Bronx foreclosures in the multifamily sector have been driven largely by speculative deals and impractical gentrification projects, according to New York City housing advocates and analysts.
According to a survey done by the Right to the City Coalition, more than 600 condo buildings in South Bronx, Harlem, West Village, Bushwick and Lower East Side were largely vacant or incomplete because speculative investors thought that there are a lot of buyers who can afford to buy high-priced units in the properties they acquired at overinflated prices.
In most of the areas where $36,538 is the median family income and where a large number of households are below the poverty level, condo units were being sold for more than $500,000 to $1.5 million. For over a year now, these properties have remained vacant and have been deteriorating as fast as repo homes in these neighborhoods.
One sad example of property speculation gone bad in New York City was the forced acquisition and conversion of a former factory that was turned into a 42-unit subsidized housing. Despite seeing that the building was already occupied legally by artists, a private equity investor still targeted it, purchased it and filed a court action to evict the artists. Those that resisted were threatened with individual lawsuits.
The building was later resold to a developer who paid almost $20 million, with a $9.8-million loan from American International Group. In 2008, the apartment units were offered for sale at $1,100 per square foot, but there were no takers. Now, the building is abandoned and as dilapidated as the other Bronx foreclosures in the area.
According to William Apgar, adviser to HUD Secretary Shaun Donovan, about 100,000 occupied apartment units in New York City are headed toward foreclosure. Owners have not been able to pay their mortgages and do needed repairs because of low rents, high vacancy rates, expiration of rent subsidies and stricter property lending.
Apgar said that foreclosure rates in the multifamily sector could increase as foreclosures in the single-family sector slow down. Families living in distressed properties could experience worse property conditions and could be forced out of units as lenders pursue repossession proceedings.
Benjamin Dulchin, director of the Association for Neighborhood and Housing Development, also added that about 10 major speculative deals involving over 21,000 apartment units in the Bronx, Harlem, Washington Heights and other areas are in danger of foreclosure in 2010.