An unprecedented rise in sales prices during the past decade without a corresponding rise in net operating income continues to threaten the private multifamily housing stock of the Bronx. In many cases, this phenomenon has led to both physical and financial distress, and has reached the foreclosure stage in an increasing rate. Since 2004, University Neighborhood Housing Program has operated the Multifamily Assistance Center to bring together lenders to discuss the Bronx multifamily housing market and present data on pricing and sales trends.
At the core of these meetings has been the Building Indicator Project (BIP) database which identifies physically and financially distressed properties in the Bronx. The BIP features a weighted scoring system to highlight distressed properties using violation data from the Department of Housing Preservation and Development (HPD) and Department of Buildings (DOB) and lien data from Department of Finance (DOF) and Department of Environmental Protrection (DEP). Using lender data pulled from ACRIS, UNHP has been able to present lenders with their Bronx portfolios at Multifamily Assistance Center meetings, with the purpose of highlighting high scoring buildings, with the expressed goal of lender action. Future meetings of the Assistance Center will include expanded BIP data for Manhattan, Queens and Brooklyn in addition to the Bronx.
Through the Multifamily Assistance Center, UNHP has brought together lenders, owners, foundations and HPD to strategize on ways to improve building conditions and to use as a preemptive alternative to foreclosure. Past roundtable discussions have been instrumental in creating a collaborative approach to gauging market conditions, assessing lending practices and developing a common strategy to preserve and improve distressed multifamily housing. While more than a dozen lenders have participated in the Center over the past six years, we continue to look for more participation.
A number of reports by University Neighborhood Housing Program during the past decade explained the justification for such a Multifamily Assistance Center, including the 2003 report, A Real Estate Bubble in the Bronx?, followed by Rising Values in a Highly Subsidized Market in 2005, Shrinking Affordability in 2007, and Envisioning the Future of the Red Zone in 2009.
UNHP continuously predicted that the sharp increase in operating costs would make it difficult for some properties to stay current on tax and mortgage payments while maintaining the building in good repair and maintaining appropriate services. While the potential for this exists in all properties, the likelihood is much higher in properties that sold or were refinanced during the boom period of 2002-2008.
Many Bronx building suffered when Freddie Mac foreclosed on a large number of properties in the late ‘80s and early ‘90s. An article in the Bronx County Historical Journal by Margaret Groarke recalls the major financial losses Freddie Mac took in the late ‘80s due to over financing, causing them to close down their multi-family lending program in 1990. While financially costly to Freddie Mac, the foreclosure process took its toll in less quantifiable ways to the tenants of the buildings and to the neighborhoods in which the buildings were located.
While not anticipating the volume of foreclosures seen 20 years ago, UNHP expects the upward trend in multifamily foreclosures to rise, and the emergence of more private equity backed disasters as we have seen with Ocelot and Milbank buildings. Developing an alternative to the foreclosure process would be beneficial for all parties involved and the neighborhood in general.
More on the Building Indicator Project here, plus articles about its launch in Crain's and the Daily News.
