A NEIGHBORhood Housing Corporation

The mission of the Fordham Bedford Housing Corporation is to improve our Bronx neighborhood by providing community run housing that is safe, sound and affordable.

SOLD OUT! (September, 1998)

City-Ownership Is Becoming a Housing Thing of the Past. A Community-based housing organization notes the end of an era, using lessons learned to plan for the future.

The Fordham Bedford Housing Corporation and the communities it serves in the Northwest Bronx passed a milestone of sorts this past June, 1998. When we purchased two apartment buildings from the City of New York in late June, it marked the first time in more than 15 years that the Housing Corporation was not managing or supervising renovation in a city-owned building. Since its formation in 1980 the Housing Corporation has worked with more than 60 city-owned apartment buildings, most of which are now tenant or community owned. These most recent sales mark the winding down of a long era of political and economic controversy, radical shifts in city policies, significant government investments in low-income housing and tireless efforts by community organizations to restore a long neglected portion of the local rental housing stock.

The milestone encourages us to pause and reflect on how and why we've reached this point and what it might mean for the future. It requires us to take a look at current and previous city housing programs and policies and how they've been used and changed. It also requires a look at conditions in today's real estate market in low and moderate income neighborhoods.

The Fordham Bedford Housing Corporation (FBHC) was formed in part to respond to the city's vesting (tax foreclosure) of a number of apartment buildings in the Fordham Bedford neighborhood in 1978. Tenants in these newly vested buildings had to decide whether to organize and stay or pack up and move. The buildings where the tenants decided to stay were eligible for a handful of small city programs which ultimately allowed the tenants or the community to purchase the buildings. These programs were administered by the relatively new Division of Alternative Management Programs (DAMP), a unit of the city's Dept. of Housing Preservation & Development (HPD). In Fordham Bedford these first tenants took the route offered by the Tenant Interim Lease (TIL) program. TIL provided a modest renovation usually involving two building systems and a sale to a tenant owned corporation. If the tenants did not wish to buy the city agreed to offer the building to a local community organization.

In Fordham Bedford this program was used to move a number of buildings through city ownership to tenant and community ownership. During the early 1980's when abandonment was still ravaging many city neighborhoods, FBHC and the Fordham Bedford Community Coalition ( a local affiliate of the Northwest Bronx Community and Clergy Coalition, NWBCCC) used city ownership as a way to prevent abandonment and permit committed tenants to stay in their homes and neighborhoods. Building deterioration and real estate tax delinquency often went hand in hand, and tenants used Housing Court and the 7A Program as a way to wrest management control from negligent property owners. When the city tax foreclosure took place, the tenants used an interim lease or TIL as methods of maintaining tenant or community management while in city ownership.

The popular political theory of the day embraced by both the city and many community groups favored tenant ownership, preceded by a modest, city funded rehab. Following this moderate upgrade, the building was usually sold to the low and moderate income tenants for $250 a unit. The rehab and sales process was slow and labor intensive, however, and the search was on to find new methods of getting the buildings off the city ledgers and back into private ownership.

What followed was two decades of programmatic trial and error driven by politics, federal funding and at times a genuine effort by the city's Dept. of Housing Preservation & Development, community groups and tenants to renovate and preserve this neglected yet valuable resource as affordable housing.

Our Housing Corporation worked with buildings in virtually all of the programs created during this 20 year process. We used TIL, which led to both tenant and community ownership. When the city offered to sell buildings to private owners, FBHC entered POMP (Private Ownership and Management Program). Two years later (1987) we successfully fought for a CMP (Community Management Program) contract. CMP allowed us to greatly expand the extent of the rehab we could perform in buildings. It meant that we could provide the more extensive renovation needed in the more deteriorated buildings in Fordham Bedford while also starting work with several organized buildings in the South Fordham area.

The city ultimately found TIL and CMP too slow as the number of occupied buildings in city ownership continued to increase faster than the renovation/sales process could sell them. POMP became a political liability as it became more difficult to find legitimate private owners interested in renovating the increasingly deteriorated buildings remaining in the city's inventory. The "better" buildings had already been sold and those remaining had become havens for drug dealing and miserable holding pens for the increasing homeless population in the late 1980s.

This called for still another revamping of city programs for dealing with in rem property in the 1990's. (In Rem is the term for the city's legal action to take ownership of delinquent properties) POMP and CMP were out, NOW was coming in. NOW (Neighborhood Ownership Works) took heat from community groups and housing advocates right from the start. Fordham Bedford pointed out many of the inherent flaws in the program, not the least of which was that private companies would manage and renovate the buildings, but would not buy them afterwards. It was POMP II without the incentive to perform provided by eventual ownership. Community housing companies were offered title after rehab, but not given a formal role in the renovation process.

