Pressured to Move, Low-Income Tenants Resist Buyouts

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Crown Heights is one of several once-modest Brooklyn neighborhoods that have suddenly become attractive to real-estate investors and the high-dollar tenants they hope to attract.

Photo by: Vbm214

Crown Heights is one of several once-modest Brooklyn neighborhoods that have suddenly become attractive to real-estate investors and the high-dollar tenants they hope to attract.

Marcia McLean is a hard-working health-care professional who lives with her extended family in the same Crown Heights apartment that she’s occupied for nearly 30 years. Her landlord had been trying to convince her to accept a cash buyout and relocate to another apartment the landlord would find for her in a less desirable neighborhood.

She refused the offer last year, but agreed to move out temporarily while her apartment was renovated. When she tried to move back in last October, the landlord had changed the lock, saying the repairs were yet to be done, she says.

McLean’s story is extreme example of what has been a common practice among New York City landlords for decades. The practice of buying out tenants is a method for getting renters out of regulated apartments that rent for below-market rates in gentrifying neighborhoods. In McLean’s building, newly renovated apartments rent for nearly $4,000 a month. She currently pays under $1,000.

In city that is rapidly gentrifying and where nearly 50 percent of rental housing units are rent-regulated, building owners have a powerful incentive to deregulate rent-stabilized apartments. Under rent-stabilization laws, if a tenant continuously occupies an apartment, an owner can only increase rents by a small percentage each year. But if an apartment is vacated or if the owner makes major improvements on it, the owner can raise the rent drastically. Once an apartment rents for over $2,500, it is no longer rent-stabilized and can be rented at market rate.

During the city’s real-estate boom last decade, some firms invested in New York City rental housing solely with the intention of replacing rent-stabilized tenants. This proved more difficult than the firms anticipated, however, and many of these building went into foreclosure when modest rent rolls failed to provide enough income to pay off hefty mortgages.

Offering buyouts can be beneficial financially for landlords, even if the upfront cost runs to tens of thousands of dollars.

Dealing with hefty mortgages

In Crown Heights, one target of advocates’ and tenants’ complaints is BCB Realty, a management company affiliated with firms that recently bought up several buildings in the neighborhood .

BCB refers to its buildings on its website as “undermanaged with amble upside.” Its website also claims that the company works in “emerging marketplaces and prides itself on a proactive and ethical approach to management.” BCB did not respond to requests for comment.

But activists claim BCB Realty bought buildings in the neighborhood with the sole intention of removing long term residents and deregulating rent-stabilized apartments. According to an analysis by the Urban Homesteading Assistance Board (UHAB) of public records, BCB’s current income from rent at 1059 Union St. would make a mortgage of $1,730,000 sustainable. However, they currently have a mortgage for over $5 million.

“There are two ways landlords can make that mortgage payment without going into foreclosure,” Cea Weaver, an organizer with UHAB, says. “They can push people out and raise rents or reduce services to the building. Or they can own a building that they’re content to lose money on.”

Complaints have become so pervasive that the Department of Housing Preservation and Development has placed 1059 Union Street. in its Alternate Enforcement Program. Only 200 buildings with the most pervasive violations are entered into the program each year. Under the program, landlords are told to make necessary repairs within a few month time. If they refuse, HPD will hire a contractor to do the work and then bill the landlord. According to HPD, the building at 1059 Union Street has 77 open violations, including everything from leaking pipes to missing carbon monoxide detectors.

BCB Realty, which only bought the building in 2013, is offering buyouts to long-term tenants while at the same time failing to adequately maintain the apartments of long term residents, according to Weaver.

Betty Rice, a tenant at 1059 Union St., complained of the condition of her apartment and the building in general. She says workers had done shoddy repairs on her apartment, there were problems with heat and hot water, and bells in her building didn’t work. Even the new tenants who paid higher rent came to tenant association meetings and complained, according to Rice. BCB offered her a buyout, but she did not even consider negotiating a price, as she would not be able to stay in the neighborhood with even a five-figure buyout, she says.

Tenants refusing large sums

McLean who has been locked her out of her apartment for nearly eight months, lives at a different building on the same corner. Hers has a newly renovated apartment listed for almost $4,000 per month for a four-bedroom apartment. McLean currently pays under $1,000 a month for her apartment.

While her landlord was renovating an apartment above her in July of last year, the ceiling collapsed while she was in the apartment. ZT Realty, the owner of the building, immediately relocated her into another, smaller apartment in the building. In addition to fixing the ceiling, ZT Realty claimed that it would renovate her kitchen and bathroom, she says. Representatives from ZT estimated the repairs would take four to six weeks and would be finished in September, according to what McLean wrote in documents filed in Brooklyn Housing Court. But as soon as she relocated to another apartment in the building, the locks were changed on her apartment, she says.

McLean now lives with her two sisters, two nephews, and a niece in the same building as her previous apartment, but in a smaller space where she feels cramped. For several months she didn’t have access to belongings she left behind in the old apartment.

McLean says she declined ZT Realty’s offer of a $45,000 buyout before management locked her out of her apartment. It also attempted to move her into a building in a far away neighborhood that she hasn’t even considered, she says. McLean has lived in her apartment for nearly 30 years.

“I can’t move anywhere with that money,” she said at a protest organized by the Crown Heights Tenant Union in front of 1059 Union St. in February. Finding another apartment at her current rent would be difficult, and she said that she would have to pay much more in rent for a similarly sized apartment if she moved elsewhere. “It’s retaliation. They’re trying to get me frustrated so I move out,” she added in a phone conversation.

ZT Realty did not respond to requests for comment.

Maria Cortes, who lives on the border of Bedford-Stuyvesant and Williamsburg, another gentrifying neighborhood, says her former landlord Yoel Malik, made a buyout offer while neglecting repairs. Her landlord only offered her $5,000 to leave her apartment. She refused.

At Yoel Malik’s residence, a woman who said she was his wife, claimed over the phone that Yoel Malik was never the landlord at 870 Bedford Ave. But Malik’s name appears on real-estate documents as the president of 0728 Realty Corp., the previous landlord of 870 Bedford Ave.

The previous landlords may not have had much to offer, as the building went into foreclosure several times in the past decade. It most recently changed hands in 2013, according to real-estate records. However, her new landlord Abraham Fischbein, has still neglected to make necessary repairs on her apartment, she says. Fischbein did not return calls for comment.

Unregulated and hard to track

The city has seen massive changes in its rental market over the past 30 years. Over 200,000 rent regulated units have been lost since 1981, according to the Furman Center for Real Estate and Urban Policy, and rents continue to increase across the board.

Kerri White, the director of organizing for UHAB, said that buyouts have been seen more often as the real-estate market experienced an uptick in the past few years. Buyouts were not unusual in the early 2000s, and have become more common recently as the New York City real estate market recovered after the 2008 financial crisis, she says.

White sees the strategy of buying out tenants in order to deregulate rent-stabilized apartments as detrimental to the city in general, as it depletes an already undersized affordable housing stock. Buyouts are also completely unregulated and finding out information on them can be very difficult, she says.

The prospect of quick cash may be enticing for some tenants, but most of the tenants White works with don’t see them as beneficial in the long term, she says. Tenants would likely be forced to pay more rent to stay in their neighborhood, where they have communal and familial ties.

“Most tenants I work with are very skeptical of buyouts,” White says. “The money from a buyout is not going to last forever.”