In high-cost markets, preservation purchases are expensive. Landlords are able to find buyers even for highly-distressed buildings with limited rent rolls, typically at a price higher than what they initially paid. This drives up multifamily building costs beyond the reach of tenant unions and nonprofits. Expanded tenant protections outlined in Part 3, including rent stabilization, the Right to Remain, and Right to Counsel have begun to change these market dynamics in the areas where they have been enacted. TOPA legislation would provide tenants with an organizing strategy for challenging the most speculative purchases. However, municipalities must assist preservation purchasers more frequently, targeting privately-owned housing in chronic disrepair. This requires a significant increase of subsidy levels available to preservation purchasers, with clear funding guidelines. Community groups working collaboratively with tenants organizing for new ownership of their buildings should receive particular priority.
Existing City and State preservation purchase programs include the New York City Acquisition Fund, Neighborhood Pillars, and the Shelter Modernization Program. All three provide good frameworks, but would need to be modified and significantly expanded. The Shelter Modernization Program is the most recent example of bold public action in this vein in New York City, in which the City purchased several buildings that were previously a part of the Cluster Site Shelter program. This program, notorious for landlord abuse and horrendous — sometimes deadly — conditions for tenants, was phased out during the de Blasio administration with a promise, long demanded by organizers, that the City would purchase the buildings and convert them into high-quality permanently affordable housing. The City purchased 45 buildings totaling hundreds of units through three clustered acquisitions and has been working with community-based nonprofit organizations to stabilize building conditions, while planning a substantive long-term renovation. While this preservation purchase came under criticism due to its high acquisition cost, it is important to note that the capital commitment spent upfront reduces the long term operating costs of rental payments. In addition, the implicit benefits of increased quality and stability in the housing reduce additional social costs.
Preservation purchases are less common outside of New York City, but have taken place after persistent organizing campaigns. For example, after years of deplorable living conditions, the residents of 447 Thurston Road, with the support of the City Wide Tenant Union of Rochester, compelled the City of Rochester to sue the landlord for repairs. Through this lawsuit, the tenants were able to negotiate a sale of the building to a regional developer. Unfortunately, due to the lack of social housing infrastructure in the city, the tenants ultimately had little control over the building’s ownership model. State and Federal funding should be extended to make preservation purchases more possible across the state, and the social housing infrastructure must be developed, so that opportunities like this are not lost in the future.
In order to ensure not just the acquisition of distressed housing but also any necessary rehabilitation, local municipalities and New York State must fully staff up public agencies (such as HCR and HPD) and ensure that government workers have the resources and support they need to close on these projects in a timely manner. NYC Department of Buildings and related entities in other municipalities, as well as private entities such as ConEdison and National Grid, should be required to prioritize social housing developments to avoid unnecessary delays.
Connections
» (i) Collect Civil and Financial Penalties, (ii) Expand and Reform 7A Administration, (iii) Pass Tenant / Community Opportunity to Purchase
» Increased enforcement programs and civil penalties heighten the leverage the City has in negotiations with owners over the purchase price for buildings they seek to acquire. Additional organizing tools, like 7A administrators and TOPA, would help tenants push their buildings toward preservation purchases.
Potential Impact
» There are countless examples of the difficulties of creating deeply and permanently affordable housing in high-value markets and the shortcomings of relying on market actors in preservation. One New York City parcel with zoning that would allow for nearly 600 units of housing to be built as of right, is particularly illustrative, even though it is of vacant land and not existing housing. This vacant lot went through City foreclosure in 1981 and was sold in 1983 for $15,000 with no regulatory or deed restrictions. Over the next thirty years, the property changed hands twice each time for a purchase price of less than $1 million. In 2007, it was bought by a for-profit affordable housing developer for $5 million with a loan from NYC’s Acquisition Loan Fund for $13.7 million. By September 2020, the group had not broken ground on the site and sold their interest in the property to another for-profit affordable housing group for $18.2 million. The sale represented a profit of over$13 million. This money was earned while the lot sat empty and the owners added no value to the community. As of late 2021, a different for-profit affordable housing group was exploring buying the property: this time the price tag was close to $30 million. The lot remains vacant today.
» Earlier this year, Housing Justice for All conducted a preliminary analysis of the costs of preservation purchases, looking at prevailing prices for multifamily and single-family housing across New York State and applying estimates for financing and rehabilitation costs. That analysis suggests that with $1 billion in state funding each year for the next five years, the state could finance 20,000 homes and apartments annually.