FBHC ultimately decided to participate, a decision not popular with groups from other parts of the city. South Fordham alone contained more than 20 large apartment buildings eligible for the program, however, and most were being used to create a "criminal enterprise zone" where drugs and violence raged out of control for the buildings' legitimate tenants and their neighbors. NOW was seen as a way to gain some measure of control over a situation then completely beyond control. It would also mean many millions of dollars in improvements for buildings in desperate need, some facing consolidation orders from the city. Should we tell the tenants to wait for something better? The tenants, FBHC and the NWBCCC decided to move forward, confronting issues as they arose.

NOW proved to be as flawed as we had originally pointed out. The rehab scopes and budgets were too small, city oversight was thin and the private managers were given large portfolios and little instruction on how to proceed. Fordham Bedford ultimately pushed its way into a construction supervisory role. A tenant relocation policy was implemented by the city following extreme community pressure and the city was forced to honor its commitment to provide Section 8 for existing tenants and obtain J-51 benefits for the buildings.

Despite the many difficult issues, the decision to enter NOW proved to be the correct one for the Housing Corporation and the community. 19 buildings were rescued and virtually
"decriminalized". Millions of dollars of increasingly scarce public support improved the living conditions of hundreds of households. What had once been an open wound in the South Fordham neighborhood is now a secured source of affordable housing for the present and future.

NOW was supposed to be two programs: one where the buildings were first renovated and then sold and another where the city sold the buildings to a community group with a loan to carry out the rehab. This second approach was an attempt to "privatize" the rehab process, making it more like the Participation Loan Program (PLP).

This second phase was long delayed and eventually appeared in the form of the Neighborhood Redevelopment Program (NRP). The NOW program was already being laid to rest by the time NRP got started. NRP still involved sales to community groups as originally envisioned, but resources available for renovations were changing. Most vacant city owned buildings had been renovated or "pipelined" by the early 1990's using Federal Low-Income Housing Tax Credits (LIHTC) as a source of rehab financing. The city now proposed using the LIHTCs in occupied buildings for the first time through NRP. The Enterprise Foundation and the Local Initiatives Support Corporation joined the process to recruit private investors to buy the Tax Credits and oversee the development and construction work.

The Credits along with federal HOME funds brought increased renovation resources and operating subsidies into some of the city's most deteriorated buildings. They also brought increased complexity and tighter income restrictions. Going through the first round of a new city program can be a little like blazing a jungle trail with a pen knife: tough going. While the projects eventually got done, NRP requires perseverance. It privatized only responsibility, not authority, as the city for some unknown reason seemed determined to maintain control over decision making, even after they'd unloaded the buildings.
Tax Credits have also been used to create a clear example of "deja vu all over again" as yet another child of POMP arrived in the form of the Neighborhood Entrepreneurs Program (NEP). The city has again looked for solutions in the same private sector that created the in rem mess in the first place. It is essentially an NRP for the private guys who face the same certification burdens not-for-profits face using Tax Credits and HOME financing.

Changing Policies in a Changing Market

So what's different? Why suddenly no more community managed, city owned buildings? Well, for one thing, the city has no more and that's due to several factors. FBHC and other non-profit and private owners have renovated virtually all the existing city owned buildings in the Northwest Bronx. The remaining buildings are now earmarked for a specific program, including for the first time in our community, NEP. Another factor is more readily available private financing. This has allowed property owners and speculators to finance outstanding city tax debt along with existing mortgages, in effect putting off the eventual bad news. This new debt seldom contributes to improving conditions in many aging buildings and depends on generating increased rents to keep making loan payments. This has led to foreclosures in the past and will in all likelihood do so again in the future. It also leads to decreased services for tenants as speculative, short term owners eliminate repairs and heat in favor of mortgage payments and profits. It eventually results in another market drop as rent roll dollars get stretched too thin and the demand for loan and tax payments, combined with the expense of even the most minimal services, can no longer be met.

The other major factor has been the city's decision not to take title to any more tax and lien delinquent properties. The Giuliani Administration early on decided it would not take ownership of any additional occupied housing. It saw past efforts as too expensive and time consuming and an inefficient use of city resources. Although a great deal of good housing has been created by all these many city programs over the years, its hard to argue that the city's efforts have run like a well oiled machine.

