Early Warning Signs

How to Assess the At-Risk Housing Complexes in Your Area By: Kyle L. Rosenkrans, Esq. Visiting Assistant Clinical Professor Seton Hall Law School Center for Social Justice

Identifying Distressed Properties

1. 2. 3. 4. 5. 6. Declining REAC inspection scores Strategic Disinvestment Excessive Evictions Foreclosure Expiration of Project-Based Subsidy Contracts Storm Damage

1. Declining REAC Inspection Scores

Background on REAC inspections Obtaining score data Obtaining inspection reports What is a good score? Often a lagging indicator Example

2. Strategic Disinvestment
Definition Can be a precursor strategy to empty building Source is often anecdotal reports from tenants Aggregating anecdotal accounts is key Early advocacy here can help preservation efforts later. Example

3. Excessive Evictions
Concentrated eviction activity in one building with the goal of emptying the building Zero Tolerance-like evictions Example

4. Foreclosure
Legal process by which government or other lien holder can initiate the sale of property in default on debt obligations Not common in New Jersey Can trigger certain tenant protections and incentives for preservation of project-based subsidies. Example

5. Expiration of Project-Based Subsidies & Other Agreements

Non-renewal of project-based subsidy contracts Prepayment of mortgage Expiration of Deed Restrictions and/or Use Agreements Obtaining data on federal contracts, deed restrictions, use agreements, etc. Examples

6. Storm Related Damage

Problem of growing significance in Post-Sandy New Jersey. Example

Case Studies
Carmel Towers, Zion Towers, and The Regency

Case Study: Carmel Towers

Case Study: Carmel Towers

Case Study: Carmel Towers

Location: Newark, NJ, South Ward, Weequahic Neighborhood, Overlooking Park Built: 1966 Size: 246 Units, 185 federally-subsidized Owner: 440 Elizabeth Ave. Corp., Inc. Mortgagee: NJHMFA REAC Scores
11/25/2004: 81c* 12/20/2006: 38c* 08/19/2010: 18c*

Case Study: Carmel Towers

Subsidies Involved:
HUD: Section 236 Interest Reduction Payment
Mortgage maturation date: 10/27/2011

HUD: Rental Assistance Payment, Project-Based Rent Subsidy, a/k/a orphan program
Contract expiration date: 07/31/2011

Why was there a problem:

RAP contract expiration + low REAC + little explicit contract renewal authority for HUD (no RAD)

Case Study: Carmel Towers

How was problem discovered?
Notices sent to tenants
Sept. 2011 HUD notice RE: vouchers for tenants October 2011 Landlord Notices to Quit

Concerns about lack of relocation funds and tenant ability to relocate with vouchers Key role of tenant organizers

Case Study: Carmel Towers

Strategies:
Tenant Organizing
Tenant Meetings City Council Meetings Elected Officials NYT article

Media

Community Legal Education Preservation Organizing

ENLS & CSJ Media

Outcome:

Recruited prospective preservation buyers and connected them with HUD, NJHFMA and city officials

Building largely vacated in course of six months. Still lies dark and vacant, a year later.

Case Study: Carmel Towers

Pluses and Deltas
Pluses
Media involvement made more people interested/aware, both locally and nationally
One of several similarly-situated orphan program buildings across the country that created impetus for RAD program.

Large turnout for tenant meeting: 150+ Short-term contract expirations by HUD gave some tenants extra 4-5 months. Created more local background knowledge on potential preservation buyers in NYC metro area.

Case Study: Carmel Towers

Pluses and Deltas
Deltas
Challenge: Learned of tell-tale signs too late--declining REAC scores and RAP contract expiration.
Delta: with greater understanding of the law, could have used publicly-available information and directed scarce tenant organizing efforts and community legal education efforts toward the building. Once notices are issued, it can .

Challenge: By the time the contract expired, tenants were fed up with the poor conditions in the building and ready to take a voucher
Delta: with more advance notice, could have started organizing tenants earlier to demand habitability improvements and preservation.

