A nonprofit says it can no longer afford to own rent-stabilized housing.
Brooklyn-based Food First aims to sell over 20 apartment buildings across Brooklyn and the Bronx in auctions this week.
Dr. James Auta, a member of Food Firsts board of directors, said the costs of maintaining the buildings were too high. The nonprofit also struggled to evict tenants who failed to pay rent and they were constantly in housing court.
“Those buildings are becoming a serious liability,” said Auta. “We have so much backlog of rent.”
Auta said Food First failed to get help from the state, so it decided to sell its real estate. The nonprofit will continue to focus on its other services such as food pantries and vocational training.
The buildings were supposed to provide supportive housing for people who are low-income, elderly or disabled.
The properties consist of mostly rent-stabilized units. Many are HDFCs, a program set up by the state to provide loans to nonprofit organizations to build low-income housing.
Food First’s director, Alfred Thompson, ranked the city’s fifth “worst” landlord by Public Advocate Jumaane Williams last year with 1,341 violations. One of those buildings, the former Studebaker Building at 1469 Bedford Avenue in Crown Heights, has 254 open HPD violations, and is one of the properties headed to auction.
”The Studebaker showroom in Detroit was turned into a jail, and I was determined to do everything I could not to have something like that happen here,” Thompson said in an interview with the New York Times about the building in 2000.
It’s unclear if the next owner will do any better. Changes to the New York state rent laws in 2019 reduced landlords’ ability to raise rent to pay for improvements.
Before the rent law, owners could permanently hike rents by up to 6 percent to offset the cost of major capital improvements. Now, rents are capped at 2 percent and the increases are distributed over 12 or 12.5 years, depending on building size, and then rolled back. Rent hikes for individual apartment improvements were limited to $89 a month.
Evictions were essentially halted for two years and landlords are spending years in housing court as back rent piles up.
The Federal Reserve’s interest rate hikes beginning in March 2022 made financing more expensive, if it’s available at all. Signature Bank, one of rent-stabilized buildings’ go-to lenders, was seized by regulators last year.
Interest from investors remains, however, if the price is low enough. Sentinel Real Estate recently sold a 1,300-unit, rent-stabilized portfolio in Manhattan and Brooklyn for $180 million, a 40 percent discount from the previous sale price.
Food First has already sold four of its buildings in Bedford-Stuyvesant, according to the auctioneer’s website.The prices were not disclosed.
Maltz Auctions will hold auctions during the course of the week. It declined to comment.
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The largest asset for sale is a 17-building, 51-unit portfolio at 575-595 Grand Avenue and 399-413 St. Marks Avenue in Prospect Heights. The buildings have a rent roll of over $694,000 with three vacant units, according to Maltz Auctions’ website. Bidding will start at $5.6 million, or $109,803 per unit.
Food First secured a $3.6 million loan for the assemblage in 2016 from Signature Bank. A number of the properties had loans from Signature. Some were sold to a mysterious entity called Gotham Investors.