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Thursday, March 5, 2009

More Housing Gloom

The transitional "cluster-sites" are just one of the many housing stories in the west Bronx in early 2009. The number of 1-4 family foreclosure notices filed continue to rise, half-built 3-family houses sit vacant on lots where occupied larger single family homes once stood, and the question of over-leveraged apartment buildings that sold at the peak of the housing boom looms over many neighborhoods throughout New York City.

In Harlem, the 1,228 unit Riverton went into foreclosure on February 3, and the Times is reporting that a State Supreme Court judge appointed a receiver to oversee the complex yesterday. Harold Shultz of the Citizens Housing and Planning Council is quoted extensively in the article, pointing out that the tenants are not likely to suffer since the owner did not contest the foreclosure.

For buildings in the Bronx that are similarly over-leveraged (meaning someone can't afford their mortgage payment based on the building's income), things may not be so rosy. The article continues:

Or, if the lender is unable to sell the property quickly, Mr. Shultz said, Riverton could languish with a “hands-off” managing agent that knows that it will eventually be replaced by a new owner. In those instances, the lender would have every incentive to cut operating costs and defer expensive maintenance projects until the complex is sold. And that may take some time, given that financing for large real estate investments is tough to come by these days.
Mr. Shultz, as well as tenant advocates, say that landlords at dozens of other poor and working-class tenements purchased in 2006 and 2007 are already putting off repairs and deferring maintenance. They say a cycle of disinvestment could quickly envelop the surrounding neighborhood as the buildings deteriorate.

UNHP is tracking code violations and city liens in buildings throughout the City to help identify properties at-risk for foreclosure in an effort to be pro-active. Based on past history of foreclosure waves in Bronx apartment buildings (see: Freddie Mac 20 years ago), don't expect things to turn out so wonderfully. In fact, some landlords who can't make their mortgage payments may try to increase their revenue by turning their buildings into cluster-sites.

1 comment:

  1. Bagli has no basis for his optimism about the Riverton. He confidently predicts that the complex will end up with a supportable debt load after foreclosure. That is absurd.

    The building can support about $60 million in debt, but has been appraised at $196 million. Maybe in this economic climate the mortgage holds will get less than $196 million at auction, but it's obvious that someone will bid an unsupportable amount and the building will be headed for another round of disinvestment and displacement.

    Unless someone does something about it.

    The banks that lose money on Riverton's default are going to get their money back from the federal government as part of the federal bank bailout. Our tax dollars should come with strings attached -- strings that ensure that tenants are protected from the fallout of the egregiously irresponsible acts of the landlord, Larry Gluck, the original lender, Deutcshe Bank, and the bank that turned the debt into a security, Citibank.


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