60,000 Low-Cost Housing Units in Danger of Falling into Disrepair or Bankruptcy

Over the past few years, investors have borrowed hundreds of millions of dollars to buy apartment building in working class neighborhoods through so called “predatory equity” financing schemes. The new owners’ financing plans require them to increase building revenues by evicting hundreds of low income tenants, deregulating their apartments, and renting to new tenants at market rates. Because tenants and their lawyers have fought back, eviction rates have been lower than planned and as a result many investors are having trouble paying their mortgages. The owners have been forced to increase eviction pressures, cut services, or fail to pay their loans. As a result, as many as 60,000 affordable housing units are at risk of being lost due to neglect and to bankruptcy.

Senator Charles E. Schumer has called for an investigation by the
S.E.C. into whether the loans that precipitated the predatory equity
crisis “were based on false or misleading financial assumptions.” On December 2, Senator Schumer held a press conference calling for greater regulation of ‘predatory-equity’ backed lending practices in an effort to curb a major threat to New York’s affordable housing. Senator Schumer called for clear federal regulations to ensure that loans issued to purchase affordable housing are based on reasonable expectation of the building’s rental revenue  rather than speculative projections of how much money an owner could make by deregulating the property.
Additionally, for buildings that have already been purchased by predatory equity groups, Senator Schumer called for regulations that will ensure that any modification of the loans on these buildings will provide for continued affordability and healthy, safe building conditions.

Representatives of the Partnership to Preserve Affordable Housing, a coalition of six New York housing and advocacy organizations that have been working on the issue of predatory equity also spoke at the press conference. The partners include: South Brooklyn Legal Services (a program of Legal Services NYC), Community Service Society, Legal Aid Society, Pratt Area Community Council, Tenants & Neighbors and Urban Homesteading Assistance Board.
 

Read more about this issue in the Dec. 1st New York Times . 

Legal Services NYC has been at the forefront of the fight to protect the rights of low-income tenants against harassment by landlords involved in predatory lending schemes.  In Aquaiza v. Vantage Properties LLC, Queens Legal Services,  together with the Legal Aid Society and the Catholic Migration office, filed suit against Vantage Properties on behalf of its tenants, many of whom are low-income, Spanish speaking immigrants.  Vantage Properties has spent over one billion dollars buying up properties in Harlem, Washington Heights and Queens over the last few years.  The company took out mortgages under the assumption that in just a year it would evist 30% of its rent-regulated tenants and rent to tenants who would pay higher rents.  Due to the difficulty in vacating apartments under rent control, Vantage Properties has resorted to questionable practices, such as returning rent checks and then suing for eviction based on nonpayment of rent, as well as initiating baseless nonprimary residency cases.