In place of taking title to buildings, the city is trying some new approaches. It has implemented a Tax Lien Sale program in which it essentially sells the right to collect its bad tax bills and other liens to private investors who go after the property owners to pay up. This seems to be having some success with smaller debts and in more valuable buildings. It won't work in buildings in really bad condition with large debts, however, since the rate of collection is poor and the property is no longer worth the amount of what is owed.

These buildings are presenting the city and our neighborhoods the same kinds of problems that in rem buildings presented in the past. They need major renovations and owe too much money to attract legitimate investors and developers, whether community based or private. The city now has new legislative authority that allows it to transfer its interests in a tax delinquent property to a 3rd party without actually having to take title to the building itself. This gets the city off the hook while still moving the property to more responsible ownership. This new ability has yet to be translated into a functioning policy, however, and several attempts to transfer properties in the South Bronx have been delayed. The city can also transfer properties in much smaller areas than before, giving it additional control over what was once a very unwieldy process.

What steps should be taken today?

There's a lot of water gone under the city's in rem bridge and while what was once a catastrophic flood is now slowed to a deceptive trickle, real estate history has shown there are always major storms up ahead. What have we learned from more than 20 years of program experimentation and what might we reasonably expect to see in the future?

One thing that's become apparent is that overfinanced buildings will continue to crumble, especially when combined with poor management and deteriorating conditions. This was a prime factor in the devastating abandonment in many Bronx neighborhoods which began in the late 60's and did not abate until the early 80's. There's no reason to think that we face such a severe cataclysm any time soon. There is reason to think, however, that speculative owners in buildings with large mortgages and in poor condition will stop paying taxes and water charges as the financial and physical conditions in their properties continue to deteriorate. Tenants caught in one of these buildings will hardly care about the overall scope of the disaster as their own building becomes uninhabitable.

The city must use its new 3rd Party Transfer authority in a planned approach that moves ownership of such buildings to new, not-for-profit entities along with an appropriate portion of the resources needed to renovate and operate the properties as affordable housing.

The 3rd Party Transfer authority also allows the city to work in much smaller areas, maybe as small as one property. This adds order and planning to a process that admittedly reeked havoc in many communities in the 1970's and 80's. A coordinated transfer with a building specific outtake plan is now possible.

The city must use its new authority now. Owners with small tax debts and minor code violation problems now face the city's new Lien Sale process, which collects payments from delinquent owners. The city removes the most debt ridden, deteriorated properties from the sale, declaring them bad collection risks (which they are). This leaves the worst speculators able to thumb their noses at the city and their tenants, reducing services and neglecting tax and water bills. The city needs to move against these properties quickly, before more owners decide to "tip" into this category.

There is a need for effective Code Violation Enforcement. It is becoming more and more apparent that owners can ignore code violations with impunity. There are less and less inspectors meaning less violations recorded. There are also fewer attempts to enforce the violations. In a city intent on prosecuting jaywalkers, flower vendors and bike riders, there should certainly be some room to go after owners who purposefully deprive tenants of heat or leave children living in hazardous conditions, especially while ignoring their real estate tax and water bills.

There is also a need for continued support for tenant organizing. Individual tenant associations need to confront the problems in their own buildings and be involved in developing effective solutions. These associations need to band together to address the problems they also face in common. Effective tenant groups have prevented the abandonment of hundreds of buildings in the Northwest Bronx over the past two decades and this type of work needs to be recognized, encouraged and, most importantly, supported.

Lessons learned and where they point.

There are some overall observations and conclusions we can look to if we are to avoid past errors and create a long range approach to dealing with distressed multi-family housing in New York's low and moderate income neighborhoods.

We've learned that given the proper resources, many types of programs can work. The key is proper implementation together with tenant and community involvement. The type of ownership mechanism can vary, the method of financing or supervising improvements can be different, but building management and renovations must be carefully coordinated with problems that arise addressed promptly.

No amount of goodwill can make up for an inherently inadequate financial package. If rents are too low to pay the bills or debts result in rents higher than the tenants can afford to pay, the project will remain in financial trouble and will in the long term cause more harm for the tenants, the property manager and ultimately the neighborhood. Vigilant management, effective cost controls and quality renovation work, can make the difference in keeping a project affordable and financially feasible, but only to a point. The cash flow must support the project.

None of the city's programs, past or present, provides a perfect match for each building and circumstance. All parties involved in a restoration project need to maintain the flexibility required to create a long lasting financial, renovation and ownership package to meet a particular building's needs and requirements.

Like it or not, no matter your political opinions, there is a need for governmental involvement to keep existing, and create new, affordable housing. The role can take many forms, but it must be there. The federal government needs to continue to provide rental assistance such as Section 8 for those households which cannot now afford the full cost of their own housing. Federal incentive programs such as Tax Credits and HOME are needed to allow for renovations to keep housing well maintained. Local government must provide loans, tax incentives and caps on water bills to help owners who wish to provide housing specifically for low and moderate income families.

