The Surreal Estate

Perspectives on Tenant Organizing from the Urban Homesteading Assistance Board

Tag Archives: predatory equity

Council Members Ritchie Torres, Brad Lander, Antonio Reynoso, Helen Rosenthal, Inez Barron Tenants, and Advocates Stand United against Predatory Equity: Call for responsible disposition of more than 1500 apartments currently in foreclosure.

Council Members Antonio Reynoso and Ritchie Torres with UHAB Executive Director Andrew Reicher. Photo from Council Member Brad Lander.

Council Members Antonio Reynoso and Ritchie Torres with UHAB Executive Director Andrew Reicher. Photo from Council Member Brad Lander.

For Immediate Release: March 18, 2014

City Hall — Elected leaders including City Council members Ritchie Torres, Brad Lander, Antonio Reynoso, Helen Rosenthal, and Inez Barron are joining tenants from 42 affordable buildings spread across Manhattan, Brooklyn, and the Bronx and calling on the mortgage holder and the City to negotiate a deal that would end tenants’ suffering. The rent-regulated and HUD subsidized portfolio, known as the Three Borough Pool, is in foreclosure due to irresponsible financial practices called “predatory equity.” Housing advocates across the city, including Banana Kelly Community Improvement Association, CASA New Settlement Apartments, New York Communities for Change, Northwest Bronx Community and Clergy Coalition, Pratt Area Community Council, Tenants and Neighbors, and the Urban Homesteading Assistance Board are assisting residents in their fight to secure the portfolio as affordable housing.

Predatory equity is a disturbing trend that occurs when investors purchase and grossly over-leverage rent regulated housing with the expectation of huge returns. In order to realize financial gains, property owners attempt to illegally raise rents and reduce maintenance and operating costs. This harmful cycle leads to the displacement of low-income families, deterioration of buildings, and the loss of much needed affordable housing.

Advocates say that the Three Borough Pool is emblematic of the problems of predatory equity. In 2007, a private equity joint venture (Normandy Real Estate, Vantage Properties, Westbrook Partners, and David Kramer) packaged the 42 buildings into one portfolio with a $133 million loan. By 2010 the mortgage (now part of a much larger commercial mortgage backed security) was in default. LNR, the mortgage servicer for the security, began foreclosure proceedings in April of 2013. LNR has given the owners until April 2nd to come up with a refinancing plan that would take the buildings out of foreclosure. However, tenants and advocates hope to use the foreclosure as a juncture to transfer the properties to another owner entirely.

“We’re here today to urge any and all financial institutions not to refinance with David Kramer/Colonial Management, Normandy Real Estate, Vantage Properties and Westbrook Management,” said Benjamin Warren, Tenant Association President of 1511-1521 Sheridan Avenue. “Myself and the other residents of this portfolio know what we deserve, and it is not the carelessness of these self-interested corporations. We look forward to better days without these groups.”

The buildings are physically collapsing under the weight of an enormous mortgage. There are over 2,700 HPD violations in the portfolio. Three of the buildings are in City’s Alternative Enforcement Program, an initiative that targets 200 of the most distressed buildings in the City. Tenants, advocates and elected officials are calling on LNR Property to negotiate with the City and transfer the properties to a responsible developer who will bring the buildings back to safe condition and keep them affordable for the families who call them home.

“These guys took $133 million from the bank and not one dime has gone into taking care of the buildings we live in,” said Debra Cooper, a tenant leader at 711 Fairmount Place. “We live with constant leaks. I regularly don’t have heat or hot water. We have no mail boxes and can’t get our mail. Enough is enough. If David Kramer and his friends aren’t going to take care of our homes, it’s time they are sold to someone who can. It’s past time.”

Some members of the City Council used the situation in the Three Borough Pool to call on the City administration to renew its pledge to fight financial speculation on affordable housing. Elected officials believe that one way to dissuade investors from speculative behavior is through expanding City programs like the Alternative Enforcement Program and the Proactive Preservation Program. These programs allow the City to more closely monitor buildings in physical and/or financial distress. Officials are also considering legislation to create a “watch list” of property owners who engage in predatory equity.

“Affordable housing exists to ease the burden on middle and low income New Yorkers who are looking for a decent standard of living,” said Council Speaker Melissa Mark-Viverito. “This situation highlights the need for further oversight to prevent affordable housing from being undermined by speculative and predatory equity practices in the future.”

“The loss of affordable housing to the practice of predatory equity has created a crisis in our communities that will only become more severe if we fail to take action,” said Councilmember Ritchie Torres, Chair of the Committee on Public Housing. “These properties belong in the hands of new, responsible owners, committed to their preservation and long-term affordability. As a concrete step to address these abuses I have proposed legislation that would create a publically accessible watch list of property owners that engage in this negligent and abusive practice.”

