The Surreal Estate

Perspectives on Tenant Organizing from the Urban Homesteading Assistance Board

Putnam Portfolio and Stuy Town: Preservation Opportunities for Affordable Housing Once Lost to Speculation

Metro North Residents at Putnam Rally, photo courtesy of Tenants & Neighbors

In recent years, speculation in the affordable housing market is an accepted fact. Real estate investment targets the homes of low income families with the express intent to make financial profit from exploiting the residents who live in these buildings. This practice has failed. Over and over again. However, this hasn’t stopped the perception that massive profits can be gained by gambling on NYC’s affordable housing stock. The question in front of our policy makers now is how will we respond to this continuing and destabilizing crisis?

Stuyvesant Town is likely the most famous affordable housing complex that was victim to the overleveraging crisis of the early to mid-2000s. This is because both it is the largest housing complex with over 11,000 apartments and the fact that in 2006 it was purchased for an astronomical price of over $6 billion. This deal was in default within 3 years. Due to the complex nature of the financing, the buildings have been in limbo since 2009, but as was reported by the New York Times, the properties are back on their way to auction, and unfortunately, there are already willing bidders preparing to speculate on the buildings again.

Although, Stuy Town is the largest and most recognizable portfolio, it is hardly the only large complex on the edge of another critical moment. The Urban American Putnam Portfolio is a group of five former Mitchell Lama projects in upper Manhattan and Roosevelt Island that comprises nearly 4,000 units of what used to be protected, affordable housing. This portfolio is, similar to Stuy Town, at risk of being flipped again. Last week, Bloomberg News rendered an accurate and clear explanation of the history of the properties and the risk the portfolio is currently facing.

To give a brief history, in the height of the housing boom the portfolio was flipped twice under business plans to remove the affordability from the project, push out lower income residents and raise rents as high as possible. Urban American purchased the buildings for $918 million, taking out an $800 million mortgage financed by Fannie Mae. Fannie Mae also took the opportunity to invest at least $60 million in equity in the portfolio (although they won’t admit it) something which seems to be in direct conflict with their mission to protect affordable housing. It should come as no surprise that this isn’t the only time they’ve invested in these types of deals. To complicate matters further, it was discovered that the City Investment Fund partnered with Urban American in this predatory deal. The City Investment Fund includes money from the New York City and New York State retirement systems; a bitter irony considering many of the residents in these Mitchell Lama projects were public workers.

This $800 million mortgage is now due, which has inspired a flurry of activity around the portfolio. Urban American is looking for a new investment partner that would help them refinance. Brookfield Properties has expressed interest in buying a stake in a $1.1 billion refinancing. This is a $182 million increase over the last purchase price, which has stretched the rents to the highest level and allowed the conditions of the properties to decline. In the event of this refinancing both the City Investment Fund and Fannie Mae would be paid off, fulfilling their fiduciary responsibility at the expense of thousands of New Yorkers’ having an affordable place to live.

It DOESN’T have to be this way. We as a City can decide that we are going to fight to preserve these homes, as well as other buildings that are victims of this crisis. We can do this without creating diminution in value to the bondholders. Here’s what we need to do:

Fannie Mae: The mortgage was due in early May. As a deal has still not been completed, Fannie Mae is in a position as holder of the defaulted debt to push for a quicker preservation deal. Fannie Mae could also commit to finance a preservation deal that would protect the affordability and commit to improving the conditions. Additionally, Fannie Mae should take responsibility for the fact it invested in this portfolio and use its equity stake as additional leverage to push for a better outcome.

City Investment Fund/Comptroller Scott Stringer: The Comptroller should support the tenants and the preservation of affordable housing by taking a stance that doesn’t ignore the impact of his predecessor’s actions. Pension funds should never have been used in a deal that puts low and moderate income tenants at risk of losing their homes. However, there is no reason why the City Investment Fund couldn’t explore the opportunity to remain invested in these properties as long as an owner steps in who commits to affordability and decent housing.

HPD and other City Agencies: This portfolio represents a substantial amount of affordable housing in Upper Manhattan and Roosevelt island, and it should have never been allowed to lose its affordability protections. HPD and the other City Agencies should explore ways to once again tie rent restrictions to these buildings through the use of tax abatements or subsidy that would (a) provide much needed capital towards repairs and (b) add regulatory agreements that would keep the buildings affordable for the residents who call them home.

Mayor de Blasio and other Elected Officials: Mayor de Blasio, Speaker Melissa Mark-Viverito and the other Elected Officials should support the residents of these properties and the need to protect these units of affordable housing, a much needed resource of affordable housing in upper Manhattan and Roosevelt Island. They also could call all the above mentioned parties to the table with the tenants to negotiate how to preserve these properties.
This is not an easy task, in fact it will be difficult and tedious and with no assurances that we can win. However, the tenants are ready to stand up and take on this fight, the only question is who will stand with them?

