The Surreal Estate

Perspectives on Tenant Organizing from the Urban Homesteading Assistance Board

Tag Archives: Tenant’s Rights

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?

Three Borough Pool Press Conference

A few weeks ago, tenants from all across New York City came together in front of City Hall to demand that the Three Borough Pool, a group of 44 buildings in the Bronx, Brooklyn, and Manhattan, be taken over by a new, responsible owner.

The current owners (David Kramer, Normandy Real Estate, Vantage Properties, and Westbrook Partners) failed at paying their mortgage, landing all of the buildings in foreclosure. They’ve also failed at maintaining the buildings, resulting in horrific living conditions in apartments. If the lender, LNR, sells the buildings to a responsible developer who commits to rehabilitating the buildings and including tenants in decisions about their homes, this foreclosure can be an opportunity to preserve the nearly 1,600 units of rent regulated housing that are at stake.

UHAB created this video from our footage of the press conference. Follow the link at the end of the video to watch the tenants’ full speeches!

Friday News Round Up!

Made it through another week. Here’s some things that happened in New York while nothing good happened in Washington. 

  1. Big developers and the Department of City Planning are rushing to finish up their final projects before Bloomberg leaves office. Its looking very likely that the next mayor will be a little bit less friendly to big ticket development (and ideally in favor of more affordable housing.) 
  2. Speaking of development: Greenpoint is currently facing a debate that underscores all debates around affordable housing in New York. What does affordable mean? Affordable to who? How much “affordable” should developers provide? Is the AMI even a useful measure of income? 
  3. What does Tish James as Public Advocate mean for the race to be the next City Council speaker? 
  4. Glenn Beck claims that the media focus on Anthony Weiner was simply a distraction, a communist plot to take over the government. It’s funny. 
  5. A coalition of tenants have been fighting against their notorious Predatory Equity landlord, Pinnacle, for years. They charge their landlord used widespread practices to illegally raise rents and push out low income tenants. Though tenants will now be able to seek compensation from their landlord for this malfeasance, tenants are disappointed. This week, a federal judge turned down tenants attempts to appeal an earlier settlement which excluded certain types of claims that Pinnacle could be liable for. We know they’ll keep fighting. 

Predatory Equity in 2013: New Organizing Tools

Since 2008, UHAB and our allies have learned a lot about how financial malfeasance in the rent regulated housing market puts low income tenants at risk. As Wall Street rejoices over the “rebound” in housing prices, we know the truth: the rebound goes hand in hand with a rebound in speculation and overleveraging. Last year, we created the Life Cycle of Predatory Equity that reveals that Predatory Equity to be a cyclical process: an overleveraged mortgage, harassment, neglect, foreclosure, and overleveraging again. Unfortunately, since 2008, we’ve seen many buildings enter their second cycle.

Buildings entering the second round of Predatory Equity often are faced with a new speculative landlord who will use familiar tactics to try and “improve the underperforming asset.” (i.e., Landlord speak for “increase rents by pushing regulated tenants out.”) One common tactic that’s  particularly popular in gentrifying neighborhoods is a “buy-out,” where landlords offer tenants seemingly large sums of money to vacate their units. The money is never very much – hardly even enough to move. (One tenant we work with was offered $6,000 and a bus ticket to Philadelphia where, her landlord said, “housing is more affordable.”)

Fighting these buy-outs is important: when tenants opt to leave, landlords are automatically able to raise rent by 20%, contributing to the erosion of affordable housing stock in New York, and potentially even bringing the unit out of rent regulation.  If a tenant decides to stay, landlords can only raise rent by 4% to 7.75% depending on length of lease.

We developed a fact sheet on these kinds of buy outs while working with tenant groups at 1153 and 1159 President Street in the rapidly-gentrifying neighborhood of Crown Heights. Check it out here.

News isn’t all bad: in the past few years, we’ve seen some buildings get preserved for long term, quality affordable housing. We’ve seen tenants successfully organize to reclaim their buildings from predatory banks, and are currently in the preservation pipeline

Finally, with the help of graphic designer/artist Donna Choi, we developed an organizing tool that we’re using to engage tenants fighting to break the cycle of Predatory Equity. The infographic, available in English and Spanish, explains how developers buy buildings that are in foreclosure and illustrates how tenants can organize and to demand that the building is sold to a developer of their choosing.

We encourage you to these resources and use them!