Local government must stay involved in enforcing the Housing Code to maintain building services . There are other areas, however, where government can withdraw. Many loan and improvement programs can be supervised by banks and not-for-profit intermediaries such as The Enterprise Foundation and the Local Initiatives Support Corporation. They can do the job more efficiently and their financial stake in a project keeps them involved long term. This also frees up city resources for increased Code Enforcement.

The relationship between the city government, residents and communities is a fluid one. The overall interests of a government agency do not always merge with those of an individual tenant or a group within a community. We must be prepared to disagree on certain issues. It does not create the need for permanent enemies, however, and all the parties must seek out solutions that meet their respective objectives and needs. This is certainly the case now as we face a new system for dealing with seriously tax delinquent, neglected properties throughout the city. The buildings do need to be taken from negligent owners, but no one would argue that the old method of vesting was good for the city or for the tenants and neighborhoods directly affected.

Building management has gone through the same "debate in motion" for city owned buildings as has ownership. Tenant management has produced some stellar successes, but depends too much on an outstanding individual tenant to be replicated on a large scale. Community management has successfully renovated and run hundreds of buildings. The renovation of thousands of units in vacant buildings during the past decade has, however, produced some growing pains for many of the groups involved. The development fees from the renovations have dried up and these same community developers are now facing the management of these units with much smaller fees for more difficult work. The renovation of occupied housing is a new challenge for many of these organizations and tenant issues during construction require very close attention. Private managers have also shown their plusses and minuses while involved with city owned buildings. The number of "privates" capable of doing this work proved too small to handle the volume of buildings the city was trying to move. Private managers are less likely to challenge the city on budget issues leaving some buildings with inadequate rehabilitation plans. As for NEP, the jury's still out on this most recent attempt by the city to create a new crop of small private "entrepreneurs".

One form of management that has produced universal thumbs down has been the city's own efforts. It readily admits its own central management unit has been unable to handle the large crumbling inventory of vacant and occupied buildings scattered throughout some of the city's poorest neighborhoods, even with the infusion of hundreds of millions of dollars in federal money for repairs. Its attempt to run the newly renovated SIP (Special Initiatives Program) buildings for homeless families soon led to the SOS (SIP Occupied Sales) Program, which sold the buildings to not-for-profits.

An era which began with unprecedented housing abandonment leading to an equally unprecedented tenant, community and government response is clearly coming to an end. The issues of housing deterioration and affordability, however, are not ending and many of our neighborhoods face a new crisis which is beginning to look like the one they faced twenty years ago. The city's response to the most deteriorated, tax delinquent buildings in coming months will provide insights as to the role, if any, it intends to play in solving this crisis.

Summary of Housing Programs & Agencies

HPD - The City of New York's Department of Housing Preservation & Development.

DAMP - HPD's Division of Alternative Management Programs

TIL - DAMP's Tenant Interim Lease Program

7A - An Administrator appointed in housing court to make repairs in a deteriorated building.

POMP - DAMP's Private Ownership and Management Program

CMP - DAMP's Community Management Program

NOW - DAMP's Neighborhood Ownership Works program

PLP - HPD's Participation Loan Program which combines city and private loan money for renovations in privately owned apartment buildings.

NRP - DAMP's Neighborhood Redevelopment Program

LIHTC - The Federal Government's Low Income Housing Tax Credit program,

HUD - The Federal Government's Dept. of Housing and Urban Development

HOME - Federal housing improvement funds administered by HUD.

Section 8 - Federal rent subsidy program administered by HUD.

NEP - DAMP's Neighborhood Entrepreneurs Program

SIP - HPD's Special Initiatives Program to create permanent housing for the homeless.

SOS - HPD's SIP Occupied Sales program which arranged sale of SIP buildings.

Special Projects of the Housing Corporation include:

Concourse House, a transitional shelter for 42 homeless women and their children, which provides a wide array of services for residents while helping them seek permanent housing.

Edison Arms, a new 70 unit building for the elderly built in partnership with Fordham University.

Fordham Bedford Children's Services, an organization providing services to residents of community run housing and the neighborhoods of the Northwest Bronx. It provides an extensive summer and afterschool programs for young people as well as an immigration program, computer training and a community center at Casita Refugio.

New Walton Avenue, two new apartment buildings providing permanent housing for formerly homeless and low income families as well as a public school kindergarten and a community center administered by Fordham Bedford Children's Services.