Case Study: Carmel Towers

Pluses and Deltas
Deltas
Challenge: NJHMFA was the mortgagee, but did little over the years to ensure that their property was being maintained properly.
Delta: should have put more pressure on NJHMFA to not let the property fall into disrepair.

Challenge: Local, state and federal elected officials failed to respond to inquiries by tenants; those who did were told by HUD that there was nothing that could be done.
Delta: needed to simply the law and clearly communicate to them that what they were being told by HUD was wrong and the building was preserve-able, if there was will.

Case Study: Zion Towers

Case Study: Zion Towers

Case Study: Zion Towers

Location: Newark, NJ, South Ward, Weequahic Neighborhood, Overlooking Park Built: 1968 Size: 268 Units, 242 federally-subsidized Owner: Zion Towers Realty, LLC Mortgagee: NJHMFA REAC Scores
10/31/2002: 57c* 07/07/2005: 57c* 07/14/2010: 58c*

Case Study: Zion Towers

Subsidies Involved:
HUD: Section 236 Interest Reduction Payment
Mortgage maturation date: ?

HUD: Rental Assistance Payment, Project-Based Rent Subsidy, a/k/a orphan program
Contract expiration date: 05/01/2013

Why was there a problem:

RAP contract expiration + sub-60 REAC Recent purchase, rumblings about refinance

Case Study: Zion Towers

How was problem discovered?
Notices sent to tenants Meetings held with tenants RE: possible closing of building, vouchers being provided Informal networks within HUD and NJHMFA that had developed during Carmel Towers incident Key role of tenant organizers

Case Study: Zion Towers

Strategies:
Tenant Organizing
Tenant Meetings Long history of tenant advocacy for better building conditions, reasonable rents Relationships within HUD, NJHMFA, City Hall were outgrowth of Carmel Towers situation Requests for information on REAC inspections, RAD conversion applications Review of HUD data for expiring orphan program contracts flagged this building as at-risk HTC, LSNJ, ENLS, CSJ, ICC, etc.

Leveraging relationships w/ government officials FOIA Work HUD Data

Joint study of problem / coalition building / info sharing

Outcome:

New ownership group is in the process of applying for a RAD conversation whereby tenant vouchers would be project-based on pre-payment.

Case Study: Zion Towers

Pluses and Deltas
Pluses
Strong relationships with tenants and tenant organization ensured that advocates were aware of the problem early. Critical mass of tenants also invested in remaining in the building and participating in RAD conversion Relationships with government officials helped advocates stay informed as the process was unfolding. FOIA work helped better understand whether and how the RAD program was being administered. Coalition building helped advocates learn and share information more quickly.

Case Study: Zion Towers

Pluses and Deltas
Deltas
Challenge: while there was a better relationship with tenants and they generally had a stronger group, they didnt let us all the way into their meetings or share lots of documents provided to the tenants.
Delta: Minor point, but perhaps greater trust-building would have helped here. However, with a preservation-minded ownership group, triage made this less of a priority.

Case Study: The Regency

Interactive Discussion: Distressed Property

Low/Declining REAC Scores

Interactive Discussion: Distressed Property

Pull latest REAC scores from HUD website Pull latest HUD data on HAP contract for bldg Reach out to local HUD office Reach out to NJHMFA, as appropriate Reach out to tenant association if any Reach out to bldg owner/counsel File FOIA/OPRA requests for physical inspection reports, correspondence, etc.

Interactive Discussion: Orphan Building

Low REAC

Interactive Discussion: Orphan Building

Pull latest REAC scores from HUD website Identify mortgage maturity date(s) Pull latest HUD data on RAP contract for bldg Search county deed office for use agmts Reach out to local HUD office Reach out to NJHMFA, as appropriate Reach out to tenant association if any Reach out to bldg owner/counsel File FOIA/OPRA requests for physical inspection reports, correspondence, etc.