Affordable Housing Institute : US

 

When, a year ago, the preservation forces were utterly unable to derail the juggernaut multi-billion dollar battle for Stuyvesant Town, I speculated that whoever followed Stuy Town would face a spectacular backlash.  In that maelstrom tottered David Bistricer, whose clipper Equity group offered the astonishing sum of $1.3 billion for the 5,881 apartment complex covering a quarter of a square mile. 

 

Mid-rise housing in Brooklyn

 

 

 

 

Many of the 14,000 residents of the 140-acre complex — which comprises 5,881 apartments, a shopping center, schools, churches, a synagogue and a power plant — have been in an uproar since they learned of the pending sale last November.

 

A complex unto itself in Canarsie

 

Mr. Bistricer, a relatively unknown Brooklyn real estate figure, won the bidding in February for Starrett City, the largest federally subsidized housing project in the country.

 

Now, entirely predictably, HUD has for a second time rejected Mr. Bistricer’s proposal, as reported in New York Times:

 

For the second time in four months, federal housing officials yesterday [i.e. July 9, 2007 — Ed.] rejected a real estate investor’s $1.3 billion plan to buy Starrett City, a working-class enclave of 46 apartment buildings on Jamaica Bay. They said that the proposal by the investor, David Bistricer, was not “financially feasible to sustain the project as a long term affordable housing resource.”

 

My $1.3 bill isn’t good enough?

 

Under HUD’s Transfer of Physical Assets rules (the world-famous Chapter 13 of HUD Handbook 4350.1 — and no, I am not making these numbers up), HUD may reject a proposal only if it fails what are called the ‘determinative criteria,’ which basically mean that the property will be physically sound, as cited in Section 13-12:

 

In order to approve the proposed transfer, the Director of Housing Management must determine that the project will be restored to sound physical condition within 24 months from the date of transfer.

 

Although I know no more of the property than what I’ve been reading in the newspaper, I have very serious doubts as to whether HUD in fact had valid grounds for denying its approval … but what I think matters not a whit. 

 

In a letter to Mr. Bistricer’s group yesterday, the secretary of Housing and Urban Development, Alphonso R. Jackson, said that the group “has not demonstrated that it has the organizational or financial capacity to immediately perform under the proposed financial plan.”

 

Even this explanation is questionable, to say the least.  Either Mr. Bistricer can perform, in which case HUD’s reason disappears, or he cannot, in which case he will be unable to close.  As he himself put it:

 

Our critics charge we offer no assurances and our plan might change. Wrong again. Our plan must be approved and guaranteed by city, state and federal government, scores of elected officials, and at least a half dozen governmental agencies. It will be the most scrutinized, verified, analyzed - and guaranteed - housing plan in the nation.

 

Unfortunately, I doubt that Mr. Bistricer will get far trying to litigate this matter, either before an administrative law judge or in an undoubtedly hostile New York court. 

 

Mr. Jackson also expressed reservations about the group’s “desire to increase tenant rent.”

 

Such political dicta, as Secretary Jackson must know, is entirely irrelevant to HUD’s decision — and its inclusion in his rejection statement tends to undermine the credibility of the Secretary’s stated reasoning.

 

My decision is based on a solid foundation, solid

 

Still, it’s all moot.

 

A spokesman for Mr. Bistricer and his group, Clipper Equity, declined to comment. Federal officials had rejected their first proposal in March for similar reasons.

 

No, ‘moot’ not ‘mute’

 

Mr. Bistricer’s purchase effort seems dead.

 

“His proposal — it’s dead, Jim.”

 

Time for the residents to celebrate, right?

 

The proposal, which requires state and federal approval, ran into a storm of protest from tenants, housing activists and elected officials. They feared that anyone paying such a heady price, which critics said was closer to $1.4 billion when all the fees are included, would have to raise rents and displace tenants in order to make the deal work financially.

 

Starrett City has gotten an unusual array of subsidies since it opened in 1974, and Mr. Bistricer’s proposal would have involved even more. But officials were reluctant to put more money into the complex solely so that the current owners could get a windfall from the sale.

