Under City Program, Renters-Turned-Homeowners Could Become Renters Again

NYTimes.png By Nikita Stewart

Robert Mattox was not in the position to own a home.

He was raising seven children in 1980 when New York City turned his Harlem building into a cooperative. He was asked if he wanted to buy his three-bedroom apartment.

The city began turning deteriorating buildings over to tenants to save their homes and to help the city in the 1970s. The effort was envisioned as a way to improve a neglected housing stock but also give New Yorkers with low and moderate incomes a financial stake in their homes. Mr. Mattox said he paid $250 for his co-op on 143rd Street and then continued to pay maintenance fees and taxes to retain the apartment.

But what began as a way to help renters own their homes became a challenge as many cooperatives struggled to keep up with taxes and utilities. Since 1997, the city has foreclosed on 74 cooperatives that fell behind in bills, according to data provided by the city’s Housing Preservation and Development agency.

In 2015, the city began taking action on 111 co-ops as part of a roundup of hundreds of residential buildings that were in deep debt or disrepair.

Since then, the number has dwindled as co-op owners have banded together to make arrangements with the city to pay back bills. The exact number fluctuates as residents make personal appeals and take legal action. Last week, the City Council voted to remove four cooperatives from the pending foreclosure list. But residents in about 60 cooperatives remain in danger of losing their status as owners.

Without intervention or finding a way to pay the city, the buildings will be transferred to developers for $1. But the developers will also pay the city $8,750 per unit. In exchange for a commitment to improve conditions and management, the developers will not have to pay arrears and will get tax exemptions. Once a developer takes over, the owners will become renters again. 

The failure of the low-income cooperatives serves as a reminder that good intentions can go awry. “This ain’t playing house. This is house,” said Bill Perkins, a council member who represents Harlem, home to many of the co-ops. “We’re finding that so many people couldn’t handle it.”

Some co-op owners and their advocates say the city underestimated the need for oversight and guidance.

The homes are known as Housing Development Fund Corporation co-ops, or H.D.F.C.s, and the H.D.F.C. Coalition is a group of residents that formed 26 years ago to help each other.

Glory Ann Hussey Kerstein, a key member and an organizer of an anti-foreclosure committee within the coalition, estimated that the group has helped 11 cooperatives avoid foreclosure since last year. “What you’re doing is rewarding the bad boards, you’re rewarding the bad management, and you’re punishing everyone else,” she said. “This is a handoff to developers.”

The pending foreclosures add to the city’s housing crisis that includes: a lack of housing for the very poor; record numbers of homeless people; crumbling public housing projects; and rent regulations set to expire next year.

According to the housing and development agency, the co-ops on the foreclosure list each have an average $972,000 in debt and an average of 78 violations, such as for pests, mold and lack of heat and hot water. (Advocates have questioned whether those violations are accurate.)

But city officials say there is so much dysfunction in some of the cooperatives that residents have turned on themselves. “Folks are calling in violations on their own units,” said Anne-Marie Hendrickson, a deputy commissioner of the agency.

Councilman Robert E. Cornegy Jr., chairman of the committee on housing and buildings, held a hearing on the foreclosures in April. He said he was “taken aback” when former co-op owners said they favored the foreclosures.

“I had more people testify that they had been protected,” Mr. Cornegy said. “They wanted to see the building in the hands of someone who would be responsible and increase their quality of life.

“It was clear that the third-party transfer program may not be the devil,” he said.

But advocates say the city must take responsibility for a program that the city started.

From 1996 through 2008, the city foreclosed on 74 buildings with 1,669 units, according to city data. The city has hailed the transfers to developers as beneficial to the residents, but Ms. Kerstein said some apartments now rent at market rates and some buildings still have violations.

Since September 2015, the city made about 70 outreach efforts on average to each building on the current foreclosure list, according to the Department of Housing Preservation and Development.

Many co-op owners said they learned they were in danger of losing their shares when the city placed fliers under their doors last October and November. Some of the previous notices had been sent to long-gone board members or to board members who did not tell their neighbors, advocates said. That lag allowed arrears to accrue.

Victor Morisete-Romero, a consultant who offers his services at no cost to co-ops filing applications to save their buildings, said the city failed to notify residents until it was too late.

In retrospect, the city also should have given renters-turned-owners money for repairs in the beginning, Mr. Morisete-Romero said. “They gave titles to tenants before renovating the property,” he said.

And many boards kept maintenance fees unrealistically low for low-income residents, Mr. Morisete-Romero said. “Guess what? Tenants thought $200, $300 was going to be enough. It did not keep up.”

There also were other financial issues, including poorly worded lease agreements initially agreed upon by the city with commercial tenants. In Mr. Mattox’s co-op, the residents have been paying toward a $1.8 million water bill for a laundromat, he and Anita Cheng, 49, another owner in his building, said. Other buildings have covered water bills for beauty salons.

Those major expenses could have been avoided with some guidance from the city, advocates said. “That’s not good intentions. It was bad planning. It was bad training,” Ms. Kerstein said. “They want to blame residents 30 years later.”

Councilman Mark Levine, a Democratic councilman whose Upper Manhattan district has eight buildings on the foreclosure list, said the city should address its mistakes. He questioned the foreclosures and said there is no substitute for homeownership.

“Many of them have no other assets other than their home. This is working class. There are no 401(k)’s,” he said. “For them to lose that, they’re not going to be better off.”

Clara Meregildo, 60, and other owners in her building in Harlem are negotiating with the city. In 2007, Ms. Meregildo paid $280,000 for her three-bedroom apartment, way more than the $250 her neighbors paid in the 1990s.

“If we become renters, we will pay rent and we will also pay a mortgage for apartments that we don’t own,” she said. “I will lose my equity and I still owe $200,000.”

Luis Cordero is in the same predicament in Washington Heights. In 2012, he paid $50,000 for his two-bedroom apartment, which he renovated. He is trying to get the building out of financial shambles.

Mr. Cordero, 52, a bus driver, has been working with Mr. Morisete-Romero to seek an agreement with the city.

He said the building has had a tremendous turnaround, and he wished city officials could recognize the hard work that he and his neighbors have put in. “Just somebody without knowing what’s going on will say, ‘I’ll take it away from you?’ It would be very unfair,” he said. “Everybody here is for the American dream.”

But Mr. Mattox said an agreement may not end the issues.

His 38-unit building was removed from the list after reaching an agreement that included a $1.2 million payment and continued payments of about $20,000 a month to cover back water bills, taxes and debt service. Residents came up with the money by selling four vacant units and agreeing to pay about 35 percent more in maintenance fees, said Ms. Cheng.

But Ms. Cheng said the installments are not sustainable over time and may prevent the owners from paying for repairs and maintenance. If the residents default, the building will go back on the list.

“We are in the red every single month,” she said.

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