The problem of unethical landlords and developers pushing out long-time, rent-regulated tenants is not a new phenomenon: In addition to legal means such as offering buyouts, building owners might pressure tenants to leave, neglect essential repairs, illegally overcharge for rents, or even destroy their own property in an attempt to push the rent roll higher or empty out a building in advance of a sale.
What is new are allegations that one of the country’s most lauded housing charities — Habitat for Humanity — knowingly worked with allegedly corrupt developers, spending millions of dollars to purchase buildings where long-time, rent-regulated tenants were pushed out, according to an in-depth story by investigative-journalism nonprofit ProPublica.
Documents and emails uncovered by ProPublica’s investigation purportedly show that the New York City affiliate of Habitat for Humanity bought buildings in Bed Stuy where at least seven rent-regulated families were forced out of their homes so that the buildings could be sold to the nonprofit without occupants. Three of those families became homeless, according to ProPublica.
“We are spending federal money to throw low-income New Yorkers out of buildings, then sell the apartments back to them, with a number of people in the middle making a bundle,” wrote a Habitat whistleblower in an internal email in 2012, quoted in part in the story.
The pressures of time, money and location
Before these incidents, Habitat for Humanity primarily bought vacant buildings and lots directly from the city. But in 2009, Habitat-NYC received a $21 million federal grant to scale up its construction and renovation efforts. The grant required the nonprofit to purchase buildings on the open market and to do so quickly — half the money had to be spent within 18 months.
Habitat was buying directly from Brooklyn developers, and was running out of time.
A little more context
The alleged wrongdoing took place between 2010 and 2011, just before the Brooklyn home market began recovering from the financial crisis. The neighborhood Habitat chose to target, Bedford Stuyvesant, has a very high foreclosure rate (of residential townhouses) and a very low vacancy rate. The idea was to help low-income New Yorkers own their own homes.
This meant that there were very few long-vacant apartment buildings on the Bed Stuy market at the time that Habitat was looking to buy. In short, the nonprofit became desperate to find unoccupied multi-family buildings to renovate into affordable housing — even if it meant turning a blind eye to hasty evictions, alleges ProPublica.
Accusations of wrongdoing
ProPublica’s story methodically piles up evidence that Habitat for Humanity knew it was paying millions of dollars to buy apartment buildings from developers possibly engaged in shady practices:
- Multiple emails from Habitat NYC’s then-Executive Director Josh Lockwood acknowledged that Habitat was working with an allegedly corrupt developer to purchase buildings. (The investor had previously been accused of a real estate scheme but had settled out of court without admitting wrongdoing.) In an email, Lockwood wrote, “There’s zero doubt in my mind that [the developer is] a bad guy and did bad things,” referring to past events.
- In one instance, the nonprofit bought a building at 203 Marion Street for $623,700 when the seller had bought it from its elderly owners the same day for just $381,500, enriching the middleman at the expense of the longtime owners, according to the story.
- Habitat had the seller renovate three newly purchased brownstones on Madison Street, a move which ProPublica alleges was made in order to skirt the federal requirements that they pay workers a wage set by the government.
- The nonprofit also paid $1 million for a building that another seller had purchased just 10 months earlier for $500,000. A rent-controlled tenant in that building was pushed out just four days prior to sale.
What do you think?
The families profiled in ProPublica’s investigation said they were pressured into leaving in a variety of ways, including lack of water, heat, and necessary repairs as well as buyouts. One tenant said he was illegally evicted when the locks on the building were changed. The others left unwillingly but voluntarily, according to the story.
The sellers signed good-faith agreements affirming that no tenants had been improperly displaced.
Thanks to Habitat’s program in the area, 105 needy families were able to purchase their own homes. The new homeowners earned about $50,000 a year, according to ProPublica — more than some of the tenants who were allegedly pushed out but still relatively little by New York standards and typically not enough to purchase property without assistance.
Can Habitat be faulted for the allegedly unethical actions of a few developers? Or should this nonprofit have known better? Can Habitat ethically create housing for needy families in Brooklyn?