A coalition of housing advocacy groups and two
large banks that hold mortgages on hundreds of apartment buildings in New York
City announced an unusual agreement yesterday under which they will use the
banks’ leverage as lenders to pressure landlords into repairing dilapidated
buildings.
The agreement between the coalition, Housing Here and Now (Make the Road by Walking is a coalition
member), and the banks, Citigroup and New York Community
Bank, represents a new weapon against landlords reluctant to make repairs.
Housing advocates hope to use this tool not simply to fix leaks and crumbling
plaster, but also to shore up low-income neighborhoods and make them less
vulnerable to gentrification.
The loan portfolios of New York Community Bank and
Citigroup together include more than 900 buildings and 66,000 units, according
to Housing Here and Now. New York Community Bank, which holds the loans on a
majority of those buildings, describes itself as the largest producer of
multifamily loans in New York City and operates a network of branches including
Queens County Savings Bank and Roslyn Savings Bank.
Under the agreement, a bank that receives an
application for a mortgage on an apartment building must first evaluate the
owner’s and the building’s track record. Using the records of the city’s
Department of Housing Preservation and Development and those of Housing Here
and Now, the bank will consider past housing code violations, emergency repair
liens and litigation.
The bank would then require that run-down conditions
and violations be fixed before closing on the sale. New York Community Bank
agreed to hold repair money in escrow for release when repairs are done. The
banks are also to inspect buildings annually; those considered severely
distressed are to be given a repair plan and timetable for completion.
While in theory a bank has the power to foreclose
on a building whose owner has repeatedly failed to make repairs, bank officials
said such a step is unusual. Under the new agreement, banks are more likely to use
the threat of withholding a loan, rather than the threat of foreclosure, to
pressure landlords into properly maintaining their properties.
Representatives of about 18 other banks doing
business in the city met on Wednesday with Citigroup and New York Community
Bank officials, as well as city and state housing and banking officials, to
discuss the agreement.
Diana L. Taylor, the state superintendent of
banks, has written to banks throughout New York encouraging them to adopt
similar practices voluntarily.
"This is a big deal," Alan G. Hevesi, the New York
State comptroller, said at a news conference yesterday organized by Housing
Here and Now to announce the agreement. "This is serious and historic.
It’s an agreement that brings the banks in as partners in maximizing the
potential for landlords to clean up buildings."
Mr. Hevesi added, "This is serious mostly for
tens of thousands of tenants in the city who have not been able to get
landlords to respond to the problems that they live with every single
day."
In a hot real estate market like New York’s, with
the price of land rising, housing advocates say some landlords feel little
pressure to maintain their buildings.
If tenants leave, the owner is free to sell.
"If you’re a landlord, you don’t need to preserve your collateral,"
said Jonathan Rosen, a spokesman for Housing Here and Now. "You just flip it
on the land prices alone."
The agreement is the product of a campaign that
began last summer, when Housing Here and Now released a list of what it
described as the city’s 10 worst landlords. When some of the owners continued
to fail to make repairs, even after the city had cracked down, the coalition
turned its attention to the banks that had financed the purchase of the
buildings.
In January, the group reported that its own
analysis of city housing code violations turned up problems in more than 600 multifamily
buildings on which New York Community Bank held the mortgage. The group vowed
to block the bank’s planned acquisition of another bank, Atlantic Bank of New
York, which was under federal review at the time, until it required its clients
to repair their buildings.
The coalition accused New York Community Bank of
failing to meet its obligations under the Community Reinvestment Act, which
requires that banks meet the credit needs of their communities including,
advocates say, by doing business in a way that strengthens community ties. A
bank’s compliance with the act can be reviewed when the bank is planning an
acquisition.
The coalition enlisted the help of Christine C.
Quinn, the City Council speaker, who wrote a letter to the bank’s president in February
saying she was considering asking the state’s Banking Department to hold public
hearings and delay the merger "until the issue of poor building conditions
is satisfactorily resolved."
Julie Miles, the director of Housing Here and Now,
said yesterday, "We’ve withdrawn our objection to the merger."