Whot Is

1his About?
Ptedototy equity.
keoI-estote specuIotots spent
exotbitont sums to buy up
ottotdobIe housing oII ovet
N¥C. Now the buiIdings they
bought ote ot tisk ot detouIt.
1ens ot thousonds ot tomiIies
stond to Iose theit homes,
ond N¥C stonds to Iose tens
ot thousonds ot ottotdobIe
opottments. 1his postet
expIoins the ptobIem ond
how to üx it.
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MAkING POlIC¥ PU8lIC is
o ptogtom ot the Centet tot Utbon
Pedogogy (CUP) thot poits poIicy
odvocotes ond gtophic designets
to ptoduce toId-out postets Iike
this one. CUP chooses ptogtom
potticiponts thtough o juty ptocess
ond tociIitotes theit coIIobototion.
www.mokingpoIicypubIic.net
COllA8OkA1OkS
Amy Chon (1enonts ond Neighbots),
GIen Cummings (M1W1I), Dino levy
(UHA8), John Mongin (CUP), ond
kosten Woo (CUP)
1HL CLN1Lk IOk Uk8AN
PLDAGOG¥ (CUP) ptoduces
cteotive educotion obout pIoces
ond how they chonge.
www.onothetcupdeveIopment.otg
1LNAN1S AND NLIGH8OkS
is the Iotgest tenonts' tights otgo-
nizotion in New ¥otk Stote, with
15,000 membets. Iot mote thon
30 yeots, thtough gtosstoots otgo-
nizing, 1&N hos totged o powettuI
movement in the üght to ptesetve
ottotdobIe housing, sttengthen
tenont ptotections, ond sustoin
divetse ond IivobIe communities.
www.tondn.otg
UHA8 is o nonptoüt otgonizotion
thot heIps Iow-income tenonts
conttoI theit housing thtough
the cteotion ot Iimited-equity
coopetotives.UHA8 oIso heIps
tenonts ptesetve existing ottotd-
obIe housing by empoweting them
to moke ptooctive decisions
obout the tutute ot theit homes.
www.uhob.otg
1&N ond UHA8 ote pott ot the
Pottnetship to Ptesetve AttotdobIe
Housing.
M1W1I is o gtophic design studio
specioIizing in pubIicotions,
envitonmentoI gtophics, ond identity
systems. M1W1I engoges in
coIIobototive ptojects with pottnets
in othet discipIines, such os
otchitectute, industtioI design, ond
utbon pIonning. www.mtwtt.otg
1HANkS 1O: PouIo Ctespo
(Ptott Centet tot Community
DeveIopment), Don DeSIoovet,
Som Stotk, voIetio MogiIevich,
ond 1om Wotets.
Suppott tot this ptoject wos ptovided
by the New ¥otk Stote CounciI on
the Atts (N¥SCA) ond the New ¥otk
Depottment ot CuItutoI Attoits.
© 2009
Ptedototy
Lquity
1HL
SUkvIvAl
GUIDL
SP¥
Duting the housing boom,
specuIotots Iooked tot buiIdings
thot they couId buy ond teseII
ot o ptoüt.
1hey totgeted buiIdings coveted
by govetnment ptogtoms thot
keep tents ottotdobIe. 1hen they
ttied to moximize theit ptoüts by
pushing out tent-teguIoted tenonts
ond toising tents ot by seIIing the
buiIdings to othet specuIotots.
8U¥
8ut otten the specuIotots didn't
hove oII the money (ot even ony
ot the money) to buy o buiIding.
How did they get the cosh?
Iitst, o specuIotot toised money
ttom ptivote investots by ptomising
o high tote ot tetutn in o shott
petiod ot time.
1hen the specuIotot used this
bose money to get o much
Iotget omount ttom o bonk.
1he stondotd totmuIo wos 20°
cosh ttom ptivote investots
ond 80° Ioon ttom o bonk.

SpecuIotots wete wiIIing to poy
huge ptices tot buiIdings becouse
they thought the voIue ot the
buiIdings couId onIy go up. 8onks
wete wiIIing to moke huge Ioons
becouse they thought they couId
shed the tisk ot bod Ioons. (Mote
on thot Iotet!)
Whot Is
Ptedototy
Lquity?
It's when specuIotots ovetpoy
tot ottotdobIe housing with
bottowed money, convett it
to housing tot tich peopIe,
ond ßip it to new buyets tot
o quick ptoüt.
It specuIotots succeed,
tenonts Iose theit homes,
ond New ¥otk City Ioses
ottotdobIe housing.
It specuIotots toiI ond con't
poy theit mottgoges, the
buiIdings go into totecIosute.
