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Overvaluing of Bronx Properties Could Lead to Crash
Just as the stock market has seen a recent shake up, a similar jolt may be on its way to the Bronx housing stock. An overvaluing of multifamily properties in the borough with no legitimate basis other than comparable sales prices could lead to a crash in the market.
For the past few years, UNHP has been observing the steady escalation of prices with concern. We are watching real estate values move closer to 6 times the rent roll. Just a couple of years ago, buildings were selling for prices slightly over three times the rent roll.
Many of our colleagues in the multifamily real estate market have stopped trying to buy new properties while expressing similar concern and bewilderment. The only suggested explanations relate to the spill-over of the boom in real estate in Manhattan and the desire of Wall Street investors to place some of their cash in places other than the stock market.
These investors continue to purchase buildings at inflated prices, while a number of financial sources continue to lend money for the acquisitions. This has meant that a larger amount of rental income must be paid out in debt service and there is less cash available to maintain the property. It has also meant that the nonprofit housing, community and tenant groups who may have been considering purchasing a building have not been able to do so.
But just as we have seen on Wall Street, values cannot continue to rise without end. In fact, a shake-up like we saw downtown may not be all that is headed our way – an actual crash in the market may be in the forecast and, unfortunately, the tenants, the building and the neighborhood will suffer for the speculation of the owners and lenders.
The most sensible way to determine value is not based on comparable sales or multiples of rent roll; it is based on the cash flow and net income of the individual building. This past winter showed why any other method is too undependable: the spike in heating fuel costs completely threw most annual budgets out the window.
There are many other factors to consider as well: the income of our buildings is limited by rent controls; the impacts of welfare reform and the soon to arrive 5 year time limits have yet to be identified; the scarcity of Section 8 rental assistance is another hard to quantify factor. The prediction of expenses is also more art than science. No one predicted the fuel price increase this past winter. For the past 7 or 8 years, insurance prices have been low, but historically, insurance has been a cyclical expense. The increase in painting and repair costs related to the new lead regulations has not yet been quantified, either.
The possible outcomes for these poorly underwritten buildings could be any or all of the following: a) deferred maintenance and cuts in services, harassment of lower rent paying tenants to try to get new tenants at higher rents; b) court appointed receivers with no mandate to do major repairs; c) bankruptcies and years of legal haggling; and d) resale at foreclosure auctions to new speculators. These predictions are compounded by the City’s failure to provide adequate code enforcement to offer city assistance to the tenants in these buildings.
University Neighborhood has decided to tackle this issue in the coming months. A workshop involving representatives from the financial and real estate communities is in the planning stages. This is a topic of great importance to our community. Speculative real estate deals have scarred our neighborhoods many times over the past thirty years. It should not be allowed to happen again.
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Homeownership Fairs Draw a Crowd From Community
Last year, University Neighborhood’s partnership with Fannie Mae led to a series of first time homebuyer workshops. More than 100 families attended the workshops, many becoming pre-approved for mortgages and even purchasing homes.
Realizing the need for homebuyer education in the Northwest Bronx, but also wanting to reach out to existing homeowners, the two organizations decided to hold a series of Housing Resource Fairs where neighborhood residents could come and speak with community groups and lenders about various aspects of homeownership.
The resource fairs were designed to allow both homeowners and homebuyers to obtain information about homeownership and make contact with representatives from groups that could help them achieve and/or maintain their dream of owning a home. Each of the fairs had a theme (i.e. Protecting Homeownership) but information on all topics was available at each of the three fairs.
Fannie Mae provided much of the funding for the fairs, in addition to assisting with a number of lender contacts. Representatives from the mortgage divisions of the different lenders attended the fairs, including loan officers from Chase Manhattan, Citibank, Banco Popular, and Emigrant Savings.