This is not an easy task, in fact it will be difficult and tedious and with no assurances that we can win. However, the tenants are ready to stand up and take on this fight, the only question is who will stand beside them?

Friday UHAB News Round-Up!

It’s Friday and though it’s been a while, we’re back with a Friday News Round-Up!  This week, we thought we’d take advantage of all the work UHAB has been doing with press and highlight our campaigns in the news over the past couple of weeks. Check out the following articles pointing to UHAB’s work with organized tenants fighting back!

 Stabilis Capital:

Ridgewood tenants seek city assistance to wrest control of six buildings from Stabilis Capital,” NY Daily News, 5/12/14

Melrose Tenants Still in Limbo,” Mott Haven Herald, 5/12/14

Bronx Tenants Protest Building Conditions NY1, 5/6/14

After Foreclosure Crisis, Renters Suffer Under Wall Street Landlords, ” Al Jazeera America, 4/20/14

 

Crown Heights Tenant Union: 

Tenants Fight to Save Their Homes in Up and Coming Crown Heights,” Epoch Times, 5/15/14

Desperate Forces Align Over Affordable Rents,” The New York Times, 4/28/14

 

Three Borough Pool: 

Garodnick Calls for Citywide Action to Stop Predatory Equity,” Capital New York, 4/22/14

 

Putnam Coalition:

Renters ‘Sold Out’ by NYC’s Pensions Press de Blasio on Housing,” Bloomberg News, 5/14/14

 

We’re proud of our work and excited to continue mobilizing and growing tenant power throughout NYC!

 

Accepting Money to Leave

money

Predatory equity takes place when landlords buy buildings based on the “projected” rents of a building rather than the current ones, subsequently paying huge amounts of money for rent stabilized affordable housing.  The only way the finances will work is by forcing out long term residents and bringing in higher paying ones.  This process, also known as gentrification, is taking place in rent stabilized, affordable housing all over New York City.

Predatory landlords do everything in their power to get long terms residents to leave their apartments such as ignoring tenant rights, decreasing basic services, or offering buy-outs.  While asking tenants to accept money to leave isn’t illegal, it almost always is against the tenants’ interests.   (Check out our one-pager on how to decide whether or not to accept a buy-out)  One super at 725 4th Ave in South Slope, Brooklyn spoke with the Gothamist about his experience asking tenants to accept buy-outs to move:

“He said he was hired with a mandate to clean up the building,” so he did.  It was his job.

After the fourth of fifth [buy-out], Duarte said, “I felt like I was doing wrong,” but people kept coming, and if he wanted to keep his job and support his family, he had to continue paying out. Twenty families left in the first round…Some tell Duarte that taking a buyout was the biggest mistake of their lives. He is sympathetic, but said, “I never pushed anybody out. They asked me, and I made an offer. I hoped they didn’t take it.

Long term residents living in Crown Heights, Bushwick, and other quickly gentrifying neighborhoods have their own stories of being offered buy-outs.  Most often than not, tenants who accept money to leave will have a hard time finding a new apartment in the neighborhood in a similar price range.  Families and communities are uprooted.  Furthermore, each time a family leaves, the price of an apartment unit increases, and the precious stock of affordable housing diminishes.

This crisis is not just a trendy Brooklyn one.  At 836 Faile St. in Hunts Point, tenants have been offered $3,000 to move out of their rent stabilized homes! (Likely this is to produce a cluster-site homeless shelter and allow private developers to profit off of evicting long term residents and exploiting the homeless crisis).

The more tenants understand their rights and the pros and cons of accepting buy-outs, the more they are determined to fight for their homes.  To learn about how to fight back against predatory landlords, come out to the Crown Heights Tenant Union meetings every 3rd Thursday of the month at 7:00 pm at the Center for Nursing the Rehabilitation.

RGB: We Need a Rent Rollback!

Picture1

Every year, the Rent Guidelines Board votes to decide how much, if any, rents can increase. According to the law, the RGB can make “rent adjustments, if any.” The board is NOT required to raise rents – but with a Real Estate Lobby in New York that’s like Big Oil in Texas (powerful!) that’s exactly what they’ve done. For the past 12 years, under Mayor Bloomberg, landlords made money hand over fist while wages went down, unemployment went up, and working class New York City tenants struggled to get by.

There’s a new boss in town, and there’s a new RGB. (Read about de Blasio’s progressive appointments to the RGB here, and here.) This means that tenants are closer to winning a fair deal from the RGB than we have been in over a decade! But now is not the time to stop fighting.

Join UHAB and tenants rights groups from across the city at the RGB’s preliminary vote on Monday, May 5th at 5 pm at 1 Bowling Green. Let’s hold de Blasio to his campaign promises, and pack the room with tenants demanding justice.

