A growing number of apartment buildings in the city are at risk of going into foreclosure, making thousands of tenants the next potential victims of the mortgage crisis, housing activists warn.
More city apartments facing foreclosure
Nobody knows precisely how many tenants are at risk, but advocates say a minimum of 580 buildings, containing 40,000 units, have one or more factors that could lead to default.
Over the past four years, private equity firms have gobbled up at least 90,000 affordable-housing units in the city at inflated prices and in highly leveraged deals with the hopes of raising rents and maximizing profit, according to the Partnership to Preserve Affordable Housing.
But the debt service on many of the buildings is not being supported by rental income because the apartments are still governed by regulations that limit rent increases. In many cases, owners envisioned unrealistic rent growth, but lenders—caught up in the same free-flowing credit frenzy that led to rampant single-family home foreclosures—made the loans anyway. They sold the loans to investment banks, which packaged them into mortgage-backed securities.