New York’s affordable-housing developments could become the next victims of the credit crisis, according to some real estate sources.
As the mortgage crisis escalates, at least 580 buildings containing 40,000 units have “one or more factors that could lead to default,” according to a report in Crain’s Business New York.
Over the past four years, private-equity firms have scooped up at least 90,000 affordable-housing units in the city at “inflated prices and in highly leveraged deals with the hopes of raising rents and maximizing profit,” the Partnership to Preserve Affordable Housing told the newspaper.
But because of city regulations, the buyout firms have had a tougher time than anticipated raising rents at developments like Riverton in Harlem and Stuyvesant Town on the East Side. That has made it more difficult to service their debt loads and many of these loans were sold to investment banks and packaged into mortgage-backed securities.
Loan foreclosures could put capital budgets on hold and hurt maintenance levels, advocates warn.
“Don’t buy a Chevy and try to turn it into a Cadillac,” a project director for the Urban Homesteading Assistance Board said.
Steven Spinola, president of the Real Estate Board of New York, counters that the fears are overblown. “We’re going through a period when money is not as available as it has been, but that doesn’t mean these projects are in danger,” he said.