Michael Shah smiles as he sits in one of the mismatched wooden chairs that contribute to the decor of his Lower East Side restaurant Sons of Essex, a local hot spot that regularly pops up in the gossip pages as the backdrop in photos of partying glitterati. It’s one of at least seven upmarket properties Mr. Shah has acquired in the past four years as he has moved beyond his original focus on affordable housing in the outer boroughs. Mr. Shah’s new growth spurt has been fueled by snapping up properties with problems such as loan defaults and then working them out.
“I find it really exciting,” said Mr. Shah, owner of DelShah Capital, a real estate investment firm.
His latest clash, though, may be a bit too exciting. He is battling the city over fraud charges it leveled last month stemming from unpaid taxes on four of his early purchases. A nonprofit called the African-American Parent Council bought the buildings between 2006 and 2008 and transferred the deeds to companies controlled by Mr. Shah within six months, according to city records. Nonprofits are exempt from paying transfer taxes. Mr. Shah is not. The city says he should have paid the taxes when he took possession, and that it noted a pattern of transactions designed to avoid his tax obligation, according to a spokesman for the city’s Finance Department. With interest and penalties, the city says, Mr. Shah now owes $3.1 million.
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At The Surreal Estate, we envision a better affordable housing policy that embodies an end to speculation. We hope to achieve it through encouraging tenants to unify and stake themselves in the future of their buildings. We have many allies in this fight, and Shelterforce: The Journal of Affordable Housing, has documented it well. In a recent article, “Housing for People, Not for Profit”, Anita Sinha and Rachel Laforest imagine an approach to housing policy that differs substantially from policy today. In the excerpt below, they write:
Affordable housing policy should be grounded in the following principles:
- Suitable housing requires a suitable urban society, including physical and social environments designed to support the full development of each person’s individual and social human potential. Housing cannot be disconnected from the social context of the neighborhood and the city.
- The profit motive should be evicted from housing. Housing should be valued as a place to live, not for the potential profit it can create.
- Public investment is central to the provision of suitable housing for all. The role of the market should be limited to permitting those able to do so to provide their own housing, and only to the extent that such provision does not restrict the ability of all people to be housed.
- The ownership and management of housing should be non-bureaucratic and support the individual freedom of all occupants to shape their own accommodations and immediate environment. Non-speculative ownership of housing is one means to that end, as is democratically-run public housing and other non-speculative forms of rental.
Predatory Equity is the quintessential example of “profit over people“. It is a phenomenon which encourages speculation and prevents investment in permanent affordable housing. By over-leveraging affordable housing through the false projection of higher rents and absurdly low maintenance estimates, it leads to displacement in communities, tenant harassment, and a lack of repairs which are severe enough to cause health and safety concerns in already marginalized communities.
As we continue the every-day fight to bring housing policy into this vision, it has become more and more apparent that we will only be successful if we strongly encourage bank regulators to step up and start actively regulating banks like New York Community Bank and Signature Bank, among others.(Sidenote: Signature is now holding the debt on many of New York Community Bank’s most distressed portfolios. In taking over these distressed assets, Signature Bank has generally increased the level of debt.)
Our success at convincing banks to stop lending to slumlords and speculating on multi-family housing has been limited. Consequently, we now must target the Federal Reserve and the FDIC and force them to impose penalties on banks who continue to generate exorbitant profits while communities suffer.
“Housing for People, Not for Profit” is our consistent cry here and it should be heard louder and clearer, by all of us together. It’s time to move from imagining a different future to fighting for it, with the energy and excitement that comes from knowing that we needed better regulation yesterday.
N is a resident at 1576 Taylor Avenue (one of the 10 Milbank buildings which Finkelstein-Timberger purchased.) Below is a quote she emailed me on Monday afternoon regarding the progress of repairs at her building. She asked to remain anonymous.
These are the major concerns of the tenants: the tenants of 1576 Taylor Ave., Bronx, NY - a highly publicized Finkelstein-Timberger property (formerly Milbank), state that although they have seen some improvements to the building (new windows, hallway lighting), progress is still lagging in the occupied apartments. Vacant apartments are vigorously being worked on, whereas tenants must wait for their own repairs. Some repairs are started and not completed nor are they given information as to when they will do so. This was not the agreement Mr. Finkelstein made when he addressed the tenants in person, in which he stated he would take care of “OCCUPIED APARTMENTS FIRST.”
Tenants also agree that Management needs to be more accessible and they also need to be present to ensure work is being done properly. “Too often we have to leave messages and our calls are not returned,” stated several other tenants in my building. They also noted that hallways need to be cleaned on a regular basis (swept daily, mopped weekly). There is always garbage in the hallways. Tenants showed me the yard which is sometimes swept and the garbage is not picked up but swept up into a pile and left in a corner (pile is still out there since August 8th)!”
N is right. Conditions, though somewhat improved, are still not at an acceptable standard, and the repairs that residents receive certainly should not come second to repairs made in vacant units. Let’s hope it doesn’t stay this way for long.
While predatory lenders in the multi-family market have yet to be reprimanded, the good news is that the single family market is having some limited success.
“Wells Fargo & Co. agreed to pay an $85 million civil penalty Wednesday in response to allegations it steered thousands of potential prime-mortgage borrowers into more-costly subprime loans.
A cease-and-desist order issued by the Federal Reserve Board is the first formal enforcement action taken by federal bank regulators involving allegations of steering borrowers into high-cost subprime loans. The penalty is the largest issued to date by the Fed in a consumer-protection enforcement action.”