at a Pinnacle-owned building in Flatbush and toured an apartment with conditions he described as including “broken walls, torn flooring and a failure to provide heat.” The mayor made the announcement at a Pinnacle-owned building, describing his tour as evidence of the administration’s dedication to the case. This visible commitment signaled that tenant protection would be central to Mamdani’s housing agenda.
The Bankruptcy and Financial Crisis
Pinnacle defaulted on loans exceeding $560 million, prompting the company to file for Chapter 11 bankruptcy protection in May 2025. The bankruptcy was prompted after Long Island-based Flagstar Bank filed to foreclose on Wiener’s dozens of properties, which had more than $564 million in debt. Summit Properties USA made a $451 million stalking horse offer to acquire the buildings.
The City’s Financial Interest
The city itself is one of Pinnacle’s biggest creditors, with the Department of Housing Preservation and Development owed roughly $12.7 million in unpaid fines for housing code violations. This gave the city substantive standing to seek intervention in the bankruptcy.
The City’s Legal Arguments
Concerns About New Owner Capacity
The administration also raised concerns that advisers representing the bankrupt properties hadn’t provided the city with information about Summit’s ability to consummate the proposed sale or whether it was willing and financially able to repair the buildings. The city worried that the economics of rent-stabilized housing would prevent the new owner from making necessary repairs, potentially shifting the burden to the city or tenants.
Judge Jones’ Decision and Its Reasoning
U.S. Bankruptcy Court judge for the Southern District of New York David Jones declined the city’s motion to intervene in the legal fight, and reportedly informed the city that the bankruptcy sale will proceed. The judge’s decision prioritized the formal bankruptcy process and creditor interests over the city’s tenant protection concerns.
Real Estate Industry Response
The landlord and real estate community claimed validation from the court decision. Kenny Burgos, CEO of New York Apartment Association, said “It’s an astounding contradiction from the Mamdani administration, less than a week into their admin,” arguing that the financial realities facing Pinnacle are shared by many rent-stabilized buildings and that “this is not some sort of anomaly. This is the norm”.
The Campaign Promise vs. Reality Test
The Pinnacle bankruptcy sale represents Mamdani’s first major policy test. During his campaign, he pledged to aggressively hold negligent landlords accountable and to protect rent-stabilized tenants. The decision poses an early setback to Mamdani in his first full week in office. Federal bankruptcy law proved more powerful than mayoral authority to delay the process.
The Mayor’s Office to Protect Tenants Response
Leila Bozorg, the city’s deputy mayor for housing, said officials are “assessing our options” and “will continue to fight to ensure any owner of this portfolio makes necessary repairs to bring the buildings up to code and respects the rent stabilization regulations”. This suggests the city intends to pursue alternative legal strategies post-auction.
The Broader Housing Economics Question
The Pinnacle case raises fundamental questions about whether New York’s rent-stabilization regime can sustain adequate building maintenance. A package of 2019 tenant protection laws upended Pinnacle’s business by prohibiting landlords from removing units from rent stabilization in most cases and from raising rents on vacant units, and the company’s financial collapse after these laws passed has led landlords and real estate groups to argue that the cap on revenue prevented owners from investing in their buildings.
Tenant Voices in the Process
The Union of Pinnacle Tenants, a citywide coalition of residents, has been trying for months to prevent their homes from being sold by what they say is one bad landlord to another, and they lack one key element: time. The court’s rejection of the delay left tenants with limited ability to influence the sale outcome.
What Comes Next
The auction is taking place inside the Midtown offices of law firm Weil, Gotshal & Manges, which is representing Pinnacle in the bankruptcy case, with the bid from prospective buyer Summit Properties USA likely to be accepted at the auction and ultimately approved by the court at a Jan. 15 hearing. For Mamdani, the challenge now involves finding post-sale mechanisms to ensure the new owner complies with repair obligations and rent-stabilization laws. The Pinnacle setback demonstrates that mayoral housing reform faces institutional limits when federal bankruptcy law takes precedence.
