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| December 2000 |
Volume 10, Issue 4 |
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| December 2000 |
Volume 10, Issue 4 |
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Table of Contents
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SIX TIMES RENT ROLL:
Forum Discusses Rising Bronx Real Estate TrendsA forum sponsored by University Neighborhood Housing Program on November 8th discussed the trend of rising sales prices of multifamily real estate in the Bronx. The event, held at Fordham University’s Lincoln Center Campus, brought together over 50 lenders, regulators, owners and managers to discuss this pertinent issue.
The forum was organized by UNHP in response to accounts of buildings in the Northwest Bronx selling for as much as six times the rent roll, where traditionally a feasible price for a buyer would be closer to three or four times the rent roll. Reports of these sales triggered memories of the late 1980s when Freddie Mac was financing building sales for similar amounts prior to a sharp downturn in the Bronx multifamily real estate market.
As part of the forum UNHP presented research on pricing trends in the Bronx market. The first step in our research was to investigate whether there was in fact an empirically identifiable change in real estate pricing. To do this, the staff of UNHP took on the task of gathering, analyzing and graphing sales price data for buildings (with six or more units) in the Bronx over the last 15 years.
The graph shown here depicts our findings on pricing trends. The data was obtained from First American Real Estate Solutions, and shows the changes in sales price per unit annually since 1985. The graph shows that there indeed has been a sharp increase in sales price per unit since 1996.
We also examined data on other market factors that relate to the cost of housing, including inflation and net operating income (data on the latter has been compiled by the Rent Guidelines Board). Changes in average net operating income per unit and the rate of inflation both show slow and steady growth, unlike the changes in sales prices.
We then began to examine factors that affect the economic viability of the Bronx housing market. Using 1998 Housing and Vacancy Survey data compiled by the Citizens Housing and Planning Council (CHPC), we saw that the percentage of substandard housing was higher in the Bronx (over 20%) than in any of the other boroughs.
Also, we sought to examine the capacity of the existing Bronx rental market to absorb higher rent levels to support potential increases in expenses and costs that might accompany higher prices. Data from the U.S. Department of Commerce showed per capita personal income in the Bronx was the lowest among the five boroughs in both 1996 and 1998, and that the percent increase between those two years was also the lowest in the Bronx.
In addition to this fact, CHPC’s research on median rent-to-income ratios in New York City for 1999 shows an inverse relationship between income level and rent burden. This means that those with the lowest incomes pay the highest percent of their income on rent, and vice versa.
The presentation of the research findings was followed by a panel discussion. The panelists included moderator Dan Nissenbaum of Morgan Community Development Corporation, Dick Conley of the Community Preservation Corporation, Shirley Bresler of Dime Savings Bank of New York, and Tom Webler of PWB Management.
The panel discussed the possible meanings and implications of this research based on their extensive experience with the Bronx housing market. Dick Conley pointed out the possible disconnect between rising market values and existing rental subsidy and rehab loan programs.
Shirley Bresler discussed the due diligence procedures that banks such as Dime employ when underwriting loans. Also, to the extent that rising prices reflect a genuine increase in value in the Bronx market, Bresler noted the positive aspects of current investment trends. She added, however, that if there are instances where unsound lending practices are being employed, further research and investigation into those areas of the market would be useful.
Tom Webler, speaking from his experience as an owner and manager, cautioned that overpriced properties will be more vulnerable to increased costs associated with fuel, interest rates, insurance and lead abatement.
The event concluded with an open discussion involving the entire group. A number of issues and questions were brought up, including the effect the 1997 rent stabilization changes have had and will have on the rental market, as well as the extent to which rental subsidies affect the ability of Bronx residents to support building costs and prices.
UNHP has already begun to continue the research into areas brought up in the forum, including tracking interest rates over the last 15 years, and comparing the number of units and buildings sold each year.
One of the next steps will be to meet with CHPC about collaborating on a more advanced statistical analysis of the relationship between pricing and such factors as geographic location and building condition.
Additional investigation into the rise in fuel costs will also take place. Those who attended the forum were asked for their input as to where data on fuel costs and other areas of interest can be obtained.
UNHP is planning to continue researching the issue and drawing on the knowledge of the people at the workshop. A primary goal is to determine whether there are notable trends that would be useful in determining whether and/or when an increase in prices may represent a speculative trend.
