The NYC Council's Committee on Community Development held an April 27, 2009 hearing on "Equity Investment and Foreclosures: How NYC's Tenants are Affected by the Growing FInancial Crisis" - also known as "predatory equity."

The Council Chamber at City Hall was completely packed with tenants from CASA, the Mirabel Sisters, from Tenants & Neighbors, and from other boroughs.

"Predatory Equity: The Survival Guide" was handed out to attendees.

The hearing, chaired by Albert Vann, was attended by Council Members Letitia James - a stalwart who stayed all the way through, Speaker Christine Quinn, Melissa Mark Viverito, Eric Gioia, James Saudners, Jr., Dan Garodnick, Julissa Ferreras, Diana Reyna, Helen D. Foster, Miguel Martinez, Alan Gerson, and (stopping in and out) Oliver Kopell.

For details and some newspaper articles about the hearing, click on "read more" below.

Below are 3 articles on the City Council hearing on predatory equity from

1. The NY Post

2. The NY Times Cityroom Blog

3. The Indypendent.

Foreclosing in on 90,000 Apartments

By Sally Goldenberg

As many as 90,000 city apartment units could go into foreclosure as the housing crisis spreads from single-family homes to rental properties, city officials warned yesterday.

Rafael Cestero, commissioner at the Department of Housing Preservation and Development, said 2.6 percent of the city's apartment units -- which could reach up to 90,000 -- are in danger due to so-called "predatory equity" practices.

Generally, those practices involved investors' betting wrong -- buying affordable housing during the recent boom in hopes of selling the buildings at market rates, Cestero told the City Council Community Development Committee.

The fallout from those bad bets could be rising homelessness if buildings go into foreclosure, council members and tenants said at yesterday's hearing.

"As we come to terms with the downturn in our economy, it's becoming clear that many of these deals were a lot more bust than originally projected," Council Speaker Christine Quinn (D-Manhattan) said.

(2) NY Times Cityrooms Blog

After battling a suburban family for four years over music downloads, the recording industry has agreed to accept $7,000 to settle a federal music piracy lawsuit. [Associated Press via NYT] (Also see The New York Post.)

As many as 90,000 city apartment units could go into foreclosure as the housing crisis spreads from single-family homes to rental properties, city officials warned Monday. Rafael Cestero, commissioner at the Department of Housing Preservation and Development, said 2.6 percent of the city’s apartment units — which could reach up to 90,000 — are in danger because of so-called predatory equity practices. [New York Post]

(3) The Indypendent

Foreclosures Could Loom for Rent-Regulated Buildings

By Bennett Baumer

April 28, 2009

City housing officials laid out their plan to deal with multi-family building foreclosures yesterday at the New York City Council. In the Council’s Community Development committee, council members grilled newly minted Department of Housing Preservation Development commissioner Rafael Cestero on the foreclosure crisis.

HPD’s commissioner laid out a plan to tap federal bailout and stimulus money to save multi-family buildings from falling into foreclosure. Cestero essentially echoed the Geithner plan to mix public and private funding to finance problematic buildings and prevent them from foreclosure. While the plan may work on single to three family homes, New York City’s rental housing stock consists of tens of thousands of rent-regulated buildings – buildings with six or more units built before 1974.

“Its not just families in these buildings [that could face problems], there are spilover affects as well,” said Cestero.

Cestero warned about the dangers of multiple family buildings going into foreclosure such as landlord’s refusing to make repairs that contribute to deteriorating building conditions. This in turn could drive entire blocks into decline by lowering property values and encouraging other property owners from investing in buildings – namely through making repairs and capital improvements. HPD will stress outreach to owners in danger of foreclosure, code enforcement targeting distressed buildings and the linchpin – using federal funds to purchase or co-finance mortgages with private investors.

“We are looking at ways to use resources to purchase bank assets and transfer ownership to those who are interested in the long-term affordably of the building,” Cestero said.

In other words, putting restrictions on any private investors who accept public financing for purchasing buildings in danger or in foreclosure. Nonetheless HPD was not specific and admitted to not even talking to the federal government about tenant protections.

Driving the looming foreclosure crisis in the city are private equity firms; little regulated and non-publicly traded investment firms that pool private capital to purchase assets. In New York City, private equity firms bought tens of thousands of rent-regulated apartments. Private equity firms, or “predatory equity” as tenant groups refer to them, have attracted negative press because of their business plans and the lengths the companies go to carry them out.

“These robber barons in the guise of bankers are pillaging our neighborhoods,” Council member James Sanders said.

Private equity investors generally look for quick returns on their investments and during the boom, overpaid for rent-regulated buildings with business predicated on high tenant turnover. When these firms, like Vantage Properties that bought 48 Queens buildings for $300 million last year, according to the Real Deal, are unable to dislodge rent-regulated tenants fast enough they are in danger of foreclosure.

While foreclosures continue to wreak havoc Queen’s larger stock of one to three family homes, a novel idea came forth from housing advocates at the Council meeting; let multi-family buildings foreclose. Advocates contend if the rent-regulated buildings fall into the foreclosure process, they can use federal money to preserve affordable housing from deteriorating and prevent private equity abuses of tenants.

Advocates fear a new generation of private equity firms taking advantage of the bad luck of their predecessors and taking over their distressed buildings and implementing the same business plan.

“The second wave of the foreclosure crisis is sadly just around the corner,” said Chris Quinn, Speaker of the City Council.

Additional comments from this website:

The hearing, chaired by Albert Vann, was attended by Council Members Letitia James - a stalwart who stayed all the way through, Speaker Christine Quinn, Melissa Mark Viverito, Eric Gioia, James Saunders, Jr., Dan Garodnick, Julissa Ferreras, Diana Reyna, Helen D. Foster, Miguel Martinez, Alan Gerson, and (stopping in and out) Oliver Kopell.

Preventing Harm Before it Happens

Melissa Mark Viverito asked HPD to implement a comprehensive system to trigger HPD or City involvement when a building is at risk - before foreclosure or predatory equity wreaks its harm. Some suggestions for "triggers" : several apartments being de-regulated, bank loans for purchases of government-subsidized buildings, increase in number of violations reported to the New York City Department of Buildings - including for ppor or dangerously-done work done on renovations.

Using a $5000 grant from the MacArthur Foundation, HPD and the NYU Furman Center are developing an interagency "early warning system" on foreclosures of multi-unit buildings. While this is "in the works," HPD Commissioner Cestero could not give a time frame for its completion.

Cestero asserted that tenant advocacy groups are part of the warning system's development.

Owner Hotlines not working in buildings suffering from predatory equity.

To motivate rent-regulated tenants to leave, some landlords are getting rid of their supers. The law requires that any building with 6 or more apartments have one of the following:

• the building owner living on the premises (and available to make or arrange repairs)
• a full-time super
• a 24-hour hotline.

The owner must get HPD permission to use a hotline, and HPD says it checks that the hotline works by having pretend tenants call for repairs. But tenants in many buildings - and their City Council representatives - have found that the hotlines don't work. In that situation, HPD's Vito Mustaciuolo urges the tenant or the elected official to get in touch with him. Permission to have a hotline may be revoked.

Where there is a power imbalance, the government must step in.