Outside one of the Milbank buildings, a batch of Bronx properties where default and disrepair inspired a new early warning system for troubled buildings.

Photo by: Marc Fader

Outside one of the Milbank buildings, a batch of Bronx properties where default and disrepair inspired a new early warning system for troubled buildings.

For years, New York City’s housing enforcement regime learned about bad buildings only when they got so bad someone complained about them.

Under a program launched last week, the city will look for signs that a property is slipping into distress, and act to stop it—hopefully with the negligent owners paying the bill.

The Proactive Preservation Initiative will keep an eye out for buildings that fall behind in their taxes or water fees, or that are located in areas where other multiunit structures are going into default—all warning signs that a property is getting into trouble.

After the program, led by the city’s Department of Housing Preservation and Development, identifies a property that is at risk, it will determine whether to offer the owner a rehabilitation loan or step up enforcement actions.

And in cases where the city has to step in and make emergency repairs, and is left footing the bill, the Bloomberg administration now plans to develop ways for the city to sell liens to third party collectors.

The new initiative aims to help 500 buildings in the next year.

It was apparently spurred by the experience of the Milbank portfolio, a batch of 10 Bronx buildings that, as City Limits has reported over the past year, were bought at the height of the real estate boom, then went into default and, soon thereafter, disrepair.

For years, housing advocates have warned about a rash of private equity real estate purchases of multiunit buildings in low- and moderate-income neighborhoods. The prices these investors paid were higher than the buildings’ rent rolls seemed to justify. Advocates suspected that investors hoped to displace low-rent-paying tenants and bring in more affluent ones.

And if that didn’t happen, they feared that the same wave of foreclosures hitting owner-occupied homes in 2007 and 2008 would soon strike multiunit buildings where thousands of people live.

The Milbank portfolio was a canary in that coal mine. They were bought in 2007 for $35 million by a private equity-backed investor who quickly withdrew services and fell behind on debt payments. In March 2009 Wells Fargo began foreclosure proceedings on the properties. The buildings are currently maintained by a bank-appointed special servicer, LNR Property Corp. of Miami, Florida.

In September, an expert analysis of conditions at the buildings found it will cost at least $19 million to return the decaying homes to livable standards.

The following month, HPD Commissioner Rafael Cestero toured three of the ten buildings with tenants organized by the Northwest Bronx Community and Clergy Coalition. He found collapsed ceilings, tubs sinking into the floors and water pouring down walls, he said, conditions tenants have been raging about for ages. HPD inspectors wrote 173 code violations in the three hours Cestero spent in the buildings.

And last month, HPD subpoenaed financial information on the portfolio from the former and current owner and the court-appointed receiver.

As LNR aims to sell the property, HPD has been leaning on the seller to find a buyer capable of rehabilitating the buildings, and to set a price that makes doing so financial feasible for the purchaser.