“What these predatory investors are doing is simply unconscionable; everyone in this city deserves a safe, affordable, and well-maintained place to call home,” said Council Member and Bronx delegation leader Annabel Palma. “The administration must take aggressive action against these irresponsible owners and make good on its promise to preserve the city’s affordable housing stock.”

“No one should live in an apartment with mold, water damage or rusted, broken pipes in New York City. It’s time to close the gap between the rights of tenants and obligations of property owners. When homeowners across the country were facing foreclosure because the banking industry had gone rogue, the federal government stepped in to regulate the industry and offer financial assistance through the HAMP modification program. Tenants are no less important than property owners,” said Council Member Mark Levine. “It’s time for the City to step in to empower tenants and to put an end to these abuses. No one’s quality of life should be diminished because of negligent slumlords.”

“Predatory private equity is sucking the life out of our communities, leaving buildings vacant and in decay across New York City. Thousands of long time, hard working residents will be forced from their homes and this is unacceptable,” said Council Member Ydanis Rodriguez. “The city must step in to save these tenants or else this disturbing trend will continue wreaking havoc in our most vulnerable communities. Going forward, the state needs to put safeguards in place to prevent these practices because in every scenario, NYC residents and taxpayers are losing.”

“Today I’m proud to stand with the tenants of the Three Borough Pool. Predatory lending is rooted in disingenuous dealings and tenant harassment, practices that have allowed building owners to shed affordable housing in the race for greater profits, said Council Member Helen Rosenthal. “On the Upper West Side, advocates and tenant leaders have stood firm against speculators like Meyer Orbach whose portfolio includes 25 buildings located between West 106th and West 109th Street. Like the investors behind the Three Borough Pool, The Orbach group has used frivolous litigation and intimidation tactics to push long-term rent regulated tenants from their homes and strip regulated apartments of their affordability through vacancy decontrol. These actions are unconscionable and we must call on every available recourse in our city government to help tenants save their buildings, protect their homes, and preserve their quality of life.”

“Together, we have the opportunity to ensure that over 1,500 families live free from bad conditions, harassment, speculation and fear,” said Sheila Garcia, an organizer at CASA New Settlement Apartments. “Tenants across these buildings want a landlord who will follow the laws and listen to their concerns. Tenants across these buildings have raised families and built communities that we cannot let be destroyed, period, but especially not in the name of speculation.”

“Brooklyn tenants living in HUD subsidized buildings that are part of this foreclosure pool have had enough,” said Jon Furlong, Assistant Organizing Director at the Pratt Area Community Council (PACC). “PACC is proud to stand with the tenants from ALL the affected buildings to ensure they get the repairs and services they deserve. We must continue working together to prevent this type of speculation in multi-family buildings.”

“We’re pleased to see the City Council standing with Three Borough Pool tenants in their fight for a better deal,” said Kerri White, Director of Organizing and Policy at the Urban Homesteading Assistance Board. “However, as a City, we need to figure out ways we can stem speculation on affordable housing in the first place. Tenants shouldn’t have to suffer for years and face foreclosure, waiting for the opportunity to fight for something better.”

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Fighting Jewish Slumlords Isn’t Anti-Semitic PLUS A RALLY!

The Jewish Daily Forward published an article today written by UHAB Organizer Elise Goldin called “Fighting Jewish Slumlords Isn’t Anti-Semitic.” Inspired by the inflammatory media attention around slumlord Menachem Stark’s murder, she writes about the ways that religious Jews too often appear in NYC’s shady real estate business:

Through my work, I do a great deal of research to try and untangle the mess of who owns what property and who’s connected to whom in the real estate industry. And it’s not easy. Take 199 Lee Avenue, an address in the religious Jewish part of Williamsburg. It’s connected to literally hundreds and hundreds of distressed buildings. Entities with an address at 199 Lee touch all sides of any real estate deal — as owners, mortgagers, brokers — and it’s nearly impossible to connect the address to an actual person.

This Wednesday, we’re holding a tenant action in the neighborhood of Borough Park with tenants from 230 and 232 Schenectady in Crown Heights. The buildings are in some of the worst condition we at UHAB have ever seen: unbelievable leaks, ceilings caving in, and two electrical fires since they’ve been in foreclosure.  Back in 2012, tenants actually won their organizing campaign:  an non-profit group, MHANY, purchased the mortgages on the buildings with the goal of finishing the foreclosure and becoming owner.  Unfortunately, the foreclosure process has moved at a glacial speed and even though MHANY holds the mortgages, no real work can be done until the foreclosure is finished.  While tenants continue to live in dangerous conditions, the owners of the building are further stalling the foreclosure by marketing the buildings with hopes of paying off MHANY and making some money off the top.

