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Speaker Quinn: Preserve Over-Leveraged Housing
February 26, 2013
Champions ANHD's & HPD's First Look / Preserving City Neighborhoods Strategy:
Sometimes good ideas don't get the attention they deserve. Council Speaker Christine Quinn earlier this month announced an important new strategy to preserve over-leveraged apartment building facing physical and financial distress.
In her State of the City speech, Speaker Quinn proposed creating a Distressed Housing Preservation Fund "to be used by HPD to make bulk purchases of overleveraged housing. The city will make sure repairs get made while properties make their way through the foreclosure process. Then we'll transfer them to an approved developer who will keep the buildings affordable and in good condition. Since we are buying these properties at a bulk rate, we'll be able to offer them to good developers at a price they can afford."
Quinn's important proposal builds upon the First Look strategy that ANHD developed in partnership with NYC's Department of Housing Preservation and Development. This First Look strategy, fueled by Speaker Quinn's Distressed Housing Preservation Fund, can take distressed, over-leveraged buildings out of a destructive, speculative cycle and preserve them with a community-based developer as decent, affordable housing. This program can be an important, new, and much needed pipeline of affordable housing for our city.
ANHD first blew the whistle on distressed housing at the start of the economic crisis and has already blogged about some successes of its First Look strategy including a recent sale of 3 distressed buildings on College Avenue in the Bronx to a local, not-for-profit developer. These financially over-leveraged apartment building become troubled when speculative developers pay inflated prices thinking they can quickly (and often illegally) raise regulated rents, hold operating costs artificially low, and drastically increase the turnover rates of lower-income tenants. As a result, they were being sold and resold by banks who held these mortgages, to unscrupulous developers who were doubling-down on this strategy.
Starting two years ago, and after a lot of public discord, ANHD and our allies began approaching local banks asking them to consider an alternative approach. Instead of communities struggling to save one distressed building at a time that fall victim to speculative investment, we asked banks to participate in a First Look program. The bank would give a community-minded developer, recommended by ANHD and HPD, an early and exclusive window of opportunity to buy foreclosed, rent stabilized apartment buildings or the distressed mortgages on those buildings. In return for the First Look opportunity, ANHD and our groups promised an orderly due diligence process that is sensitive to the private-market timetable that the banks need.
Three major lenders agreed and have been participating in an ongoing First Look program, and hundreds of at-risk affordable housing units have been saved and refinanced with community-minded developers. ANHD believes that this program can be an invaluable and new source of stable, affordable housing for our city.