Press Release
New CSS Report: Corporate Windfalls or Social Housing Conversions?
Researchers lay out the stakes of the current housing moment and the choices facing NY
Large numbers of rental building foreclosures could be on the horizon in New York due to the combination of the pandemic and a pattern of risky borrowing practices going back decades. Corporate investors stand to profit handsomely from a potential upheaval in the real estate market by buying up financially distressed buildings, which would be painful and destabilizing for tenants, resulting in mass displacement and a sharp rise in homelessness.
Such a scenario however, in which corporate interests take advantage of the economic downturn to further consolidate their hold on the real estate market, is not the only path forward.
A new Community Service Society (CSS) report, Corporate Windfalls or Social Housing Conversions? The Looming Mortgage Crisis and the Choices Facing New York, explains why many multifamily owners could soon be heading into foreclosure, profiles the predatory investors currently amassing capital to acquire this housing stock, and – most importantly – sketches out a series of policy interventions that could help tenants seize the moment by converting distressed buildings into social housing, or housing models that encourage deep affordability, decommodification, and democratic management.
“With the potential for another housing crash looming, we have an opportunity to put New York City on a course away from skyrocketing rents and mass evictions,” said David R. Jones, CSS President and CEO. “We must turn away from the idea that a rental building’s main function is to generate profit. Housing should be a human right, supporting principles of racial and economic integration, not merely an investment vehicle. Our policymakers must push for a bold vision of housing as a social good. This latest CSS report offers a primer on how we can achieve that.”
Turning Buildings into Social Housing Before They Face Foreclosure
Building on housing finance data and using New York history as a guide, report co-authors Samuel Stein and Oksana Mironova of CSS, Celeste Hornbach of the Mutual Housing Association of New York, and Jacob Udell of the University Neighborhood Housing Program, show how in just a few months the COVID-19 pandemic pushed New York into what may be a deep economic recession, exposing and exacerbating pre-existing conditions of housing insecurity experienced by low-income tenants across the state.
Those conditions draw into focus the outlines of an approaching rental building mortgage crisis: more than one million tenants out of work statewide; hundreds of thousands of tenants facing mounting rent arrears or daily trade-offs between paying rent and securing basic necessities; and growing concerns that the failure of state and federal lawmakers to extend unemployment benefits and eviction protections – which have forestalled the worst outcomes – will create mounting debt for both tenants and landlords.
Even though the real estate market is cyclical, the report argues that New York does not have to follow the post-2008 crisis trajectory. Instead of handing control over the city’s housing future and recovery to real estate speculators and private interests, the report calls on policymakers to take steps to grow the state’s social housing sector, a model that is far less susceptible to the real estate market’s fluctuations.
In response to a potential housing crisis, the report urges city and state leaders to offer funding and other resources to housing preservation purchasers – including tenants, non-profit developers, community land trusts and public housing authorities – to acquire buildings before they reach high levels of financial and/or physical distress and convert them into social housing. This will both dramatically expand the stock of permanently affordable tenant and community-controlled housing while preventing predatory real estate investors from further consolidating the rental market.
The report also recommends the following policy initiatives:
Continue to expand tenant protections and code enforcement, through such measures as good cause eviction protections at the state level and an expansion of New York City’s Alternative Enforcement Program and Proactive Preservation Initiative;
Reform the tax code and tax collection processes to stop rewarding landlords’, lenders’ and investors’ speculative behavior and instead to reward and incentivize deep and permanent affordability;
Give tenants and communities the right of first refusal when buildings are sold, and let tenants decide their housing model;
Use land banks to promote social housing conversions and development;
Permit public and non-profit debt buyouts for social housing conversions.
CSS Housing Analyst Samuel Stein: “As low-income tenants are suffering through this economic and public health crisis, major investors are gathering billions of dollars to buy up buildings and extract maximum profits,” said report co-author and CSS Housing Analyst Samuel Stein. “New York faces a stark choice: will we let this happen, or will we take bold actions to secure a better future?”
CSS Housing Analyst Oksana Mironova: "With growing rent arrears and no relief in sight rental buildings across New York State are on the brink of another foreclosure crisis. To interrupt this cycle, we need a bold post-pandemic housing vision.”
Jacob Udell of University Neighborhood Housing Program: "It is crucial to contextualize any future distress in the rental housing market in the practices of the real estate industry. The penchant among many landlords AND investors to see rental housing as a path to quick profit – predicated on rising rent burdens and rising asset values – created a housing crisis for New Yorkers well before the pandemic, and will exacerbate any current or future crisis as a result of COVID-19."
Celeste Hornbach of Mutual Housing Association of New York: “With a rental housing crisis on the horizon, the city and state should provide funding and other resources to preservation purchasers—including tenants, non-profit developers, community land trusts, and public housing authorities—to acquire buildings before they reach high levels of financial and/or physical distress. In the recent past, the New York City and New York State have created programs to facilitate preservation purchases of rental buildings and conversion to affordable housing. These existing programs need to be more deeply funded and significantly expanded to meet the scale of the current crisis.”
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