1enonts Iose theit homes ond
New ¥otk Ioses ottotdobIe
housing onywoy.
Nobody wins.
CONvLk1
Now the specuIotot hos to moke
some big chonges in otdet
to moke the buiIdings genetote
enough income to covet the
new debt.
1he specuIotot totces existing
tenonts out by ony meons
necessoty~hotossment, phony
eviction ptoceedings, cutbocks
in setvices...
1hen the specuIotot tties to get out
ot ottotdobIe housing ptogtoms
ond "tenovoteº newIy vocont
opottments to temove them ttom
N¥C's tent teguIotion Iows.
1he specuIotot convetts the
buiIding into condos ot tents
opottments to weoIthiet tenonts
tot mote money.
IlIP
1he specuIotot moy tty to seII
the buiIding to onothet specuIotot
tot o ptoüt.
8ut OOPS! IinoncioI ctisis.
Nobody wonts to buy on
ovetpticed buiIding onymote.
8ecouse ptedototy equity
specuIotots poid too much tot
buiIdings in the ütst pIoce,
they hove huge Ioons thot they
con't poy ott. 1he buiIdings ote
ovetIevetoged. Whot now?
1
Whot do
kivetton's
ünonces
Iook Iike
ottet
ptedototy
equity?
kivetton wos teünonced in 200ó
tot $250 miIIion in bottowed
money. 1hot's toughIy tout to
six times its voIue. 1he onnuoI
intetest on thot Ioon is obout
$13 miIIion. let's see how thot
odds up:
1he onnuoI intetest on the Ioon
is now mote thon kivetton's
gtoss income. And thete's
stiII $8.5 miIIion pet yeot in
opetoting costs.
1hot's o $9 miIIion lOSS
pet yeot.
Uh-oh.
1hete's no woy this buiIding
is soIvent unIess something
chonges.
Whot
wos
kivetton
wotth
betote
ptedototy
equity?
Iot tesponsibIe Iong-tetm
ownets, o buiIding is wotth
otound ten to ütteen times the
income it con net in o yeot.
let's bteok it down using
kivetton os on exompIe:
8y this coIcuIotion, kivetton
hod o net opetoting income ot
$4 miIIion. MuItipIy thot by ten
to ütteen, ond you get o voIue
ot $40-ó0 miIIion.
At thot ptice, the ownet couId
covet opetoting costs ond poy
ott the Ioon whiIe keeping the
buiIding ottotdobIe.
12.5M/¥k
lNCOML lkOM kLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
$4.0M/¥k
NLJ OPLkAJlNO lNCOML
$
$12.5M/¥k
lNCOML lkOM kLNJ
-
13.0M/¥k
lNJLkL8J PA¥MLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
($9.0M/¥k)
NLJ OPLkAJlNO LO88
One
LxompIe
HotIem's kivetton Apottments
wete deveIoped in 1944 os
ottotdobIe housing tot bIock
vetetons. In 2005, ovet 90°
ot kivetton's 1230 opottments
wete tent-teguIoted.
SpecuIotot lotty GIuck
bought kivetton in 2005
~

the height ot the boom.
He Iotet teünonced tot on
osttonomicoI $250 miIIion.
Now, the deveIopment's
tentoI income con't even
covet the intetest poyments
on the Ioon!
1he buiIding is ovetIevetoged.
GIuck con't ßip the buiIding
in this motket.
Whot's going to hoppen?
2
P U k C H A S L k G L 1 S
8 U I l D I N G
1 o h e I p k e e p t h e b u i I d i n g o t t o t d -
o b I e , t h e p t e s e t v o t i o n p u t c h o s e t
g e t s o p t o p e t t y t o x o b o t e m e n t .
1 L N A N 1 S S 1 A ¥ I N
1 H L I k H O M L S
k i v e t t o n s t o y s o t t o t d o b I e !
k e d u c e
D e b t !
l n o r u o r t o s o v o o v o r l o v o r o g o u
b u l l u l n g s , t h o l r u o b t h o s t o b o
b r o u g h t l n l l n o w l t h t h o l r l n c o m o .
l o u o r o l r o s o u r c o s s h o u l u o n o b l o
b o n k s t o w r l t o u o w n o p o r t l o n o l
t h o u o b t ÷ b u t o n l y l o r s p o c u l o t o r s
w h o o g r o o t o n o w r o g u l o t l o n t h o t
w l l l k o o p t h o l r b u l l u l n g s o l l o r u o b l o .
. . . o n d
P t e s e t v e
w i t h
S h o t t S o I e s !
