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Dozens of East New York and Cypress Hills residents marched across Eastern Brooklyn on Saturday to tell speculators that their neighborhoods are “not for sale.” Along the way, participants tore down “all cash” for homes signs that have become an unwelcome symbol of the rush of developers and brokers targeting homeowners in and around the communities rezoned by the City Council in April 2016. But while tearing down signs and calling attention to aggressive speculation may highlight the issue, a policy solution to the problem may come in the form of a cease and desist zone.
Last year, East New York led the City in property flipping, a maneuver that allows often unscrupulous brokers and developers to capitalize on the financial vulnerability of low-income homeowners. The signs can have more sinister implications as well: mortgage modification and deed theft scams have also mushroomed in the neighborhood, and too often homeowners turn to the solicitors knocking on their doors or the shady companies putting up signs who don’t have homeowners’ best interests at heart.
Homeowners can access free, legal help by calling the
Center for NYC Neighborhoods at 855-HOME-456.
New York City Council Member Rafael Espinal, who was among several elected officials who marched with residents on Saturday, tore down a sign during the march and told the crowd, “We have to give our homeowners and tenants all the resources they need to fight gentrification.”
Public Advocate Letitia James declared, “We’re basically here to defend Cypress Hills from the speculators who are preying on this community.” She called speculators “bad actors” who “target homeowners, especially seniors who are equity rich but cash poor.” City Comptroller Scott Stringer also marched with the group.
State Sen. Martin Malave Dilan joined Espinal and James in calling for a cease and desist zone, which would empower homeowners to stop harassing calls, door knocking and fliers from speculators seeking to purchase their home. In a cease-and-desist zone, homeowners can opt-in to a no-solicitation registry enforced by the New York Department of State.
The rally was organized by an alliance of local groups called the Coalition for Community Advancement.
“They have a door to door process, they sit down with you, they become friendly to you, you invite them into your homes, so the sales that are happening are under the radar … They’re not giving ‘Darma next door’ an opportunity to buy the house next door to her,” said Darma Diaz, a local homeowner and a member of the Coalition, told City Limits.
Photo: Julia Watt-Rosenfeld, Cypress Hills LDC
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In a previous blog post, we showed how nearly a decade after the Great Recession many black homeowners in the city owe more on their mortgages than their property is worth. Homeowners in these “underwater mortgages” are unable to begin to build wealth and are more likely to end up in foreclosure.
This time, we’ve taken a look at home sale prices, again finding stark racial and ethnic disparities. In this case, prices have rebounded since the recession in majority white and Asian neighborhoods, but not so in majority Hispanic and, most markedly, black neighborhoods. While the luxury market (until recently at least) has been soaring, particularly in Manhattan, and bidding wars regularly break out in gentrifying areas of central Brooklyn and western Queens, other neighborhoods with predominantly black homeowners show values that are below 2004 levels.
The following chart captures the heart of this story: Forty-six percent of black homeowners live in ZIP codes where the median home value has decreased since 2004. Another 26 percent live in ZIP codes where home values have only marginally increased, giving owners a meager gain in equity for 10 years of ownership.
So what does this mean for housing policy in the city? Homeownership remains one of the best avenues for wealth creation; however, there is a tension between affordability and equity accumulation. When property values in a neighborhood rise too quickly, it can lead to speculation and displacement of longtime residents. But when property values crash and then rebound slowly, as in neighborhoods like Wakefield in the Bronx and Jamaica, Queens, many homeowners struggle to pay their mortgages and are unlikely to have the option to move, even if they wanted to.
These patterns in predominantly black homeowner neighborhoods, and to a lesser degree in Hispanic majority neighborhoods, did not develop in a vacuum. Starting in the 1930s, extensive redlining by the federal government effectively stopped lenders from issuing mortgages in predominantly non-white neighborhoods. Redlining was followed by racial steering and blockbusting that largely determined where non-whites were able to purchase homes. Later, with the arrival of blacks and Latinos, those areas –including southeast and central Queens, central and eastern Brooklyn, and much of the Bronx — were part of the national “white flight” phenomenon, with corresponding municipal disinvestment as neighborhoods shifted.
Today, homeowners in these same neighborhoods are struggling to get reasonable loan modifications and stave off foreclosure. Through its network of over 30 community-based partners, the Center has helped coordinate free, high-quality housing counseling and legal services for hundreds of those residents through the New York State Attorney General’s Homeowner Protection Program.
So what can policymakers do to support stable and affordable homeownership for these households in the years to come?