A number of community groups were heavily involved in the fairs, including Neighborhood Housing Services of the South Bronx (whom UNHP worked with on last year’s workshops), Mount Hope Housing Company and Fordham Bedford Housing Corporation. These groups provided community residents at the fairs with valuable information pertaining to homeownership in general, as well as to their specific programs.
Some examples of these programs included Mount Hope’s new Individual Development Accounts (IDAs) in which participants are encouraged to save for a downpayment on a house by starting a savings account where their funds are matched 2 to 1. Mount Hope also offers a number of programs for current homeowners, including a home improvement grant (up to $25,000) for eligible applicants.
NHS offers a wide variety of homebuyer and homeowner services including credit counseling, down payment and closing cost assistance, trainings on how to do minor repairs around the house, and foreclosure prevention counseling.
The theme which attracted a large crowd to the second resource fair was “Buying a Newly Renovated Home in the Bronx.” Community groups participating in the Neighborhood Homes program with the City’s Department of Housing Preservation and Development, including Fordham Bedford Housing Corporation (FBHC), were able to show off pictures of the homes they are being given to renovate and sell to community residents.
FBHC was able to get a list of interested home buyers and the community residents were not only able to sign up for a chance to buy a home at a great price, but were able to gather a great deal of homebuyer information and speak with various lenders regarding obtaining a mortgage.
More than 70 families and individuals turned out for the resource fairs, the majority of them prospective home buyers.
Fannie Mae and UNHP plan to continue reaching out to both homeowners and homebuyers, and are considering holding another three resource fairs this fall. If you would like more information about homeownership, give us a call at (718) 933-3101 or visit our website at www.unhp.org where we have pages devoted to both homebuyers and homeowners.
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Water Board Approves 1% Rate Hike
The water and sewer rate increases for Fiscal Year 2001 were approved by vote on Friday, May 12. As of July 1, 2000, metered and unmetered water rates will increase by 1.0%. The wastewater rate will remain at 159% of corresponding water charges.
The 1% increase is much lower than the 4% increase last year, but when people are stretching to make payments now, even a small increase hurts. Even worse, projections for the coming years show rates rising from 5.4% for FY 2002 to 7.3% in FY 2006. The Water Board claims these rate hikes are necessary to cover the costs of providing water and wastewater services.
UNHP testified at the Water Board public hearings on May 2, opposing the proposed rate increase and asking for some sort of relief on water charges.
Also approved by the Water Board was a Multiple Family Conservation Proposal which will replace the existing Transition Program, Retroactive Transition Program and Meter Billing Cap Program for residential buildings with six or more dwelling units. The new program entitles owners of such buildings who replace at least 70% of the toilet, sink and showerhead fixtures in a building with low flow water consuming fixtures to be billed on a fixed charge currently estimated to about $410 per dwelling unit per year, although this amount might be significantly higher than the current frontage rates in some cases. This per unit charge will also be subject to change each year. Implementation will take place over 3 years with July 1, 2001 as the earliest date on which a charge would be effective.
While UNHP supports the creation of a program that encourages water conservation and establishes a fixed charge per apartment, we had hoped for the rate to be lower than $410 and for the rate to be locked in to provide some long time assurance. We are also calling for the program to be easily accessible, as complicated programs can discourage owners from using it, and could also lead to the creation of a new line of business for consultants that will take a piece of the critical savings from other affordable housing needs.
The Multiple Family Conservation Program also excludes 3-, 4-, and 5-family buildings. These buildings have also been excluded from the existing Transition Program, and are subject to immediate metered billing. UNHP had hoped that all buildings with three or more units could have been included in the new program. However, all 1 to 5 unit buildings can still use the Bill Cap program.
We had also hoped to see the resurrection of the Toilet Rebate Program, which many of our buildings utilized when it was open. The buildings that did not use the program were either poorly managed or unaware of the impact metering would have on their bills. These buildings that missed out are the ones that need the Toilet Rebate Program now, as they probably will not be able to afford the capital costs of replacing their toilets without the program. To punish these current building owners by simply saying they missed the program when it was open hurts both the buildings and the City’s goals of conservation.
