 |
|
With 'affordable housing' buildings for sale, tenants worry
The US blocked the sale of Brooklyn's Starrett City complex until the buyers can prove it will stay affordable.
from the March 5, 2007 edition
Page 2 of 3
"We have not lived through this kind of an era before where so much of the capital of the US and the world is commingled," says Shekar Narasimhan, managing partner of Beekman Advisors in McLean, Va. And that, he says, has fundamentally changed the economics of investing in apartment houses. It used to be that investors used a property's rental income to calculate its value. Now, they calculate it by the building's potential future worth on the real estate market and compare that to other investments, say in stocks or bonds. As a result, Mr. Narasimhan says, prices have "become disconnected from reality."
The record prices investors are now willing to pay are generating fears that new owners may raise rents in places like Starrett City to help pay for them. If that happens, many working and middle-class families who have made Starrett City home since it opened in the 1970s may not be able to afford it.
"This trend obviously could result in the displacement of some lower income families, and it's been particularly hard on the elderly and those with fixed incomes," says Conrad Eagan, president and CEO of National Housing Conference, a nonprofit that advocates affordable policies. "Many families had anticipated they could stay [in their apartments] for a long period of time, and then suddenly they find the property being sold out from under them."
Starrett City, like 47 other apartment complexes in New York, was financed in part by state-backed low-interest mortgages in exchange for the developers' commitment to keep the units affordable for the length of the mortgage. The program is known as Mitchell-Lama, after the lawmakers who wrote the bill that created it. Under current state law, if a complex was built after 1974 the units can be priced at the market rate once the Mitchell-Lama mortgages are paid off.
A pledge from the proposed buyers
The Starrett City sale will allow the current owners to pay off their Mitchell-Lama mortgage. Despite that, the potential buyers have pledged to maintain the affordable character of the complex. "We have said again and again our intention is to preserve the affordability of Starrett City," says Lloyd Kaplan, an attorney representing Clipper Equity, the proposed buyers.
On Friday, the Department of Housing and Urban Renewal blocked the sale until Clipper Equity can prove to its satisfaction that the complex will remain affordable. Also last week, state Democratic lawmakers introduced a bill that would require all units at Starrett City and the 47 other Mitchell-Llama affordable housing complexes in the state be rent stabilized if they're sold and their mortgages are paid off.
RSS feed