To view the graphs presented at the forum, click here-->
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Bank Regulators Hear Over-Financing Concerns From Community The Northwest Bronx Community and Clergy Coalition (NWBCCC) and the National Peoples Action (NPA) recently called a meeting with a number of bank regulators to discuss the issue of over-financing multifamily properties in the Northwest Bronx.
Present at the November 30th meeting were representatives from the Office of the Comptroller of the Currency (OCC), Federal Depository Insurance Company (FDIC), Office of Thrift Supervision (OTS), and the Federal Reserve Board.
The meeting focused on the role of financial institutions in monitoring the health of the buildings they finance. Community and tenant representatives sought improvements and changes in mortgage oversight and underwriting as a means to reduce building neglect.
UNHP staff presented the research from the November 8th forum on the rise in Bronx multifamily property sales prices. Included in the presentation was data showing the contrast between the sharp rise in sales prices and the slow rise in average net operating income and inflation. UNHP also discussed the ability of Bronx residents to support the increased costs owners face due to higher sales prices and rising fuel costs.
The Coalition then discussed the agreement they negotiated with North Fork Bank, the top multifamily lender in the Northwest Bronx over the last five years, in which the bank works with tenants to ensure landlords keep their buildings in good condition as required by the good repair clause in mortgages.
Community representatives also spoke about their own buildings and how certain banks have been cooperative in convincing the landlord to make repairs, while other banks have not cooperated.
The issue of predatory lending was also touched upon at the meeting, and the idea was proposed to have sub-prime affiliates of banks regulated by including them in their holding company’s CRA review.
The response of the regulators was generally positive. OTS spoke about its “safety and soundness” requirement which sets standards for evaluating the soundness of loans in terms of their impact on the physical and financial stability of properties. Plans will be made for community residents to meet directly with bank examiners to further discuss this issue and its impact on both CRA and safety and soundness criteria that the examiners use when reviewing a bank record.
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Water/Sewer Update Applications for the new DEP/Water Board rate program for multifamily buildings will be available this month. Eligible buildings approved for the “Conservation Program for Multiple Family Residential Buildings” will be billed on the new program’s formula as of 6/30/01. The rate will be $424 per apartment plus whatever the increase that may be passed in the spring 2001 Water Board hearings. Eligible buildings must be metered and have at least 6 units, and they must meet certain water conservation requirements, including 70% of toilets and showerheads must meet low flow requirements.
The new program will ultimately replace the transitional programs that have been established for multifamily buildings over the past decade. These programs had been developed in response to strenuous objections from nonprofits, for-profits and lenders about the negative impact of rising water rates on affordable housing.
These transitional programs have been extended annually by the Water Board, but it was always clear that the intent was to get all buildings onto a metered billing system. Research has supported the statements of many involved in apartment building management that there would always be a substantial number of buildings that would not be able to control water use enough to keep the prices affordable.
The new program seeks to encourage conservation by offering the fixed rate charge in exchange for water conservation actions by the owner. Owners will have until the end of 2003 to elect to enter this program. This will give owners an opportunity to decide whether they would be able to contain water use to keep water charges under the new program’s per unit charges.Owners currently in the transition program do not need to and should not get out of the transition program immediately; the existing transition program still has charges that are slightly less than the new program. The buildings that should jump into this program immediately are ones that are currently using the bill cap program. These buildings are metered, but deemed ineligible for the existing transition program. Buildings in the cap program are already using more than $500 per apartment in water; therefore, the new program will bring immediate savings.
The City is currently considering a new, modified round of the toilet rebate program which it terminated a few years ago. Under the rebate program, owners using qualified plumbers were reimbursed for the installation of low flow toilets. Many organizations urged the City to re-create the program as part of this new billing program. The Water Board reports that proposals to do that are currently under consideration.
Applications for the new program can be obtained by calling DEP at (718) 595-7000 or by visiting the DEP website at http://www.nyc.gov/html/dep/.
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Continuing Our Work with Homeowners Realizing the difficulty in attracting Bronx homeowners to general homeownership workshops held on weekday evenings as UNHP has tried in the past, we decided to try a more personal approach.
This fall, a letter and a survey was sent out to homeowners in the Northwest Bronx informing them of grants, loans, and other services potentially available to them and inquiring about their interest in those programs.
