More frequently than we can stomach, the UHAB Organizing and Policy Department gets calls alerting us to impending, exorbitantly priced, sales of buildings we work in. One such time, our trusty informant exclaimed, “It’s like 2008 didn’t even happen!”
If you wandered blissfully through the past few years in a daze, unawares of the massive unemployment, rise in poverty, and unprecedented levels of foreclosures and subsequently, homelessness, please tell us how you did it. We’d have fewer ulcers. And here’s a quick breakdown, to catch everyone up to speed: the years leading up to 2008 were marked by predatory lending and excessive speculation in real estate. This took place in both single family and multi family markets. Borrowers became unable to make payments on loans that were too large to begin with, and so lenders began to foreclose on properties, one after another, after another.
In the single-family market, borrowers are rather sympathetic. They’re usually low-income families who were seduced by the homeownership craze and lured into signing irresponsible mortgages by predatory banks. In 2008, their life savings and their most valuable asset both disappeared from underneath them.
In the multi-family market, however, the borrowers are real estate speculators who borrowed tens of millions of dollars to buy crumbling properties in the worst parts of the Bronx, betting on pushing rent-regulated tenants out and bringing higher paying tenants in. Gentrification is the name of the game. And when that proved (surprise, surprise) to be an untenable financial plan, they just let their properties deteriorate, leaving the innocent tenants living in slum conditions.
Well, now its 2011 and we’ve been tracking more than 70,000 units of overleveraged properties for about 5 years. Many of these units are in buildings which are now in foreclosure. Unfortunately, we don’t have the capacity to work in all of them, but in the ones that we do, we are fighting predatory buyers tooth and nail to lower their offering prices, and to force the bank to take a smaller deal.
When I describe this all to my friends and family who aren’t in the affordable housing world, and I describe the horrendous state of the buildings we go to, they are dumbfounded. I usually tell them that we’re going to the worst neighborhoods in New York City to illustrate just how much these tenants are isolated – not only in their buildings, but in their neighborhoods. Usually the first thing anyone asks is “Why would someone pay $35 million for that?” It doesn’t make sense, does it? But the world is full of bad people who just want to make money, and predatory equity is nothing if not persistent. Better yet, It’s like 2008 didn’t even happen!!!