J h o g o v o r n m o n t s h o u l u o n c o u r o g o
s p o c u l o t o r s o n u b o n k s t o s o l l s h o r t
( l . o . , o t o l o s s ) t o º p r o s o r v o t l o n
p u r c h o s o r s º ÷ t o n o n t o n u g o v o r n m o n t
o p p r o v o u o w n o r s c o m m l t t o u t o
m o n o g l n g h o u s l n g l o r t h o l o n g t o r m .
G l U C k S L l l S S H O k 1
1 h e m o n e y t t o m t h e s o I e w o n ' t
c o v e t o I I h i s d e b t , b u t t h e b o n k
t o t g i v e s t h e t e m o i n d e t , o n d t h e
g o v e t n m e n t g i v e s G I u c k p o t t i o I
t o x t e I i e t . ( U s u o I I y , t o t g i v e n d e b t
i s t o x e d I i k e i n c o m e . )
8 A N k S G L 1 k L l I L I
1 o c o v e t p o t t o t t h e i t I o s s e s t t o m
t o t g i v i n g G I u c k ' s d e b t , t h e b o n k
g e t s o c c e s s t o t u n d s t t o m t h e
1 t o u b I e d A s s e t s k e I i e t P t o g t o m .
O v e t I e v e t o g e d b u i I d i n g s h o v e
m o t e d e b t t h o n t h e y c o n s u p p o t t .
S p e c u I o t o t s h o v e o n I y t h t e e o p t i o n s :
k A I S L k L N 1 S
1 o d o t h i s , t h e s p e c u I o t o t n e e d s
t o g e t t i d o t t h e t e n o n t s p t o t e c t e d
b y t e n t t e g u I o t i o n s . 1 h e o v e t o g e
t u t n o v e t t o t e t o t t e n t - t e g u I o t e d
o p o t t m e n t s i s 5 ° p e t y e o t . M o s t
s p e c u I o t o t s n e e d o m u c h h i g h e t
t o t e t o t u t n o p t o ü t , o n d t h e y ' I I
t o t c e t e n o n t s o u t t o g e t i t .
C U 1 S L k v I C L S
I t t h e s p e c u I o t o t c o n ' t t e p I o c e h i s
c u t t e n t t e n o n t s w i t h p e o p I e w h o
p o y m o t e t e n t , h e ' I I t t y t o c u t h i s
e x p e n s e s ~ p t o b o b I y b y m o k i n g
d t o s t i c t e d u c t i o n s i n m o i n t e n o n c e ,
t e p o i t s , o n d o t h e t s e t v i c e s .
I O k L C l O S U k L
I t t h e s p e c u I o t o t s t i I I c o n ' t m o k e
t h e b u i I d i n g b t e o k e v e n o t c o m e
c I o s e , t h e b o n k w i I I t o t e c I o s e . I o t e -
c I o s u t e i s o I e n g t h y o n d u n c e t t o i n
I e g o I p t o c e s s t h o t i s b o d t o t t h e
s p e c u I o t o t , b u t e v e n w o t s e t o t
t e n o n t s . 1 h e y d i d n o t h i n g w t o n g ~
b u t c o u I d s t i I I I o s e t h e i t h o m e s !
I n o I o o n m o d i ü c o t i o n , t h e b o n k
t e d u c e s d e b t t o t s p e c u I o t o t s w h o
o g t e e t o n e w t e g u I o t i o n .
A t k i v e t t o n , t h e g o p b e t w e e n i n c o m e o n d e x p e n s e s w o s s o g t e o t t h o t o
I o o n m o d i ü c o t i o n p t o b o b I y c o u I d n ' t h e I p . 8 u t t h e t e o t e o t h e t b u i I d i n g s
w h e t e t h i s c o u I d w o t k .
8 A N k S k L D U C L l O A N S
I n e x c h o n g e t o t o c c e s s t o t e d e t o I s u p p o t t , b o n k s s h o u I d w t i t e d o w n ( i . e . ,
t o t g i v e ) o p o t t i o n o t t h e u n s u p p o t t o b I e d e b t t h o t t h e s p e c u I o t o t s o w e .
S P L C U l A 1 O k S G L 1 k L
-
k L G U l A 1 L D
I n e x c h o n g e t o t t h i s w t i t e - d o w n , s p e c u I o t o t s w o u I d h o v e t o e n t e t
i n t o n e w t e g u I o t o t y o g t e e m e n t s t h o t e n s u t e t h e ü n o n c i o I o n d
p h y s i c o I i n t e g t i t y o t t h e b u i I d i n g s o s o t t o t d o b I e h o u s i n g .
