- Proposal for Multifamily Foreclosure Prevention Clearinghouse
- Read the Norwood News Article on the forum
- Download the Anniversary Journal (.pdf)
2003 Marks 20th Anniversary Year and Forum
Thriller was number one on the pop charts, Ronald Reagan was half way through his first term as President, and the movement to rebuild the Bronx after the waves of abandonment and arson during the 1970s was in its infancy. The year was 1983 and Fordham University, the Jesuit institution of higher learning located in the heart of the Bronx, took its role in the community to another level when it created the University Neighborhood Housing Program. While it would be another five years before the Northwest Bronx Community and Clergy Coalition signed on as a partner sponsor organization, UNHP had begun to carry out its mission to create, preserve and finance affordable housing in the Northwest Bronx.
This year we celebrate 20 years of community development work, playing a vital role in the improvement of the Northwest Bronx through our low interest loan funds, technical assistance, research and organizing efforts. As is often the case, the measurable outcomes cannot adequately reflect the value of UNHP’s work. Problem solving, issue raising, and relationship building cannot be easily quantified. However, our numbers are not insignificant.
Some of our highlights over the years include 85 loans totalling over $3.1 million, assisting in the creation of over 750 units of affordable housing, organizing the Providers United Family Daycare Network, creating the award winning Community Resource Guide on our website, gaining status as a Community Development Financial Institution in 2001, and winning the participation of 8 banks and 2 religious investors in our various loan funds.
On Wednesday, June 25, UNHP marked its anniversary with a
Breakfast Forum and Fordham University's Walsh Library. Joe Muriana, Board President, offered opening remarks, after which Executive Director Jim Buckley introduced the topic of multifamily real estate prices in the Bronx and what led to UNHP's study. Catherine O'Leary, Research Associate, presented the findings of the report, A Real Estate Bubble in the Bronx?. Jim Buckley then followed the presentation with the proposal for a Multifamily Foreclosure Prevention Clearinghouse which was discussed by those in attendance, including Naomi Bayer, of Fannie Mae, lawyer John Van Bomel, Tom Webler of PWB Management, Brien O'Toole of the Enterprise Foundation, and Mary Dailey of the Northwest Bronx Community and Clergy Coalition. The forum concluded with a presentation on the history of UNHP by Gregory Jost, Project Coordinator, and closing remarks and a petition for increased investment in UNHP by Board Member Dalma De La Rosa.
A Real Estate Bubble in the Bronx?
UNHP Publishes Study of Rising Prices in Bronx Multifamily Housing
This spring UNHP published a study on rising prices in the Bronx real estate market. The report, entitled “A Real Estate Bubble in the Bronx? A Study of Trends in Bronx Multifamily Housing, 1985-2001,” examines pricing trends in the Bronx market and explores factors that influence price.UNHP’s report echoes concerns being voiced throughout the housing field about the impact of escalating real estate prices on affordable housing. If there is a housing “bubble,” what are the potential consequences for the preservation of affordable housing and the stability of our local communities?
In the wake of instability in U.S. financial markets in recent years, “speculative bubble” has become a familiar term to many. It describes a situation where an asset’s price is based on the expectation of future price increases and not on the earnings or profitability of the asset.
UNHP initiated this research over two years ago in order to assess whether rising prices for multifamily properties correlate to a fundamental rise in property values or indicate a more speculative form of market activity. UNHP began investigating pricing trends in 2000 as increasing anecdotal evidence of significant price increases began to circulate in the Bronx housing market. The research was sparked by a concern about how broader trends in the Bronx housing market might threaten the stability and affordability of local housing, and thus also the stability of our local communities.
The research project has received invaluable support and assistance from Citizens Housing and Planning Council. In particular, Dr. Frank Braconi consulted with UNHP on the research design and performed the regression analysis of the data on building sales.
The research findings confirm that the Bronx multifamily housing market has experienced a dramatic and sustained increase in the average price per unit since 1996. The regression analysis of the data, which controls for a number of property and market factors including location, indicates a substantial increase of 123.6% in real per unit sales prices from 1996 to 2001. In the past two years, the UNHP data (obtained from First American Real Estate Solutions) indicates that prices dipped in 2001 and rebounded in the fourth quarter of 2001 and throughout 2002.
However, according to data from the New York City Rent Guidelines Board, these price increases in the Bronx market have not been matched by increases in the net operating income in Bronx multifamily properties. This disconnect between price and profitability raises concerns about the long term impact of higher prices on affordable housing and local communities in the Bronx.
