New York, NY - State Senator José M. Serrano today called upon Mayor Bloomberg to select a new housing chief who will carry on efforts to combat "predatory equity" real estate investment in New York City.
His statement followed news that Shaun Donovan, the well-regarded Commissioner of the Department of Housing Preservation and Development (HPD), will leave to join President Obama's Cabinet.
"Earlier this month, before an Assembly Housing committee, Mr. Donovan acknowledged that over-leveraged purchases of New York's affordable housing stock present a real threat to tenants throughout the five boroughs," said Senator Serrano.
"Private equity firms have spent the last several years buying up rent-regulated complexes throughout my district, in East Harlem and the South Bronx. The complex mathematics of the deals are, in my opinion, contingent upon kicking out long-standing residents. Moreover, due to the securitization of risky mortgages, many of the purchases are financially unsupportable and could lead to foreclosure."
He continued: "The new HPD Commissioner must hit the ground running, with the professional background, and the foresight, to protect the dwindling number of affordable units in the city. In particular, we need someone with dynamic ways to bring over-leveraged buildings back into the umbrella of affordability."
Housing advocates estimate that 60,000 apartment units have been purchased by private equity developers in the past five years.
In one notable example from Serrano's 28th District, real estate mogul Mark Karasick purchased 1520 Sedgwick after compelling the owner to opt the building out of a state-subsidized program. Senator Serrano opposed the deal, claiming the purchase was over-leveraged, and that Karasick would be unable to operate the building at the low costs he promised to investors.
"Not surprising, Karasick has now threatened to slash wages and benefits for the building's hard-working union staff," said the Senator, who joined the union in a protest last week. "This is right out of the 'predatory equity' playbook, and it's the residents and the workers who suffer the most."
He added, "Guys like Karasick gamble on our homes, and they leave us with the check."
Additionally, Serrano has been among the Senate leaders in the fight to repeal "vacancy decontrol," a provision that allows for massive deregulation of rent-controlled and rent-stabilized units. Private equity firms point to vacancy decontrol as a hallmark of the weak housing laws that draw them to invest in the city's affordable housing stock.
"We need the full support of the city to attack predatory equity, and I look to HPD and the Mayor for help in moving this agenda forward ... before it's too late."