WHAT:  ROLL BACK OUR RENTS @ RGB Preliminary Vote
WHEN:  Monday, May 5 at 5 PM
WHERE: U.S. Customs House, 1 Bowling Green 
 
For more information, contact the Real Rent Reform campaign at 718-864-3932.

The Systems That Govern: the NBA, Racism, and Affordable Housing

By now most of us have heard of — and been disgusted by — the (most recent) statements that allegedly come from  current Los Angeles Clippers owner, Donald Sterling to his girlfriend. If you haven’t, here are a few choice parts:

It bothers me a lot that you want to broadcast that you’re associating with black people. Do you have to?…You can sleep with [black people]. You can bring them in, you can do whatever you want.  The little I ask you is not to promote it on  … and not to bring them to my games.

There has been a lot of anger being directed at Sterling over the past few days. Players from many different teams have had pretty strong reactions: “I couldn’t play for him”; “There’s no room for Sterling in this league”; and comparing the comments to “plantation politics”.

What is almost as shocking as what he said is that this is not the first time that Sterling has come under fire for his overt racism. Deadspin has a full list of the most famous comments he’s on the record as saying. In 2009, Elgin Baylor, the Clippers General Manager from 1986 to 2008, filed an age and racial discrimination suit against his old boss alleging, among other things, that Sterling repeatedly expressed a desire to field a team of “poor black boys from the South … playing for a white coach.”

Beyond his abhorrent racism, Sterling is also a vicious slumlord. In 2009 he was forced to pay $2.73 million in a settlement accusing him of discriminating against Black and Latino tenants. Sterling said he did not like to rent to “Hispanics” because “Hispanics smoke, drink and just hang around the building.” He also stated that “black tenants smell and attract vermin.” The case ended with the largest ever settlement obtained by the US Department of Justice in a housing discrimination case involving rental units.

A vastly disproportionate amount of the low-income tenants we work with are people of color. The systematic link between poverty and race is well documented – though of course it does not mean that all poor people are people of color and that all people of color are poor. The folks who live in affordable housing are, shockingly, folks who are working low-paying jobs or not able to work for any number of reasons.

Low-income tenants are too often vulnerable at the hands of their landlords. NYC’s rent laws are difficult to understand, and landlords are literally paid to exploit the loopholes that exist. And when tenants try and push back, there is always the worry that landlords will take tenants to court over and over again for frivolous charges, forcing tenants to take off work or adding stress that could literally kill them. For example, Sterling was also forced to pay $5 million in legal fees (plus an unknown, large settlement sum) to over a dozen tenants represented by the Housing Rights Center. According to The Nation blogger Dave Zirin:

Not all the plaintiffs, though, lived to see their windfall. Court documents state that on July 12, 2002, “Kandynce Jones was under threat of eviction by [Sterling] even though she had never missed a rent payment. Ms. Jones, who is a senior citizen and a person with a disability, suffered a stroke caused by the stress [of Sterling’s] housing practices. On July 21, 2003, Ms. Jones passed away as a result of that stroke.”

This exploitation is not isolated. It is a direct result of the systems that govern.

On WNYC’s Brian Leher Show this morning, the Washington Post’s Clinton Yates talked about the incredible structures of power at play here.

If you think about what that [Housing Rights Center settlement] is on its own, and the fact that the NBA knew this, understood this, and allowed him to continue unfettered in his ownership of an NBA team points to you — I mean it points you to how the major structures of power really, really work.

This last point — “how the major structures of power really, really work” — is worth repeating and emphasizing. The same type of people that govern the systems of the NBA — wealthy, middle-aged, heterosexual, white men — govern the systems of government that in turn dictate the laws and regulations of housing in New York City and beyond. Yates goes on:

[Sterling] indicates that there is a certain fear of his own feelings, which is that he’s afraid to not be racist because he doesn’t live in a world in which that doesn’t automatically benefit him. And that in itself is a frightening concept if you really think about, again, how the power structures of this country work, where a guy like that is emboldened — and it makes sense to him to operate in discriminatory manors because it makes him more money.

When privileged individuals are encouraged to exploit others in order to become wealthier and more privileged, we know the systems that govern have failed. When it is good for business — and legal — to harass tenants into leaving their homes so you can raise the rent, we know the systems that govern have failed us. When landlords are allowed to take out mortgages they can’t possibly pay back to buy buildings they have no intention of maintaining, we know the systems that govern have failed.

Sterling’s comments and the full backstory behind them should remind us that we need to continue to push our elected officials and organize en mass for a system that works for all people, no matter their race or income.

Follow

Get every new post delivered to your Inbox.

Join 1,120 other followers

%d bloggers like this: