ANHD estimates as many as 70,000 units of affordable housing in the five boroughs may be dangerously overleveraged, with owners unable to maintain both debt payments and living conditions. ANHD arrived at the 70,000 unit figure by looking at the default watch lists maintained by loan servicers, according to Dulchin.
If those owners default and mortgage holders look to sell the debt, they need to be ready to accept substantial losses, he states. "For there to be a real preservation strategy the banks need to realize they need to really step up and bring the buildings down to their real value. It will probably cost them more, but it will undo a lot of the damage they have done to our neighborhoods," Dulchin said. "They have an obligation to stabilize themselves in a way that is useful to the community as a whole. These are financial institutions that have been the beneficiaries of tremendous government largesse. This is really a critical moment."
Depending on the outcome of the Ocelot sale, Dulchin said, the city and advocates could put pressure on other mortgage holding banks to write down the value of troubled properties.
For its part, HPD is trying to stay ahead of the problem of over-leveraged buildings, Visnauskas said. It doesn't want another Ocelot and it doesn't want to return to the days of the 1980s, when the agency held a huge roster of tax-delinquent and abandoned properties.
"We are trying to continually assess the magnitude of the problem," Visnauskas said. "HPD is developing a watch list to serve as an early warning system, to be more proactive in stepping in when buildings start to be distressed.”
"We definitely believe the other shoe will drop, but we want to have a system in place to address it. In contrast to the housing crisis of the 1970s, we have so many strong, capable nonprofit and committed for-profit developers that really have a track record with managing rental housing."