I n o p t e s e t v o t i o n s h o t t s o I e , t h e
s p e c u I o t o t s e I I s t h e b u i I d i n g t o o
b u y e t w h o w i I I k e e p t h e b u i I d i n g
o t t o t d o b I e .
1 h e s p e c u I o t o t I o s e s m o n e y b u t o v o i d s t o t e c I o s u t e . 1 e n o n t s s t o y i n
t h e i t h o m e s . H e t e ' s h o w o p t e s e t v o t i o n s h o t t s o I e w o u I d w o t k o t
k i v e t t o n :
H o w C o n
W e S o v e
O v e t I e v e t o g e d
8 u i I d i n g s ?
P r o u o t o r y o q u l t y h o s p u t m o r o t h o n
ó b , 0 0 0 u n l t s o l N o w ¥ o r k C l t y ' s
o l l o r u o b l o h o u s l n g o t r l s k l l l n o t h l n g
l s u o n o , r o n t s w l l l g o u p , s o r v l c o s w l l l
g o u o w n , o n u b u l l u l n g s w l l l g o l n t o
l o r o c l o s u r o .
) & - 1
) & - 1
N ¥ C 8 U I l D I N G S A 1 k I S k
( D A 1 A P k O v I D L D 8 ¥ S U k v L ¥ I k O M P A k 1 N L k S H I P 1 O P k L S L k v L A I I O k D A 8 l L H O U S I N G , 2 0 0 9 )
43
H o w C o n
W e S t o p
P t e d o t o t y
L q u i t y i n
t h e I u t u t e ?
l n o r u o r t o p r o v o n t t h l s l r o m h o p p o n l n g
o g o l n , w o n o o u t o l o o k o t h o w t h l s
h o p p o n o u l n t h o h r s t p l o c o .
1 ) I N C O M L I k O M
k L N 1 : $ 1 2 . 5 M
2 ) O P L k A 1 I N G
C O S 1 S : $ 8 . 5 M
3 ) 1 U k N O v L k
k A 1 L : 5 °
4 ) A N N U A l D L 8 1
S L k v I C L : $ 1 3 M
S i n c e t h e t e ' s n o w o y t h i s
b u i I d i n g c o n s u p p o t t o
$ 2 5 0 m i I I i o n I o o n w i t h
$ 1 3 m i I I i o n i n o n n u o I
i n t e t e s t p o y m e n t s :
l O A N v L 1 O L D !
U n d e t w t i t i n g i s t h e p t o c e s s
t h o t b o n k s u s e t o d e c i d e
w h e t h e t o t n o t t o o p p t o v e o
I o o n . 8 o n k s u s u o I I y c h e c k t h e
v o I u e o t t h e u n d e t I y i n g o s s e t
o n d t h e b o t t o w e t ' s o b i I i t y
t o t e p o y . 8 o n k s g o t I o x d u t i n g
W i t h n e w u n d e t w t i t i n g s t o n d o t d s ,
b o n k s w i I I I o o n m o t e t e s p o n s i b I y .
W i t h b e t t e t u n d e t w t i t i n g s t o n d o t d s ,
w h o t w o u I d h o v e h o p p e n e d o t
k i v e t t o n ? G I u c k w o u I d h o v e o s k e d
t o t o $ 2 5 0 m i I I i o n I o o n . 1 h e b o n k
w o u I d h o v e I o o k e d o t :
t h e b o o m , e s p e c i o I I y w i t h h i g h -
p t o ü I e s p e c u I o t o t s b o c k e d b y
p t i v o t e e q u i t y . 1 o p t e v e n t t h i s t t o m
h o p p e n i n g o g o i n , p t o p o s e d s o I e s
o t m u I t i t o m i I y o t t o t d o b I e h o u s i n g
s h o u I d b e t e v i e w e d w i t h n e w
u n d e t w t i t i n g s t o n d o t d s .
A c t u o I
I n c o m e
I t o m
k e n t s
A c t u o I
O p e t o t i n g
L x p e n s e s
A c t u o I 1 u t n o v e t k o t e s
1 H L S I 2 L O I A l O A N
S H O U l D 8 L l I M I 1 L D 8 ¥ :
u u r l n g t h o b o o m , b o n k s o s s u m o u t h o t
h o u s l n g p r l c o s w o u l u g o u p , o n u t h o t
s p o c u l o t o r s c o u l u o l w o y s b u y l o w o n u
s o l l h l g h . J h o y l o o n o u m o n o y t o s p o c u l o
t o r s w l t h o u t r o o l l y l o o k l n g l n t o b o s l c u o t o
W h y d i d b o n k s I e n d m o n e y t o s p e c u I o t o t s ?
l l k o r o n t o l l n c o m o , o p o r o t l n g o x p o n s o s ,
o n u t u r n o v o r r o t o s . 8 o n k s o l s o t h o u g h t
t h o y c o u l u s h o u t h o r l s k l r o m b o u l o o n s
t h r o u g h h n o n c l o l t o o l s l l k o m o r t g o g o
b o c k o u s o c u r l t l o s .