The report concludes by considering practical steps that could be taken by city agencies, foundations, nonprofit housing organizations, private owners, and financial institutions to offset the potentially negative consequences of recent pricing trends. UNHP hopes to engage all participants in the affordable housing community—public, private, nonprofit, philanthropic and community residents—in considering these important questions and possible steps that can be taken to increase the stability, well-being and sustainability of local communities likes ours here in the Bronx.
Proposal for Multifamily Foreclosure Prevention Clearinghouse
In response to the report, "A Real Estate Bubble in the Bronx?", UNHP has proposed a multifamily foreclosure prevention clearinghouse.
Background:
A report recently issued by University Neighborhood Housing Program (UNHP) raises concerns about the impact of sharply increasing purchase prices of apartment buildings over the last six years in Bronx neighborhoods. These per unit increases in purchase prices have not been matched by similar increases in net operating income. Much of the financing of these properties has been provided by conventional banks and financial institutions. Despite loan-to-value ratios of between 70-75%, UNHP is concerned that sharp increases in operating costs will make it difficult for some property owners to stay current on tax and mortgage payments while maintaining the building in good repair and providing appropriate services at adequate levels. While we have been operating with the lowest interest rates in recent history, the impact in some buildings may be more clearly felt if interest rates rise significantly when buildings that have recently taken advantage of these rates and financed with five-year balloon mortgages have their financing come up for renewal.
The Bronx has seen this trend before. Many Bronx building suffered when a large number of apartment buildings were over-financed and foreclosed upon by Freddie Mac in the late 1980s and early 1990s. An article recently published in the Bronx County Historical Journal by Margaret Groarke recalls the major financial losses Freddie Mac took in the early 1990s due to over-financing, causing them to close down their multi-family lending program for an extended period in 1990. While the foreclosure process was financially costly to Freddie Mac, it was more costly to the tenants of the buildings and to the neighborhoods in which the buildings were located.
UNHP has been working with the Fordham Bedford Housing Corporation, the Enterprise Foundation and Fannie Mae to implement a concentrated neighborhood improvement effort in a number of adjacent Bronx neighborhoods, called the Fordham Community Action Plan (FCAP). The problems of overpriced properties are evidenced in a number of apartment buildings in the FCAP area via deteriorating conditions. As part of the strategy to improve the area, we have developed a proposal that could be utilized in many neighborhoods around New York City-a Mortgage Foreclosure Prevention Clearinghouse.
Justification for a Mortgage Foreclosure Prevention Clearinghouse:
While not anticipating the volume of foreclosures seen a decade ago, UNHP expects that there will be a number of multi-family buildings in financial and physical distress in the coming months and years. The typical path for a building confronting financial difficulties starts with a deterioration in services and delays in repairs. We are already starting to see this trend in a number of properties. If the problems in a specific building are bad enough, they can spread to neighboring buildings. If the situation reaches a point where a foreclosure is initiated, the installation of a receiver precedes a lengthy adjustment period in the building in which rent collections are complicated by competing claims from the owner and the receiver and a failure on the part of the owner to share accurate rental information, leading to a further deterioration in services. If the owner has adequate legal representation, the foreclosure process can extend for well more than a year and can, in some instances, be further complicated by declaration of bankruptcy. An alternative to the foreclosure process would be a benefit for all parties involved and the neighborhood in general.
Proposal:
We are proposing that a citywide mortgage foreclosure prevention clearinghouse be established that could be utilized by community organizations, public agencies, owners, banks and lenders that are involved with properties that are in physical and/or financial difficulty. Utilization of the clearinghouse would be intended to either move troubled properties quickly to new ownership or to ensure that critical rehabilitation funds find their way to the property to avoid further deterioration of services and building conditions while also avoiding the lengthy and expensive process of foreclosure.
To limit start-up delays and overcome credibility concerns, we are also proposing that the clearinghouse be housed within the framework of an existing organization that is currently dealing with lenders and non-profit and for-profit real estate and community development organizations.
The clearinghouse would attempt to work with the existing owner and the financial institution to devise an action plan to improve conditions in the building. Potential action plans could assist the existing owner repair the building or could transfer the property to an owner with the capacity to renovate and operate the property in a satisfactory manner.
The tools needed to make the clearinghouse viable include:
UNHP is seeking to work with its many partners and organizations of similar goals and interests to see this concept brought to reality in a timely fashion.
For more information, contact:
University Neighborhood Housing Program
2751 Grand Concourse
Bronx, NY 10468
(718) 933-3101
www.unhp.org
mail@unhp.org
UNHP Celebrates 20 Years
of Housing and Community Development Work,
1983 - 2003
