February 27, 2012
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Photo via NPR.org
Last Friday’s Morning Edition included a segment titled “With Banks as Landlords, Some Tenants Neglected.” You can read the story or listen to the segment here. This story touches on an issue we at The Surreal Estate hold near and dear: how the foreclosure crisis is affecting those who live in rental housing. We believe that tenants are truly the most innocent victims of the foreclosure crisis; they are suffering without ever having signed a mortgage.
The families interviewed for this segment live with bed bugs, mold, leaks, fallen ceilings and aging appliances: the same litany of abuse that tenants in New York City face in their day to day lives. The article grapples with an emerging issue in the weak multifamily housing market: lenders who become landlords as buildings are unable to be sold at foreclosure auction. This category of bank-owned property is known as Real Estate Owned, or “REO.” It is unsurprising that banks who make bad loans also are negligent property owners.
There is one significant difference between the New York City market and the markets discussed in Morning Edition. (Oakland, CA and Washington, DC) In New York, we have yet to see a real influx of REO properties to multifamily housing market. It seems there is no shortage of idiots willing to pay top-dollar to own property in New York City. As one person described it recently, far-flung speculators don’t necessarily know the difference between Park and 72nd and Park and 172nd. To them, it’s all just Park Avenue. Perhaps as the market stays depressed and the amount of foreclosures continues to rise, we will come across more REO properties. But for now we’re just beating off slumlords with a stick to try and clear the path for qualified preservation developers.