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In a move that could give tenants more control over the fate of their federally subsidized apartments, the Bloomberg administration is asking the U.S. Department of Housing and Urban Development to reconsider the way it disposes of unwanted property.

In a July 1 letter to HUD, the city’s Department of Housing Preservation and Development urged the agency, at the behest of tenants, to take a sprawling, three-building Pueblo de Mayaguez complex in Melrose off the auction block and sell it to the residents instead. But the letter goes beyond this deal.

“HPD hopes that [this] could be the start of a review by HUD of its auction policies for its problem properties,” wrote HPD counsel Harold Shultz. “HPD has found that auction sales are not a good way to promote long term affordable housing… Those willing to pay the maximum price at an auction sale will have the least resources available for rehabilitation.”

Residents of the 76-unit development have feared the worst since the feds announced plans to sell the property. In 2000, HUD took over the site, where it has long subsidized rents through its Section 8 program, after the owner defaulted on a HUD-insured loan. Tenants were overjoyed as the once-derelict property got security guards, new windows and a fresh coat of paint.

Then in December, HUD dropped the bomb about auctioning the buildings. While most tenants will likely receive housing vouchers and be allowed to stay, many worry that a new profit-driven landlord could still find ways to raise rents or let the buildings slip back into disrepair.

Affordable housing experts say the auction system makes these types of problems inevitable. “We don’t want HUD to run away from these buildings,” said Jim Grow, a staff attorney with the National Housing Law Project. “HUD’s main strategy is to offload responsibility for these at foreclosure and get some other slumlord to come in and buy them.”

Fortunately for Pueblo residents, the first auction was a dud-the highest bidder withdrew his offer. But with a second auction slated for July 22, tenants took their concerns to the city and to the streets. “They’re putting dollar signs on our heads,” said resident Saudia Sinclair at a protest on the day of an open house for potential buyers. “They don’t see the people or the families here.”

HPD reflected residents’ sentiments in its letter to HUD. Their proposal: that HUD sell the property to the city, which would then transfer it to the Urban Homesteading Assistance Board, a local nonprofit (with which City Limits shares office space), to help residents make necessary repairs and convert it to a collectively owned cooperative.

HUD did not respond to the letter by press time.

The city’s action gives some affordable housing advocates hope that more sweeping reforms might be close behind. Though HUD has auctioned off only two of its New York properties in the past five years, others are expiring from the Section 8 program, posing similar problems. Ellen Davidson, staff attorney with the Legal Aid Society, says she’s encouraged by HPD’s intervention.

“If the sale goes through and it’s a failure, it’ll end up on the city’s steps,” she said. “It’s in their interest to come in first rather than waiting.”

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