For too many years, rent-stabilized tenants in New York City were subject to the impacts of housing deals that put a target on their backs. Private equity firms and hedge funds borrowed far too much to speculate on housing, and the only way to make a buck was to push people out of their apartments.
This all-too-common horror story has a name: predatory equity.
Predatory equity is a business model in which speculators purchase rent-regulated properties at inflated prices, taking on debts that cannot be supported by the existing income flow from the property’s rent. Landlords can turn a profit only by systematically driving out rent-regulated tenants.
Along with New York City Councilman Jumaane Williams and 50 other elected officials, we have already taken steps to fight back against this pernicious practice. In 2014, we organized a Coalition Against Predatory Equity, made up of elected leaders in New York and 15 community and tenant organizations. Our advocacy resulted in Fannie Mae and Freddie Mac agreeing not to finance any future deal in Stuyvesant Town and Peter Cooper Village that did not have the support of tenants and the city. We also delivered millions of dollars in the city budget to Stabilizing NYC, an initiative that provides tenants with the tools to fight back against predatory landlords, such as the odious Steven Croman, who was recently prosecuted and sent to prison by Attorney General Eric Schneiderman.
But we must continue to shine a light on this destructive behavior and bring it to an end in our city. That is why we are formalizing our fight against predatory equity into new law that is expected to be passed by the New York City Council on Thursday.
Our legislation will create the first-ever speculation watch list, which will leverage data gathered by the New York City Department of Housing Preservation and Development (HPD) to identify the buildings most likely to be under threat from predatory equity.
Using known indicators such as the capitalization rate and unaddressed hazardous code violations (among others), the speculation watch list will publicly identify property owners who may be engaging in predatory equity practices. Buildings that appear on this list can be prioritized by HPD for affordability preservation programs and for enforcement of related housing laws. This list will be publicly available on the HPD website, providing policymakers, journalists and the public a direct look at the bad actors looking to do harm to tenants across our city. With a clear eye on predatory landlords, the city can more effectively step in to protect tenants and avoid these problems in the future.
Tenants must be safe and secure in their homes without the threat of greed-fueled harassment. Landlords who engage in predatory equity must realize that their behavior will soon be exposed for all to see.
Dan Garodnick and Ritchie Torres are members of the New York City Council.