City Council Member Robert Cornegy, Jr. (D-Bedford-Stuyvesant, Northern Crown Heights) is beginning to zero in on the city’s Department of Housing Preservation and Development’s (HPD) alleged predatory targeting for foreclosures of Housing Development Fund Corporations (HDFC).
Meanwhile, sources close to a task force that Cornegy Co-Chairs along with HPD Commissioner Louise Carroll that is charged with looking at the city’s controversial Third Party Transfer program (TPT), says that a proposed regulatory agreement forged early in the de Blasio Administration and foisted on HDFC co-op owners strips away almost all ownership rights to the co-ops.
HDFCs are a class of buildings created in the 1980s that gave home ownership co-ops to mainly low-income tenants when the fiscally struggling city wanted to offload the massive liability of decrepit buildings it owned after landlords abandoned them. In many cases, tenants bought the co-ops for $250, with some restrictions on not being able to sell units to buyers that are above certain Area Income Medians (AMI).
The vast majority of HDFCs are in Manhattan, the Bronx and Central Brooklyn, including 58 in Cornegy’s district. In the latest round of TPT in rem foreclosures – in late 2017 – 40 percent of the over 60 properties were HFDCs even though HFDC’s represent roughly 1.5 percent of all residential property in the city, according to sources close to the task force.
While the city, through HPD and the Department of Finance (DOF) negotiated payment plans for back taxes and water bills with several of the HDFCs to get them off the TPT in rem foreclosure list, they padded on huge interest fees – up to 18 percent compounded daily – and administrative fees, according to sources close to the task force.
Taskforce sources also allege that the city, in some cases, has HDFC owners responsible for paying emergency repair costs issued under HPD’s Alternative Enforcement Program (AEP) dating back from before HDFC co-op owners took over the building.
Under the TPT program, pre-selected non-profit and for-profit developers are given “distressed” properties for $1, have all back property and water taxes removed, and these developers are given access to city funding for zero to 1.5 percent interest to redevelop the properties. In some cases, they do eventually give the properties back to co-op owners, but get a 10 percent management fee of the total financing package.
Also putting HDFCs under the gun, according to sources close to the task force, was a separate HPD task force convened behind closed doors in 2014 – early in the de Blasio Administration – that was charged with forging a new regulatory agreement with HDFC co-op owners.
Shortly after this task force was convened, HPD hatched a plan to try to convince the city council to repeal a tax break that HDFC co-op owners were originally given that would limit property taxes per unit to $1500 annually, which is set to expire in 2029, according to current taskforce sources.
The 2014 task force wanted to repeal this date to 2016 as a carrot for HDFC co-op owners to sign the new regulatory agreement, in which co-op signers of the agreement would keep their tax break until 2029, according to sources close to the current task force.
“The regulatory agreement was hugely onerous in that it requires all HDFCs to hire and pay for a monitor, the monitor would have incredible power and final say on any sales, rentals, sublets and commercial leases, and the monitor can fine HDFCs for noncompliance without any due process for which an HDFC could oppose or appeal any decisions the monitor makes,” said one source. “The monitor could also dismantle the board, and the agreement also requires a management company, which would dismiss HDFCs from managing themselves.”
The source said co-op owners would also have to sign affidavits that they slept in their co-op apartments a minimum of 286 nights a year and would give up their rights to pass the co-ops to their children under the regulatory agreement.
Cornegy Spokesperson Edward Amador said Cornegy is working with council colleagues and stakeholders on an extensive package of HDFC and in rem related reforms.
“We believe that current agreements between HDFCs and HPD are burdensome and usury and something fairer must be achieved to ensure the health and vitality or HDFCs,” said Amador.
“It was made evident, particularly by the TPT investigation and hearings, that HDFCs have not received the support needed from city government to stay solvent or afloat, and we must make serious programmatic changes and investments to ensure that this affordable homeownership opportunity remains available to low and moderate-income New Yorkers,” he added.
HPD was contacted and gave no official comment for this story.