Following a modest response, a few staff members have been meeting one-on-one with interested homeowners discussing steps to take to renovate, refinance and improve their homes. The homeowners have then been referred to other agencies for either credit counseling or grant and loan product information and applications.
If you are a homeowner in the Bronx and would like information about some of these programs, visit our website under Projects or give either Elba Mercado or Gregory Jost a call at (718) 933-3101.
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Enterprise Foundation Awards UNHP Technology Grant When the Community Resource Guide (crg) was in its planning stages, an ultimate goal of online interactive maps and data was discussed.
While the site has been guiding users through the maze of finding data on their communities since October, a recent technology grant from the Enterprise Foundation will expand the site’s capabilities and help our staff extend its technological boundaries.
The grant of $12,500 will go towards the purchase of new computer hardware and software, as well as cover the costs of consultants and high speed internet access.
Our intern who helped develop crg this summer will be back on board during winter break, and a number of site improvements, including better maps, should begin to appear towards the end of January 2001.
If you have not tried using crg yet, we encourage you to test it for yourself and let us know what you think. Just go to our website and click on the crg link. If you have any ideas, questions or comments on the site, please direct them to gjost@unhp.org.
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Happy Holidays from University Neighborhood The staff of University Neighborhood Housing Program would like to wish all of you, our supporters and Notes readers, a merry holiday season. This year has been an eventful one here at UNHP, and we are glad you have taken the time to read about our work in Notes.
We would also like to take this opportunity to remind you that you can make a tax-deductible contribution towards the work of University Neighborhood easily and securely on the internet. All you have to do is go to our website at www.unhp.org and click on the “Donate Now at GiveNation.com” link.
You will be taken directly to our donation page at GiveNation.com, where you can use your major credit card to send us a tax-deductible donation just in time before the end of the year.
Of course, you can always donate the old fashioned way, by calling us or sending us a check.
Once again, we would like to wish you happy holidays from our office!
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Specialty Loan Products Offer Unique Funding Opportunities UNHP offers two specialty low interest loan programs for community controlled affordable housing properties in the Northwest Bronx. The two programs, which offer unique funding opportunities for investors, are called the Green Loan Fund and the Short Term Interest Rate Reduction (STIRR) Fund.
The Green Loan Fund assists tenant and community controlled buildings by paying for building upgrades that result in a decrease in operating expenses. These upgrades save money, energy and water achieving the dual goals of affordability and conservation.
Begun in 1995, the Green Loan Fund has been made possible by investments from the Joyce Mertz Gilmore Foundation, Bankers Trust Foundation, Chase Manhattan Bank, North Fork Bank, Apple Bank for Savings, and, most recently, Astoria Federal Savings.
The STIRR Fund assists tenant and community controlled buildings by providing below market short term money to replace high interest (18%) water, sewer, and tax back payments to the City of New York. The Fannie Mae Foundation provided an initial low interest investment of $170,000 for the STIRR Fund.
If you are interested in making an investment in either of our speciality loan funds, or would like more information about the funds, give either Jim Buckley or Catherine Clarke a call at (718) 933-3101 or email us at mail@unhp.org.
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A Season of Press Coverage You may have noticed the name of University Neighborhood Housing Program popping up in the news lately. A slew of recent press coverage has documented some of our efforts over the past few months, beginning with an article in Crain’s New York Business in the September 4-10 issue.
The article focuses on the Mini-Loan Program UNHP developed with Fannie Mae, and includes background information on our relationship with Fordham University and the Northwest Bronx community.
An article in the October 19-November 1 issue of the local newspaper, The Norwood News, reported on the lack of funding for affordable childcare in the Fordham-Bedford area. Featured in the article was the Providers United family daycare program which UNHP helped organize. Providers United was also featured in a recent NBC News Channel 4 special on the same topic.
A number of articles have also appeared concerning the Community Resource Guide on our website. Highlighted by coverage in the October 2 issue of City Limits Fax Weekly and the November 2-15 issue of The Norwood News, the stories have been very positive about our efforts to make access to community-based data on the internet simpler and better.
The articles are available on our website under Publications, or through the mail upon request, by calling Catherine Clarke or Gregory Jost at (718) 933-3101.
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