 

Although I’m entirely sympathetic to the value of preservation, this is a classic blame-the-developer calumny.  The money would not be going to give the developers a windfall (that is, an undeserved profit), for both current owners and any buyer have the legal right, now, to go market (via an incredibly cumbersome process known, for historical and legal reasons that I will forebear from explaining, as ‘dissolving the housing company’). 

 

Any new money going in would be to buy future affordability, not reward the owners. 

 

Not that there’s any new money on offer

 

“No deal that preserved affordability was possible for a sale price of $1.4 billion,” said Senator Charles E. Schumer.

 

Raising eyebrows at the buyout price

 

Perhaps that is true, Senator Schumer, but once again the cart is preceding the horse.

 

Where all the money gets eaten up

 

“I commend Secretary Jackson for taking action to preserve our dwindling stock of affordable housing.  Now let’s all go back to the drawing board to craft a plan that preserves affordable housing for Starrett residents and ensures that Starrett City remains a middle-class oasis well into the 21st century.”

 

As Senator Schumer doubtless knows, this will take either winkling the owners out of their rights, or a great deal of money to close the cost-value gap.  (Atlantic Yards in Brooklyn is projected to require $1.4 billion in volume cap to produce many fewer affordable apartments.)  To whom will Senator Schumer be offering money, or threatening new rent-control laws?

 

The buyer?

 

[Mr. Bistricer’s] contract to buy the property expires Aug. 9. 

 

The current owner?

 

“We still have an agreement in place with Clipper Equity,” said Martin J. McLaughlin, a spokesman for Starrett City Associates. “We haven’t made a decision yet on what we’re going to do.”

 

For the current owners, who have signed a contract to sell, to anticipate events publicly would be a foolish mistake.  Undoubtedly they will remain mum until after August 9.

 

I could leak what they’ll do, but boy would I get in trouble if I did!

 

Another buyer?

 

The current owners, Starrett City Associates, can either hold a new auction, or, as they have indicated they may do in recent months, make required payments to withdraw from state and federal housing programs.

 

This is the nagging detail that Senator Schumer and others are declining to mention.  Converting Starrett City to market is not some theoretical option to be created by a buyer, it is a contractual right possessed by the current owners — who do not have the proposed debt Mr. Bistricer was anticipating.  Their path out of regulation is straightforward, if fraught with public opprobrium. 

 

Navigating our bureaucracy is really quite easy, as you can see

 

As Mr. Bistricer himself wrote, in the New York Daily News:

 

What’s the alternative? The current owners of the development can and have said they will remove Starrett City from the Mitchell-Lama program. That would also remove it from government regulation and subsidy programs, allowing rents to escalate. We propose a different course: protect existing tenants, modernize and enhance community facilities and infrastructure, promote home ownership and create thousands of affordable housing units.

 

Even the Times seemed to notice this inconvenient fact:

 

Critics of the deal say it could be harder to block the current owners from leaving the state’s middle-class Mitchell-Lama housing program than to stop Mr. Bistricer.

 

Curious phraseology, that.  “Critics of the deal” say?  Anyone who knows the program, supporter, critic, or mere innocent bystanding blogger, knows that.  Mr. Bistricer again:

 

Our plan is not a threat. To the contrary, it provides the last, best hope to preserve, protect and enhance Starrett City as an enduring model of high-quality, affordable housing for this generation and generations to come.

 

The current owners have a legal right to exit.  They could have started that process themselves, even before putting the property on the market.  Now, more than likely, they will. 

 

“The fight to save Starrett City is not over yet,” said Bertha Lewis, executive director of New York Acorn, a community-building group that has organized opposition to the deal.

 

Lewis says it’s not over yet

 

“Hopefully this fight has shown the owners of Starrett City that Acorn and the Starrett tenants’ association will not let that happen.”

 

Paging a white knight?

 

I’m from the government and I’m here to help you

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