For one, it’s time for widespread principal reduction modifications by Fannie Mae and Freddie Mac. The majority of housing economists believe that principal reduction is the most effective solution for resolving mortgage distress for underwater homeowners. While the Federal Housing Finance Agency, which oversees those quasi-governmental institutions, has announced plans to implement a principal reduction pilot that will serve a very small portion of underwater homeowners, details on the program are not yet public and it’s unclear how New York City homeowners may benefit.
In the meantime, the Center, through its affiliation with the Coalition for Affordable Homes, has been advocating for city and state funding to purchase distressed mortgages at a discount and to pass on the write-downs in the form of principal reduction. Unfortunately, the Federal government has, for the most part, focused on selling distressed mortgages to deep-pocketed investors seeking to maximize profit.
Image credit: Flickr / Marques Stewart
Chart Sources: DOF Rolling Sales, Census ACS 5-year estimates 2010-2014. ZIP codes for which there were insufficient 1-4 unit home sales data were excluded from this analysis. Those ZIP codes are primarily in Manhattan below 120th street and above 153rd street. Outer borough ZIP codes excluded for the same reason are 11697, 10451, and 11359.
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With the city squeezed for space for affordable housing, policymakers are looking at every possible available square inch of land to construct homes, from church parking lots to NYCHA property.
In a report released last week, Comptroller Scott Stringer advocates for the creation of a land bank to exploit vacant land remaining in New York City for permanent affordable housing. The report is a timely contribution to the conversation surrounding how to best use limited government resources to support the housing needs of working- and middle- class New Yorkers. But a land bank is just one of many institutional and legal mechanisms that could be used to achieve those efforts. Another tool that the government could use are Community Land Trusts. Here’s a look at how both might work.
Traditional Land Banks
A land bank would assemble parcels via city agencies and tax foreclosures and then allocate them to developers to build affordable housing. There are already land banks fighting blight by repurposing properties throughout New York State, but not in the city. For example, the Newburgh Community Land Bank, formed in 2012 in Orange County, has made remarkable progress in demolishing blighted properties and steering redevelopment for affordable housing. Land banks are eligible for special funds from the state, the state attorney general, and private funders.
Community Land Trusts
At the Center, we are particularly pleased that Stringer’s report discusses the potential benefits of community land trusts (CLTs) in conjunction with a land bank. Unlike a traditional land bank, a CLT retains ownership of land, which guarantees that housing remains affordable in perpetuity. The board of a CLT also typically includes residents and community members, ensuring that the community has a voice in decisions. As the report recognizes, the scarcity and expense of vacant land in NYC means that we cannot afford to subsidize housing projects whose affordability protections will vanish at the end of a contract. As a vehicle for ensuring permanent affordability, CLTs offer a way to make the most of government investments in housing. (Learn how CLTs are gaining momentum in New York).
Ceding Properties to Land Banks and Community Land Trusts
Both land banks and CLTs would need to acquire properties with help from the City. Here are three potential sources of this land in addition to city-owned properties:
Tax lien sales: The Stringer report proposes tax lien sales be reformed for this purpose. At present, when homes or vacant properties fail to pay their taxes, the City packages the debts and sells them to a trust that in turn issues bonds against the revenues from future collections. It’s a lucrative business, but it puts families at risk of homelessness and neighborhoods at risk of blight. The Comptroller proposes those properties be removed from the lien sale and transferred to a CLT that would maintain them as affordable housing.
NYC Community Restoration Fund: The Fund seeks to acquire distressed mortgage notes from the federal government. While the main goal of the Fund is to help existing homeowners avoid foreclosure and keep their homes, in some cases this may not be possible. In this situation, the next goal would be to preserve the property as affordable housing by transferring it to a CLT or land bank.
Bank-donated properties: Vacant and abandoned properties, including so-called “zombie” properties, are another potential source of affordable housing. Zombies are houses, often deteriorating, trapped in an unfinished foreclosure. A land bank or CLT could negotiate with banks to acquire these properties at below-market rates and rehabilitate them. For their trouble, the banks would receive Community Reinvestment Act credit and remove the problematic properties from their books.
From Policy Proposals to Reality
How do we move towards putting these ideas to work? Councilman Brad Lander of Brooklyn has introduced a bill to create a land bank that would give priority to developers building homes for low-income families. It’s a great step forward. Policymakers should also consider taking actions that will help to make New York a place where CLTs can thrive.
Image: Flickr/Ralph Hockens under Creative Commons license.