At City Hall, Councilman Garodnick cited Stuyvesant Town as a prime example of predatory equity, a practice that has continued throughout the city. (Photo by Sabina Mollot)
By Sabina Mollot
With Mayor de Blasio expected to unveil a housing plan soon that’s supposed to create or preserve 200,000 units of affordable housing, Council Member Dan Garodnick has released a report that’s determined a part of the plan to maintain the city’s stock of affordable housing needs to be a crackdown on predatory equity.
Garodnick discussed the issue in front of City Hall on Tuesday, saying that even after the market crashed, landlords have continued to accrue excessive debt in building purchases and then attempt to either pass the costs on to tenants in ways that are sometimes illegal or become slumlords.
“Tenants are being forced out because rents are jacked up on their apartments or because the apartments are becoming uninhabitable,” he said. Garodnick, while joined by other elected officials, housing advocates and a handful of tenants of distressed buildings, said it’s up to the city to step in with policy to break the cycle of buildings becoming distressed and tenants getting gouged or harassed. Naturally, Garodnick gave the example of the now infamous $5.4 billion Stuyvesant Town deal, in which owner Tishman Speyer lost all of its investors’ money following a failed attempt to turn the mostly rent-regulated complex market rate. Calling it the poster child for predatory equity, Garodnick recalled how “their entire business plan was to evict as many rent-stabilized tenants as quickly as they could.”
Meanwhile, since then, there have been similar deals that have been even worse in terms of those properties being allowed to deteriorate. Such blighted properties, noted Garodnick, are a burden on the city. He also referred to the refinancing last week of the 1,600-unit Three Borough Pool, which was $133 million in debt. After being refinanced, the property’s debt has swelled to $146 million, which Garodnick said makes no sense.
“They avoided foreclosure by refinancing with even more debt. How is that even possible?”
In his report, titled “Ghosts of the Housing Bubble; How Debt, Deterioration and Foreclosure Continue to Haunt New York After the Crash,” Garodnick suggested a few policy changes to deal with properties that are overleveraged. One is to have the city invest much more in Alternative Enforcement Program, which allows the city to repair violations and bill the owner. The city currently only spends $50,000 on the program, relying on federal grants to make up the rest of the $7.6 million budget.
Another plan is to give good-acting landlords the first chance to buy foreclosed mortgages after the city buys them. He also said he would look into the possibility of “creative solutions” where long-suffering tenants being able to get a crack at buying. He noted how this was currently a goal in ST/PCV, though in that case, the proposal to buy was not organized with assistance from the city. Another of his recommended changes is to create new standards for receivers or debt servicers to make sure they are protecting the health and safety of residents. Currently, receivers can’t be sued in Housing Court without approval of the Supreme Court judge who appointed them. Finally, Garodnick also recommended creating new state guidelines around the existing federal Community Reinvestment Act, which pushes banks to lend in low-income areas. The idea there is to focus on the quality of loans, not just the quantity.
Along with those proposals, Garodnick also discussed new legislation that would make the Department of Housing Preservation and Development (HPD) create a watch list of owners who engage in predatory equity. The bill was authored by Council Member Ritchie Torres, who represents a district in the Bronx where the practice has become increasingly common.
Harvey Epstein of the Urban Justice Center recalled the predatory equity in Stuyvesant Town. (Photo by Sabina Mollot)
While at City Hall, Torres said that at this time, “There are no consequences” for owners who engage in “intentionally harassing, defrauding and displacing tenants from their homes.” He, along with State Senator Brad Hoylman, said he supported Garodnick’s proposals, and Hoylman said he would address them at the state level. A couple of tenants then shared tales of living in buildings that were so poorly maintained, the only ones who seemed to be in control were the rats and drug dealers.
The issue of Stuyvesant Town was also revisited by Harvey Epstein, director of the Urban Justice Center’s Community Development Project. Epstein recalled when Garodnick, then a new member of the City Council, contacted him in 2006 about Tishman Speyer. At that time, stabilized tenants had started receiving, en masse, primary residence challenges from the owner. “Over 3,000 tenants were subject to potential eviction in Stuyvesant Town,” said Epstein. “That’s what predatory equity is. When you take tenants who’ve lived in a building 20, 30, 40 years and you find ways to get them out.”