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Advocates Worry Harlem's Affordable Housing Being Sold to Investment Firms

By Dartunorro Clark | August 4, 2016 4:07pm
 Savoy Park was one of the apartment buildings sold to a private equity firm, which advocates say is worrying.
Savoy Park was one of the apartment buildings sold to a private equity firm, which advocates say is worrying.
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DNAinfo/Dartunorro Clark

HARLEM — Worries that affordable housing is being sold to private equity firms driven by profit have advocates asking the city to have closer scrutiny of the transactions.

New York Communities for Change said L+M Development Partners’ recent sale of Savoy Park, at 2300 Fifth Ave., and The Aspen, at 1955 1st Avenue, to two investment firms raises concerns about how affordable housing agreements the buildings have with the city will be managed.

The advocacy group voiced its concerns in a recent report, claiming the city “is subsidizing the deals that are pushing gentrification.”

“The City, which approves the transactions, needs to immediately put a halt to this practice,” the group said in the report.

L+M received subsidies from the city for affordable housing projects, including the two buildings.

The company sold Savoy Park to Fairstead Capital for $315 million in July and sold The Aspen to Clipper Equity earlier this year for about $100 million, according to The Real Deal.  

Both buildings have affordable housing regulatory agreements, but they will expire in the future.

The agreement with Savoy Park, which has rent-stabilized units, expires in 2052. The agreement with The Aspen, which sets aside about 20 percent of its units for low-income tenants, expires in roughly 20 years.

The concern is that if they're owned by private equity firms that are driven by profit, those companies won't be committed to extending the affordability.

“It’s still really concerning,” said Renata Pumarol, a spokeswoman for the group. “One day it’s going to expire.”

The group is also calling on the city to stop doling out subsidies to L+M  because of the transactions.

However, the company stood by its guarantee of building affordable housing developments in Harlem and other areas of the city.

The company also said that it spent $17 million to revamp Savoy Park, for instance, when it acquired it in 2011, took on a $300 million debt to keep it affordable for the area and put a number of deregulated units back into regulation. 

“Building enough affordable housing at a wide range of affordability is a monumental task and it hinges on the amount of resources available and the tools set forth by the government,” said Lisa Gomez of L+M Development Partners.

“The past 30 years have proven that quality, mixed-income housing is good public policy which serves to stabilize and enhance communities.”

But the advocacy group claims the firms will “exploit loopholes in the rent laws or illegally raise rents.”

The group has raised similar concerns over a development in Brooklyn, DNAinfo previously reported.  

Clipper Equity said, however, it is committed to providing affordable housing at The Aspen and will remain bound to the regulatory agreements.  

“Clipper Equity is devoted to meeting the needs and upholding the rights of its tenants, regardless of financial status,” said Elizabeth Walden, a company spokeswoman.

“The Aspen is in good repair and Clipper Equity is compliant with all rent stabilization regulations, and will continue to be as the law directs.”

Fairstead Capital did not respond to a request for comment.

The city also said the change in ownership will not diminish the existing agreements to keep housing affordable.

"City-imposed affordability agreements don't change with ownership, or when a given tenant moves,” said Austin Finan, a spokesman for the mayor’s office.

“These protections remain in place for the length of our agreements, and beyond for in-place tenants. We will doggedly defend tenants and ensure their rights are protected."

The group also argued that the affordable housing that is being created and pushed by the city is too expensive for locals. 

Harlem resident Derrick Owens, a member of the group and a resident of Savoy Park, said he is worried about the building now being managed by a private equity company.

Owens, who lives with his cousin, girlfriend, daughter and step-daughter in a two-bedroom apartment, said he is currently paying more than $2,500 and is struggling to make ends meet because he is a low-income tenant.

“I’m worried because my understanding is that it’s a private equity firm and private equity firms are all about profits,” he said.

“I really like the area but I might have to move.”