Mark Winston Griffith

When Predatory Equity Becomes Landlord, Affordable Housing Suffers

The New York Times features a story today by Gretchen Morgenson that probes "predatory equity" practices in the rent regulated housing market. Revealing yet another heartless dimension of capitalism and New York real estate, Morgenson's piece reports that private equity firms are buying up rent-regulated properties in New York with the single purpose of chasing out tenants and then jacking up the rents as high as the law will allow:

"In the last four years, developers backed by private equity firms have acquired almost 75,000 rent-regulated apartments...These companies often make clear that raising rents is crucial to their financial goals. On its Web site, Normandy Partners states 'the increased institutional appetite for New York City rent-stabilized housing transactions' and adds: 'There is a near-term opportunity to increase cash flow by converting rent-stabilized apartments to market rate as tenants vacate units'...

"But the New York City Rent Guidelines Board says the vacancy rate on rent-regulated apartments is 5.6 percent each year. Buildings with vacancy rates far higher suggest resident harassment, tenant advocates say. Vacancy rates have risen above 20 percent in some buildings owned by Vantage Properties; in some Normandy buildings, the rates exceed 30 percent. If an apartment is rent regulated, yearly increases cannot exceed the amount set annually by the Guidelines Board. Most recently, it was 3 percent on a one-year renewal lease. When an apartment becomes vacant, rents can climb as much as 20 percent. When that rent rises above $2,000, regulations no longer apply, and tenants must pay market prices."

These predatory equity tactics pose a serious threat to affordable housing goals in New York. If there was ever a practice that warranted an investigation, it's this one.

Mark Winston Griffith: Author Bio | Other Posts
Posted at 8:31 AM, May 09, 2008 in Economy
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