California's statewide tenant organization is calling for congressional representatives to include tenant protections in any bailout legislation. Tenants Together is backing a proposal set forth by New York housing advocates that would protect tenants from predatory equity schemes that result in displacement and rent hikes.
The Treasury Department has proposed a plan to the Congress to stabilize the financial markets by allowing the Treasury to buy and dispose of hundreds of billions of dollars in distressed financial assets.
California and New York housing advocates are concerned that when the government disposes of the troubled assets, affected properties, many of which are multi-family rental properties, will fall into the hands of speculators that prey on low-income tenants.
Tenant advocates point to the practice of "predatory equity," in which real estate speculators have been purchasing tenant-occupied, rent-regulated properties at prices that cannot be justified by the income flow from rents at the subject properties. These speculators promise their investors high rates of return that can only be achieved, if at all, by aggressively raising rents and driving out existing rent-regulated tenants. After acquiring the properties, they implement a broad range of tactics to drive out tenants, ranging from harassment to exorbitant rent increases and evictions. Predatory equity schemes are forcing thousands of low-income tenants out of their homes, particularly in New York and California.
Partnership to Preserve Affordable Housing, a coalition of housing groups based in New York, is urging Congress to prevent predatory speculators from getting their hands on the properties over which the government will have some control under the bailout plan. Specifically, the Partnership has issued a memo calling for the following:
1. Procedurally, tenants and community groups should be recognized as affected parties in the disposal of the assets. They should be informed of possible dispositions under consideration and have the opportunity to comment on them.
2. Substantially, the [Treasury] should be required to restructure debt or sell its assets, including foreclosed property, at a price that is sustainable
a. without imposing unaffordable rents and displacing tenants,
b. with adequate income for needed maintenance and other operating expenses, and
c. capital left over for needed rehabilitation.
3. In addition, tenants and their chosen nonprofit partners should have an opportunity to purchase any property going through disposition before it is sold to another buyer.
4. [The Treasury] should vet buyers of properties going through disposition to ensure that they are properly qualified to operate the buildings and that their plans are financially sound.
Dean Preston, Executive Director of Tenants Together, commended the quick action by Partnership to Preserve Affordable Housing. "It is essential that these basic protections be included in any bailout legislation. Tenants are innocent victims of the mortgage crisis. If the government is going to commit huge amounts of money to acquiring interests in distressed real estate assets, the government should also make sure that when it disposes of these assets it is not making things worse for tenants by allowing predatory landlords to acquire the buildings."
For a pdf of the press release, click here.