Buildings that meet the threshold of predatory equity with regards to our organizing efforts must meet at least one of the five following factors:
- A high debt-to-income ratio or low CAP rate, meaning that the building was purchased for a higher price than the rental income can support. Factors include the rental income coming in, the assessed value, recent sale price and the amount of debt and equity taken. This can sometimes lead to foreclosure;
- High levels of turnover – both in rent stabilized and non-rent stabilized stock (High turnover leading to loss of rent-stabilized units);
- Significant percentage of tenants complaining of harassment, as defined by the City’s anti-harassment statute and/or the NYS Rent Stabilization Code;
- Affordable housing becomes unaffordable: landlords tack on illegal fees; tenants experience a loss of rent stabilization; buildings exit regulatory programs such as Mitchell Lama, LIHTC;
- Poor physical conditions ((as defined by AEP, Third Party Transfer, Multifamily Distress List or other various HPD programmatic definitions) caused by deferred building maintenance .
Over the past ten years, New York City’s affordable housing market has been severely destabilized by private (predatory) equity companies. Before the 2008 market crash, these companies purchased a large number of rent-stabilized buildings at inflated prices without an understanding of the New York City housing market or the laws that protect tenants. After the crash, hoping to minimize losses, these companies began aggressively pushing rent-stabilized tenants out using a wide range of harassing techniques, some even illegal, including frivolous lawsuits and failing to provide heat and other basic services. Many companies, such as Vantage, Ocelot, Pinnacle, and Dawney Day went bankrupt, forcing their buildings into foreclosure. These foreclosure proceedings took years to resolve, leaving rent-stabilized tenants to languish in limbo without repairs.
As the market has recovered over the last few years, new predatory equity companies such as Chestnut Holdings, Urban American, Normandy, Westbrook and Bluestone have purchased these foreclosed buildings and adopted the same business model—one that cannot succeed without removing rent-stabilized tenants from their homes. As a result, the city has lost thousands of rent-regulated apartments over the last few years.
A City-Wide Response
As the crisis continues, organizers and lawyers have begun working with tenants in communities across the city, fighting back against these landlords’ aggressive and illegal tactics. Each of the members of this coalition has been working on predatory equity issues in their own communities for years, but we have recently realized that a community-based response on its own is not enough – many of these predatory equity landlords are buying up buildings in multiple neighborhoods citywide, and so our response to them must be citywide as well. Recently, the New York City Council has passed legislation useful to lawyers and organizers in this struggle against predatory equity, including the “underlying conditions bill” (passed January 2013) and Tenant Harassment bill. With additional resources, community organizers, supported by attorneys and research and policy experts, can powerfully enforce these new laws against dangerous predatory equity landlords, and tenants can begin to fight back.
If you experience harassment or have repairs, call 311 or contact New York City’s Housing, Preservation and Development office (HPD): https://www1.nyc.gov/site/hpd/about/contact-us.page