Just when you think Mayor de Blasio’s sleaze can’t get
sleazier, it does. His latest real-estate scandal involves the city’s purchase
of substandard housing from politically connected slumlords at well above
market value. Corruption aside, this deal is terrible policy, ensuring that New
York will spend even more money than the billions it forks over each year on
its homeless problem.
Lest you think Hizzoner didn’t learn his lesson from
previous scandals, he has. In his first term, he didn’t pay a price for his
massive giveaway to a downtown condo developer, or for trying to kill the
horse-carriage industry at the behest of property owners.
So in his lame-duck phase, he’s ratcheting up: City Hall is
handing over $174 million to companies controlled by brothers Jay and Stuart
Podolsky to purchase 729 apartments in 21 buildings across Brooklyn and The
Bronx.
The buildings mostly serve as “cluster sites” for homeless
families; the city wants to convert them into long-term affordable housing, run
by nonprofits, for formerly homeless New Yorkers. Blas donor Frank Carone
represents the sellers.
And a good deal Carone helped make: The purchase price is
$30 million over the appraised value.
The city insists the price is “consistent with the current
median price for a rent-stabilized apartment.” But many of these buildings are
in disrepair, having been subject to neglect and hard use for years. They
require tens of millions in gut reconstruction — to be financed by taxpayers.
Because the deal is a purchase and not a contract, it
underwent no checks and balances from the city comptroller. Scott Stringer has
subpoenaed documents, noting that “the explanations provided . . . raise more
questions than answers.”
Indeed. To be sure, the goal is fine: Convert expensive
homeless-shelter apartments into long-term apartments. But there are far better
ways to do that.
First, the city could have pursued eminent domain.
Homeless-services chief Steven Banks has told the comptroller’s office that it
didn’t use this strategy, because a court might rule for a higher valuation.
Maybe, but not certain. Why not find out? The city is
essentially saying it is embracing a risk — paying above-market prices — in
order to avoid that risk.
That aside, the city has other options. Consider: The city
pays rent to the Podolsky buildings on behalf of homeless tenants — $50 million
over five years, nearly $2,000 on each monthly apartment rent.
Two years ago, after a radiator explosion in a similar
cluster-site apartment killed two children, the city severed agreements with that
provider, which it said was “noncompliant” with city codes.
Virtually all city contracts give the city authority to
terminate for cause — and failure to live up to building standards is cause. A
Post report found last week that the Podolsky buildings have more than 400 open
violations, including dozens of “immediately hazardous” violations.
A hardball tactic would cite contract default, revoking the
spigot of easy money.
What would the Podolskys do with 21 empty buildings? Rehab,
or sell — but either way, they’ll end up on the housing market. Middle-class
and working-class housing in older, smaller buildings is affordable housing.
Indeed, one of the absurdities of the city’s cluster-site
homeless shelters — an ill-considered program that goes back to the Giuliani
administration — is that owners sometimes harass paying long-term tenants to
get them to leave. That way, the owners can win the city’s more lucrative
homeless-shelter revenue.
So the city helps create the homeless problem it is trying
to fix in the first place.
The city is supposedly afraid, too, that if it leaves the
Podolsky buildings empty, the brothers will try to remove their units from rent
regulations. But the threshold for deregulation is $2,700 — well above market
rate in these neighborhoods.
But what if the Podolskys — or new owners — don’t keep the
new apartments up to code? There’s an answer to that, too: City housing
officials can do everything from levy fines to, in extreme cases, seizing a
building’s management and rents.
Bottom line: There should be no payoff for owners whose
business model is to neglect homeless tenants’ apartments as they rake in
taxpayer cash, let alone a bizarre one-time windfall.
De Blasio has two years left to use this deal as a template,
not an aberration. “I hope there will be more such deals,” Legal Aid Society
attorney Judith Goldiner told Curbed New York. So do dozens of other cluster-site
owners.
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