New York Senator Charles Schumer introduced controversial legislation Friday that would create a federal program in which the refinancing of over-leveraged, multi-family buildings would be based on the apartments’ current rent roll.
The bill targets buildings that are delinquent, at risk of default or already in foreclosure, by providing refinancing capped at a level that can be supported by the building’s income. The bill also requires that a sufficient operating reserve be maintained in the refinanced buildings, and would also allow the building to be transferred to another owner, as long as the government considers the new owner responsible.
The bill is not specific to New York, but advocates and elected officials such as City Council Speaker Christine Quinn have said as many as 70,000 units of rent-stabilized units in the city are at risk of defaulting on their mortgages.
The city’s Department of Housing Preservation and Development recently began tracking potentially distressed buildings, an agency head said last week.
Patrick Coleman, director of organizing and advocacy at non-profit Tenants & Neighbors, said the bill’s focus on the level of debt tied to rent roll was needed to stabilize the distressed buildings, put in peril after their owners borrowed too much.
Property owners “are demonstrating pretty clearly that they are not responsible and have jeopardized tens of thousands of apartments and homes by paying too much,” he said. His group is a member of a coalition of housing advocates called the Partnership to Preserve Affordable Housing, which is pushing for the legislation.
Robert Knakal, chairman of investment sales firm Massey Knakal Realty Services, which has brokered scores of residential building sales in recent years, said the bill was an unnecessary government intrusion.
“The point is just because a property has a significant mortgage does not necessarily mean an owner is not spending money on services,” he said.
The bill would create the Multi-family Mortgage Resolution Program that would be developed through the Treasury Department and the department of Housing and Urban Development.