City officials have banded together in a bid to stop property developers from using large amounts of leverage to purchase affordable housing units in large developments, a tactic known as “predatory equity.”
The Coalition Against Predatory Equity, which is comprised of more than 40 elected officials, will be discussing bills and legislation to introduce to the City Council. Council Member Daniel Garodnick said the coalition is “looking to act fast.”
Garodnick, who represents Manhattan’s District 4, which includes parts of the East Village, Midtown East as well as the Upper East Side, said that the coalition’s goal is to make sure that no developments in the city fall into over-leveraged hands. Cautionary tales include the foreclosures of Stuyvesant Town and the Three Borough Pool, Garodnick said.
Garodnick added that the coalition will be looking at the role tax law plays in fueling the rise in what they see as predatory equity. Specifically, the group plans to examine whether tax breaks granted to property companies for upping their inventory of affordable housing helps offset the borrowing costs incurred in a highly-leveraged deal.
The Coalition is also calling for responsible investment by city and state pension funds, according to the group’s announcement on Wednesday. “Some recent over-leveraged deals designed to harm tenants were supported by the investment of pension funds around the country,” the announcement reads. “We must invest responsibly to ensure pension fund growth, while also avoiding deals that do harm to our affordable housing stock.”
East Side Congresswoman Carolyn Maloney has vowed to re-introduce an old bill that stipulates that Fannie Mae and Freddie Mac, or other government-sponsored enterprises, are not entitled to affordable housing credits if they invest in predatory deals.
“I will be introducing my bill again this week to send a message that these GSEs cannot game the system and fail to comply with their affordable housing responsibilities,” Maloney said in a statement about the new coalition.
Councilman Jumaane Williams, who represents District 45 in Brooklyn, said that the issue is not just important in New York, but on a national scale.
“Fannie Mae and Freddie Mac shouldn’t be giving those loans out,” said Williams, who is the chairman of the City Council’s housing committee. “They shouldn’t be giving incentives and breaks.”
Williams said he would like to see a law that ensures that no government entity provides money to lenders when predatory owners are clearly buying up buildings where the rent roll can’t support the mortgage.
“We are going to research and see what we are going to do in the city,” Williams said.