Properties are unlawfully targeted for seizure, says probe into city housing program

July 23, 2019 Kelly Mena

19 Kingsland Ave. Eagle file photo by Paul Frangipane

So — how does the city define ‘distressed?’

The report revealed Monday, called “Oversight — Taking Stock: A Look into the Third Part Transfer Program in Modern Day New York,” studied the most recent round of transfers and found that the program has not been following its legally defined threshold for selecting properties for the program.

“[The Department of Housing Preservation and Development] carries out comprehensive analysis of eligible buildings to determine which ones are [sic] exhibit the highest level of physical and financial distress,” said HPD Associate Commissioner Kim Darga in 2018, while giving testimony to the City Council in support of the program. (TPT is run by HPD.)

The properties under scrutiny include class-one properties (residential buildings with one to three units) and class-two properties (residential buildings with more than three units). The criteria for determining a building is “distressed” is two-fold: first, the property must have a debt-to-value ratio of 15 percent or higher; then, it must either have either an average of five or more hazardous building violations per unit, or owe a debt to the city of $1,000 or higher.

How did that definition play out?

According to the findings, at least half (210 of 420) of the properties selected for potential transfer into the program in its last round did not meet the initial criteria for eligibility into the program alone — that 15 percent debt-to-value ratio trigger. Instead, those 210 properties had, on average, a 3 percent debt-to-value ratio. Collectively, they were worth nearly $152 million, according to data from HPD, and together had a mere total debt of $4.5 million.

Three properties initially targeted for transfer owed no tax debts whatsoever, according to the data, meaning they should have been immediately ruled out by the program’s ratio criteria.

In one case, a property selected had a market value of about $2.2 million and zero violations. It was selected for a potential transfer due to $2,200 in arrears — a debt-to-value ratio of less than 1 percent.

Of the 420 properties targeted, 65 were ultimately transferred into the program. Of those 65, four had debt-to-value ratios below 15 percent, according to the data.

The data also shows that of the 210 initially selected properties that didn’t meet the first criteria — the debt-to-value ratio —155 of those didn’t meet one of the second requirements either: five or more building violations.

“Do you think that holding foreclosure over people to get them to pay their taxes is the only way?” Cornegy asked HPD Commissioner Louise Carroll during the hearing. “Do you think threatening foreclosure and the loss of all of a person’s equity is the only way to get people to pay their taxes? That seems a little bit off, quite frankly.”

How is HPD responding?

Carroll challenged these claims, stating at Monday’s hearing that the properties initially selected for the program owed an average of $800,000 in unpaid debts and had an average of eight building violations, not less than five.

According to Carroll, the main goal of the program is to act as a debt collection tool. It is meant only to target the properties with the greatest amount of city debt across a given number of years.

“… [TPT’s] primary goal is for owners to pay their taxes, or enter into a repayment plan. We were able to assist most of the properties in the most recent round of TPT to do just that, but failure to do so ultimately results in foreclosure,” said Carroll at the public hearing.

The housing agency’s newest leader was quick to note that she had only been on the job for a few months but is willing to learn quickly the needs of a disgruntled community of property owners feeling targeted by the program.

“Councilmember, this is my third month on the job, but I can assure you that as co-chair of the task force, we will look at this program completely and think about what TPT should be in the future. I can assure you that we will work to figure out the right criteria, what the right process should be and what the city would like this program to be like,” Carroll said.

The revelations come as a Brooklyn federal class action lawsuit has been moving through the courts, in which affected property owners are looking to deem the program illegal based on outright stealing of property and a lack of due process of law.