Predatory Equity Apartment Building Investments Bought At Height Of Bubble Spell Trouble For Thousands Of Tenants In NYC Neighborhoods

In The Bronx, New York, The New York Times reports:

• Here, it is not individual homes that are most under threat of foreclosure — it is whole apartment buildings occupied by hundreds of families. And it was not the residents who took out the heavy loans — it was investors who live far from the overleveraged properties. While banks and owners seek to recoup staggering losses from overly optimistic real estate deals in neighborhoods like the South Bronx, Washington Heights and Corona, Queens, tenants have been left with some of the worst of the bust: crumbling buildings, rats and roaches, the threat of foreclosure.

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• During the height of the boom, real estate investors, many of whom were backed by private equity funds, paid top dollar for as many as 120,000 apartments across the city, most of which were either rent-regulated or were in buildings that had recently been removed from the state’s Mitchell-Lama housing program, which had kept rents relatively low, according to the Department of Housing Preservation and Development. But the market collapsed, and the new residents willing to pay higher rents never came, leaving the buildings overleveraged and vulnerable.

• About 300 of those buildings were in the Bronx, and at least 40 are in foreclosure, according to the University Neighborhood Housing Program. About 100 more buildings in the borough are at risk, the Urban Homesteading Assistance Board says.(1)

For more, see Problems Mount at a Bronx Building Bought in a Bubble.

In a related story, see The New York Times: Struggling Landlords Leaving Repairs Undone.

(1) According to the story, Rafael E. Cestero, the commissioner of the New York State Department of Housing Preservation and Development, divides the city’s overleveraged buildings into three categories. There are about 4,000 apartments, mostly in the Bronx and Washington Heights, with terrible physical and financial problems that have left tenants in housing nightmares. There are at least 90,000 apartments burdened with debt but not in immediate danger of collapse. In between sit some 16,000 apartments at risk, teetering between stability and disrepair.