Wednesday morning, we’re gathering to protest real estate broker, Sanford Solny, in front of his office in Borough Park to tell him and his investors to back away from this deal and let foreclosure case finally come to an end. This is an action to preserve affordable housing in Crown Heights, and to assert that tenants, not banks and landlords, should be determining what happens to their homes.

Every minute that Sanford Solny and his slumlord investor friends continue to treat these buildings like gambling chips, tenants continue to suffer. Join us in telling them to back off! 

When: Wednesday, January 15th, 11 AM
Where: 3811 13th Ave, Brooklyn

Questions?

Contact us at thesurrealestate@gmail.com or 212-479-3358

Stabilis Press Conference

Here is  a video with footage from the Stabilis press conference and building tour on December 3rd. Letitia “Tish” James, who will become our Public Advocate in just a few days, spoke beautiful words of solidarity with the tenants. Tenants spoke about the hardships and appalling conditions they have endured while living in a building with a negligent landlord. Then the tenants lead a tour of the apartments to show some of these conditions. Please watch and share!

Crown Heights Tenant Union To Meet This Thursday

Photo: San Fran.'s Tenant Union

Photo: San Francisco Tenant Union

Crown Heights is gentrifying.  Everyone knows it, but how does it actually play out on the ground? When a neighborhood gentrifies, where are the people who used to live there?  (Often, those experiences are lost and made invisible.  San Francisco’s Anti-Eviction Mapping Project is working to bring this issue into the public eye through sidewalk stencils.)

Along with gentrification comes harassment and illegal activity.  When landlords project that property values will rise, they purchase a building for too much money, assuming they’ll make it back through the high rents that they’ll be able to charge.  Unfortunately, what they don’t take into account is that many New York City buildings are rent stabilized, and that rents can’t just be raised willy-nilly.  So they use other tactics: Harassment,  Major Capital Improvements,  Lack of repairs, Buy-outs.  Anything to force long term tenants out to bring in new, higher paying ones.

In order to pay back a too-big mortgage, landlords don’t stop with the illegal activity after getting a long term tenant to move out.  Instead, they illegally overcharge new tenants, often young people who are also unaware of New York City rent laws.  Some landlords (like ZT Realty) overcharge unsuspecting newbies thousands of dollars.  And the worst part is, they get away with it!  (And they continue to buy more buildings!)  This is the cycle of predatory equity when it works for landlords.  Because the debt levels on these buildings are so high, if landlords were to actually abide by rent laws and respect tenant rights, they wouldn’t be able to pay back their mortgages and the buildings (like so many that we see) would fall into foreclosure.

A group of tenants in Crown Heights have begun meeting as a Tenant Union, hoping to organize and make demands to landlords, lenders, and the City.  Many of the tenants have lived in the neighborhood for decades, and have been experiencing landlord harassment and decreased services, and want to speak up for their rights.  Others have lived in the neighborhood a year or two, and don’t like what they’ve been seeing or are personally being illegally overcharged.

UHAB has been organizing with small, distressed buildings in this neighborhood for years, and have seen this same pattern play out over and over.  We decided to team up with the Crown Heights Assembly to jump-start the Tenant Union and launch a campaign to protect tenant rights and preserve affordable housing.  Join us for the third meeting of the Crown Heights Tenant Union.  We’ll be meeting Thursday evening, 7:00 at 805 St. Marks (between Brooklyn and New York Ave).  

Documentary Release: “Faile St: The Human Cost of Foreclosure”

We are excited to announce the release of a powerful documentary by Elaisha Stokes and John Light highlighting UHAB’s Organizing and Policy Department’s work in the Bronx. The documentary highlights two buildings, 836 Faile Street and 553 E. 169th Street, both in the Bronx. UHAB has been organizing and working with tenant associations for a preservation outcome in these properties since 2011. At the making of the documentary, both buildings were in foreclosure, trapped in the cycle of predatory equity, and tenants were living in deplorable conditions.

Almost 2 years later, tenants at 553 E. 169th St. have a new landlord. 836 Faile St., however, remains in foreclosure with private equity company, Stabilis Capital Management as mortgage holder.  Tenants at Faile St. continue to organize, and are demanding that Stabilis transfer their building to Community Development Inc., a city-approved preservation developer.  They are are being supported by Bronx Legal Services, who will soon be filing a motion to enter tenants into the foreclosure case, and their Councilwoman Maria del Carmen Arroyo. Recently, UHAB has begun to build tenant associations in 7 other Stabilis-related buildings. 836 Faile Street tenants are working with tenants across New York City to demand that Stabilis Capital get out of the rent regulated multifamily housing business. 

Click here to watch the Earth Focus documentary about how tenants can come together to fight for quality affordable housing, and stay tuned to this exciting fight.

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