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Call for Change in Troubled "3 Boro Pool" Buildings
Over 100 tenants and advocates rallied on the steps of City Hall last week to urge the City and lenders to preserve affordable housing that is in danger from yet another overleveraged loan gone bad. Overleveraging – when a landlord saddles a building with unsupportable debt – is part of a larger process known as Predatory Equity. Predatory Equity occurs when developers, aided by lenders, purchase rent regulated apartment buildings at exorbitant prices in the belief that they can move out lower-rent paying tenants to quickly de-regulate the units and raise the rents. All of this is done with the intent to pay back what were often unsupportable mortgages and generate large profits in return. However, many of these loans end up in default, leaving the City and housing advocates to pick up the pieces.
The tenants at the rally live in what is known as the Three Borough Pool portfolio, a group of 42 buildings (1,592 units) spread across Manhattan, Brooklyn, and the Bronx. The buildings are owned and managed by four parties, two of which are have been heavily criticized by the housing community for practices prior to and since the economic collapse. The buildings are all rent-regulated, and 32 of them receive some form of government subsidy. All have long provided crucial affordable housing to low- and moderate- income New Yorkers, but their future is uncertain because these owners took out a loan that is now in default and in foreclosure. During foreclosure, the mortgage is being serviced by a group called LNR Property LLC. The buildings currently have over 2,500 open HPD violations and over $7.7 million in city liens.
Last week, on the steps of City Hall, tenants testified to the terrible conditions they are forced to live in, while the management company does little to fix the problems.
This fight is coming down to the wire, as the owners have until April 2nd to find a lender that will refinance the buildings, or else they will be put into receivership. Tenants have been extremely unhappy with the current management company (Colonial Management) and do not want LNR to give them a second chance. Given the amount of debt on the building and the costs of necessary repairs, tenants are organizing with the hope that no new lender will come forward and a receiver will be appointed for the properties, as typically happens in a multifamily foreclosure. This would give the City and tenants the opportunity to help facilitate the transfer of the buildings to a nonprofit, preservation-minded owner.
Several members of the City Council, including Ritchie Torres, Brad Lander, Antonio Reynoso, Helen Rosenthal, and Inez Barron came out in support of the tenants and organizers. They are fed up with the current state of affairs and know that without an intentional preservation strategy, the cycle of harassment, distress, and foreclosure will continue and tenants will continue to face deteriorating housing conditions and displacement pressure. The City Council members called on the new administration to renew the City’s pledge to fight speculation on housing for low income people.
“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, as quoted in the Daily News (Tenants of “3 Boro Pool” call for action on predatory equity, 3/18/14). “These properties belong in the hands of new, responsible owners, committed to their preservation and long-term affordability.”
This coalition of community advocates and tenants is urging the servicer to work with the City to find a community-minded buyer and bring the debt down to a sustainable level.
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