Tenants from Distressed Bronx & Queens Buildings Descend on Bankruptcy Court to Demand Private Equity Company Preserve Their Homes

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Manhattan, NY: Tenants from six dilapidated buildings in the Bronx and Queens travelled to Bankruptcy Court today to confront Stabilis Capital Management, the mortgage holder on their homes. The buildings are currently in foreclosure and are being managed by an agent who works for Stabilis. Tenants are suffering from leaks, mold, rodent infestations, falling ceilings, and in some cases, a lack of basic plumbing.  Stabilis is scheduled to appear in court today to seek control of the deeds on the properties, which are located in Ridgewood, Queens. Tenants fear that if they are successful in securing the deeds, Stabilis will sell the buildings to the highest bidder, putting residents at risk of continued unlivable conditions, and displacement.

Tenants, advocates, and elected officials are demanding that Stabilis meet with them to present their plan for preserving the properties, which are rent regulated and home to 36 low-to-moderate income families. Tenants are calling on Stabilis to sell the buildings to affordable housing developers who are willing and capable of fully rehabilitating the properties, keep them affordable in perpetuity, and allow tenants significant control in the management of their homes.

Stabilis is one of several companies that has been buying up debt on severely distressed rental properties in New York City’s gentrifying neighborhoods. The acquisitions resemble activity of the market before 2008, when private equity firms purchased large portfolios of rent-regulated apartment buildings, leading to foreclosure and mass deterioration of the housing stock. Today at Bankruptcy Court, the Queens tenants are joined by tenants from 836 Faile Street in the Bronx, where families are facing a similar situation with Stabilis Capital Management.

“As a resident of 1821 Cornelia St., I am concerned about the safety of the adults and children living in these six buildings,” said Tenant Leader Denise Serrano. “We pay our rent, so Stabilis should pay their bills and prevent the electricity and hot water from being shut off. They need to fix things like the locks on the front doors. We want to meet them to discuss who the next owner will be.”

There are currently 549 violations on 36 units at 1821 & 1894 Cornelia, 1673, 1675 & 1726 Woodbine, and 18-14 Woodbine. Tenants have been working alongside their elected officials and the Urban Homesteading Assistance Board to encourage the equity company to meet with them and allow them a voice in the future of their homes.

“Tenants should not suffer because of bad bets made by private equity investors seeking to gamble on New York’s housing market,” said Congresswoman Nydia Velazquez. “Stabilis Corporation must comply with local, state, and federal Fair Housing laws and should move swiftly to make badly needed repairs in all of its properties, including those in Ridgewood.”

“Too often, tenants are the ones who pay the price for bad lending decisions,” said City Council Speaker Christine C. Quinn. “If Stabilis Capital Management refuses to meet with tenants to develop a plan to protect the future of their homes, then they must sell these buildings to someone who will. I thank the tenants, UHAB, Congresswoman Velázquez and Council Member Reyna for their efforts to protect these homes and call on Stabilis to immediately begin repairs on these neglected buildings.”

“We can’t keep letting these vicious cycles send buildings deeper into distress. Whether they live in a foreclosed building or not, all tenants have a right to safe, decent housing,” said Public Advocate Bill DeBlasio. “When properties get this bad, we need everyone to come to the table–including banks and lenders–to put it back on a sustainable track. Tenants deserve nothing less.”

“It is not acceptable to put families at risk and force them to live through undignified conditions because of the irresponsibility of a landlord. Stabilis has acquired more than just foreclosed buildings, they have acquired people’s homes,” said Council Member Diana Reyna. “These tenants have a right to clean and safe housing and it is incumbent upon Stabilis to appropriately renovate any buildings in their portfolio.  If they are incapable or unwilling to do this renovation, they need to transfer control of the building to someone who can.”

“I am here today to support my constituents and neighbors who are suffering with the horrific and unimaginable living conditions for over 5 years,” said Assemblyman Mike Miller.  “Clearly, the present owner and the management corporation have been absentee allowing their tenants to live in unsuitable conditions for years.  I stand with my neighbors together to demand that our Judicial System, in particular our Bankruptcy Court, force the equity company to rehabilitate the properties immediately or to step aside and allow the buildings to be sold to HPD-approved developers who have the skills to stabilize these properties and provide safe living conditions for our community.”

“Stabilis Capital Management financial transactions seem to be disastrous for the tenants who occupy these buildings,” said Kerri White, Director of Organizing and Policy at the Urban Homesteading Assistance Board. “If Stabilis has no plan on how they will rehabilitate these properties to make them safe and decent for the families who live there and compliant with the laws of the City they should exit this deal now.”

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