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Creating Healthy Communities University Neighborhood is participating in the planning process for the upcoming forum, Creating Healthy Communities in the Bronx. The NYC Department of Health’s Community Health Works Program is partnering with a wide range of Bronx organizations to organize this forum with the purpose of engaging local residents and leaders in discussions about the health of the communities they represent.
The various groups include faith based organizations, public health groups, neighborhood coalitions, community based organizations and elected officials. Similar forums have been held in other boroughs, where the issues discussed have included the availability of parks and recreational spaces, housing and environmental issues, and the accessibility of health insurance for local residents.
The Bronx forum has been scheduled as follows:
Tuesday, June 20
5:00 to 8:30 PM
Bronx School of Science
West 205th StreetIf you would like more information or would like to participate in the planning process, please call Regina at (718) 933-3101.
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Donate to UNHP Online! Nonprofits have a new way to harness the power of the internet. One new presence on the web is that of the online charity mall – sites where those interested in donating to a worthy cause can browse through a database of charitable organizations.
University Neighborhood has signed up with one of these e-giving sites, Givenation.com. Now web surfers with a philanthropic heart can make a donation to their favorite charity, including UNHP, via a secure credit card transaction from Givenation.com’s website. If you would like to make a tax deductible contribution to the work of University Neighborhood, simply click on the link below. Happy e-giving!
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Support needed for a Strong HUD Budget The process for passing the FY2001 HUD spending bill is well underway and things are grim at this point. Calls are needed immediately to Representatives and Senators urging them to provide adequate funds for housing and community development programs. The allocations to the House and Senate appropriations subcommittees that fund HUD and a number of other programs are dangerously low. The HUD/VA/Independent Agencies subcommittees are now tasked with passing bills with unacceptably low allocations that fall far short of even maintaining the current level of service. The House subcommittee is scheduled to mark up its FY2001 bill this Tuesday, May 23 and the Senate subcommittee will follow shortly thereafter.
The Senate has allocated $77.8 billion in discretionary budget authority to its HUD/VA/IA Appropriations Subcommittee, while the House has allocated $78 billion to their subcommittee. These allocations are approximately $6.5 billion below the $84.4 billion in budget authority requested by the Administration for FY2001. They are also more than $6 billion below the level needed to maintain the current level of services, according to the Congressional Budget Office.
In light of the growing shortage of affordable housing and the substantial budget surplus, additional investments in affordable housing and community development are both necessary and affordable.Please contact your congressional delegation and the leadership in the House and Senate to explain how important these programs are to meeting critical housing goals and that reduced funding for these programs has real consequences. Tell your Senators and Representatives that the allocations to the HUD/VA subcommittees are unacceptable and that additional funds are needed for housing and community development programs.
You can reach all Senators and Representatives through the Capitol Switchboard at (202) 224-3121 or online at www.congress.org/elecmail
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Notes Celebrates 10 Years
This year marks the 10 year anniversary of the inaugural edition on Notes, UNHP’s newsletter. Since 1990, we have been providing the community, management companies, landlords, lenders, nonprofits and our other partners with information about upcoming events, housing issues, regulations, and legislation at the neighborhood, city, state and federal levels. Our circulation has grown from 100 to over 1100 through referrals and new contacts and is now available online at www.unhp.org/notes
If you know of an individual or group that would like to receive Notes free of charge, please contact us at (718) 933-3101 or mail@unhp.org
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Special Thanks to Con Edison
University Neighborhood would like to thank Con Edison for providing us with our intern for the last year. Alexsa Morales has done exceptional work with first time homebuyers, including organizing workshops, doing outreach in the community and following up with the participants. She has also assisted in other duties including accounting.
A graduating senior at Fordham University’s College of Business Administration, Alexsa plans to stay on at UNHP for the summer before taking her CPA exam in the fall and continuing on in the field of accounting. Congratulations Alexsa!
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