Report Shows Tenant Power
Helps Improve "In Rem" Housing

By Michelle Cotton

Tenant-owned cooperatives and buildings with significant tenant organizing are the healthiest of the city's large stock of tax-foreclosed ("in rem") residential buildings, according to a report just published by the Task Force on City-Owned Property.

The report, entitled No More "Housing of Last Resort": The Importance of Affordability and Resident Participation in in rem Housing, examines current city policy for in rem housing by examining it in relation to the history of this stock, the latest data on the city housing market, and the results of a survey of nearly 500 buildings in Brooklyn.

The Results of the Brooklyn Survey

The centerpiece of No More "Housing of Last Resort" is a survey of nearly 3,000 Brooklyn residents living in nearly 500 currently or formerly city-owned buildings. These residents were asked about their economic and social background, housing experiences and preferences, and community activities, and the results have been summarized and published for the first time in this report.

The survey shows that the majority of the residents in Brooklyn in rem housing are very low-income families who depend on public assistance. However, it also illustrates that these residents show underappreciated educational and economic diversity, meaningful participation in their buildings and communities, and strong interest in information and potential for involvement.

Of the various city programs for the in rem housing stock, tenant cooperative ownership was the one performing best in Brooklyn. Tenant-owned co-op buildings were head and shoulders above the others in terms of management quality and building services, had many fewer problems with drugs and crime, showed the greatest tenant satisfaction, and were comparable to buildings in other sales programs in terms of preserving affordable rents.

The program that performed the worst was city ownership and management. Although providing more affordable rents than the buildings in the reprivatization programs, it also had the worst conditions, most problems, and least tenant satisfaction.

Community nonprofit ownership and landlord for-profit ownership came out in the middle and varied the most in performance from community board to community board. These buildings seldom did as poorly as the city-managed buildings or as well as the tenant cooperatives. Community nonprofit ownership appears to have a slight edge over for-profit ownership, outperforming it on some measures.

Tenant cooperatives also came out as the best-performing program in a previous Task Force survey, involving nearly 3,000 residents of in rem housing in the Bronx in 1992. In that survey, city ownership and management, although hardly performing well, nonetheless outperformed for-profit ownership and management. (Nonprofit ownership was not assessed in the Bronx survey because there weren't enough buildings in the sample to draw conclusions.) Another consistent finding of both surveys is that tenant participation and tenant organization correlated with better building conditions and lower rents in all programs.

The Brooklyn survey was conducted by the Housing Environments Research Group of City University of New York Graduate Center, and administered and coordinated by eight Brooklyn community groups under the auspices of the Task Force. Funding and support for this effort were received from the Brooklyn Borough President's Office, New York Community Trust, New York Foundation, Morgan Guaranty, and Taconic Foundation.

History, Economics, and Current Policy

The present dire housing climate -- with increasing poverty, spiraling rents, and disappearing subsidies -- makes the in rem housing stock a particularly precious resource, a stock of apartments that could be used to blunt some of the ill effects of the housing crisis. However, current city policy both fails to exploit the potential benefits of this stock and exacerbates its problems.

As the history of this stock illustrates, the city's current moratorium on further seizure ("vesting") of tax-delinquent buildings and its plan to sell off the remainder of the in rem stock as rapidly as possible, mostly to for-profit landlords, repeat previous approaches that only turned out to cause greater dilapidation and distress.

City policy focuses on sale to for-profit owners and places the fewest units into the tenant-cooperative sales program. This approach runs directly contrary to the course recommended by the results in Task Force surveys and by the experience with the previous for-profit program, which was discontinued as a result of abuses.

Sales programs, such as the Neighborhood Entrepreneurs Program (NEP), also siphon funding away from the larger portion of units under the city's "Central Management." The city has made a conscious decision to concentrate its maintenance and repair efforts on buildings that are earmarked for sale. "Centrally managed" buildings, on the other hand, receive a minimum of resources, personnel, and commitment. The resulting unlivable conditions generate misery and displacement.

Perhaps most disturbingly, the city is warehousing apartments in central management in order to facilitate its NEP program. To make the purchase of in rem buildings more attractive, it is conveying a mixed batch of vacant and occupied buildings to the NEP landlords, with the vacancies available to be rented out at market rates. Thus, when a family moves out of its centrally managed apartment, perhaps due to unlivable conditions, the city is able to turn over the vacant apartment to an NEP landlord, provides the funds to renovate it -- and it can then be rented out at market rates to new higher-income tenants.

Of course, it is also possible that these apartments will not go to higher-income tenants, but to new low-income residents who will have to pay most of their incomes for rent. Thus, families may be made homeless by poor conditions through the city's neglect of centrally managed buildings, while their apartments may be likewise lost from the affordable housing stock when they are reprivatized as market rentals through NEP.

The Recommendations of the Report

Given the difficulty of changing city policy in the current climate, No More "Housing of Last Resort" does not attempt to make recommendations directed at city government. However, it does suggest a course of action to help preserve the affordability and increase the quality of this housing stock:

• Emphasize tenant ownership. Task Force surveys show that tenant cooperative ownership is the best of the reprivatization programs and provides stable, quality, affordable housing.
• Increase tenant organizing. Task Force surveys show that even for those buildings that are not tenant cooperatives, an involved tenant population correlates with better building conditions and more affordable rents.
• Don't neglect the large and vulnerable population in centrally managed buildings. The majority of in rem buildings remain under central management, not in any sales program, while only a couple of thousand units can be reprivatized each year. Improving the situation of the tenants in centrally managed buildings is essential if we are to prevent the homelessness that is being caused by the poor conditions there.
• Monitor the implementation of the city's new plan. The new for-profit disposition program, as well as other aspects of this plan, replicate previously problematic approaches and should be monitored for abuses and ill effects.
• Be ready to respond to the loss of Section 8. The likely loss of further federal housing subsidies calls for creative solutions to permit continued reprivatization of in rem buildings, as well as consideration of the option of continued public ownership of the in rem stock if necessary to preserve affordability and prevent displacement.

The Task Force plans to follow up its report with additional case studies of buildings that performed particularly well and particularly poorly, possible forums on the report findings, and a general distribution of information and targeted provision of assistance to tenants of the buildings that were surveyed.

For a copy of the report, please contact Theresa Brooks at (212) 431-9700. Copies of the previous Task Force report, Housing in the Balance: Seeking a Comprehensive Policy for City-Owned Housing, are also available.