P o o p l o t h o u g h t m o r t g o g o b o c k o u s o c u r l t l o s w o r o s o l o ÷ b o c o u s o t h o r o ' s n o w o y
o b u n c h o l b o r r o w o r s w o u l u u o l o u l t o t t h o s o m o t l m o , r l g h t ` W k O N O l
I S S U L
A b o n k i s s u e s o m o t t g o g e t o o
b o t t o w e t . A m o t t g o g e i s t e o I I y
j u s t o t i g h t t o t e c e i v e o s t t e o m o t
p o y m e n t s t t o m o b o t t o w e t .
S L l l
1 h e i s s u i n g b o n k s e I I s t h e m o t t -
g o g e t o o n i n v e s t m e n t b o n k .
1 h o t w o y , i s s u i n g b o n k s d o n ' t
h o v e t o w o i t t o t m o n t h I y p o y -
m e n t s t o m o k e t h e i t m o n e y b o c k ,
o n d t h e y d o n ' t b e o t t h e t i s k o t
d e t o u I t .
8 U N D l L
1 h e i n v e s t m e n t b o n k b u n d I e s o
b u n c h o t m o t t g o g e s t o g e t h e t .
8 u n d I i n g m o t t g o g e s d i v e t s i ü e s
t h e t i s k o t d e t o u I t . L v e n i t o t e w
b o t t o w e t s d e t o u I t , t h e b u n d I e i s
s t i I I w o t t h m o n e y .
S l I C L
1 h e i n v e s t m e n t b o n k s e I I s s I i c e s
o t t h e b u n d I e t o i n v e s t o t s . 1 h e s e
s I i c e s o t e m o t t g o g e - b o c k e d
s e c u t i t i e s . I n v e s t o t s o t e b u y i n g
t h e t i g h t s t o o t t o c t i o n o t
t h e p o y m e n t s t t o m o b u n c h
o t m o t t g o g e s .
H O W D O M O k 1 G A G L - 8 A C k L D S L C U k I 1 I L S W O k k ?
J h o b o s t w o y t o s t o p p r o u o t o r y
o q u l t y l s t o r o s t r l c t l t s m o l n s o u r c o
o l l u n u l n g : b o n k s w l l l l n g t o m o k o
s p o c u l o t l v o l o o n s . k o m o m b o r ÷
o l g h t y p o r c o n t o l t h o l u n u l n g l o r
t h o s o u o o l s c o m o l r o m b o n k s l
l n t h o o l t o r m o t h o l t h o h n o n c l o l
c r l s l s , o l m o s t o v o r y o n o o g r o o s t h o t
b o n k s n o o u c l o s o r o v o r s l g h t .
l l t h o l n c o m o l r o m o b u l l u l n g c o n ' t
c o v o r o p o r o t l n g o x p o n s o s o n u
p o y o l l t h o l o o n , r o g u l o t o r s s h o u l u
h o v o t h o u l s c r o t l o n t o v o t o t h o l o o n .
J h l s w l l l u r y u p c o p l t o l l o r p r o u o t o r y
o q u l t y s p o c u l o t o r s o n u c l o o r t h o
w o y l o r r o s p o n s l b l o , l o n g t o r m o w n o r s .
k e g u I o t e t h e 8 o n k s !
ó
Whot Is
1his About?
Ptedototy equity.
keoI-estote specuIotots spent
exotbitont sums to buy up
ottotdobIe housing oII ovet
N¥C. Now the buiIdings they
bought ote ot tisk ot detouIt.
1ens ot thousonds ot tomiIies
stond to Iose theit homes,
ond N¥C stonds to Iose tens
ot thousonds ot ottotdobIe
opottments. 1his postet
expIoins the ptobIem ond
how to üx it.
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MAkING POlIC¥ PU8lIC is
o ptogtom ot the Centet tot Utbon
Pedogogy (CUP) thot poits poIicy
odvocotes ond gtophic designets
to ptoduce toId-out postets Iike
this one. CUP chooses ptogtom
potticiponts thtough o juty ptocess
ond tociIitotes theit coIIobototion.
www.mokingpoIicypubIic.net
COllA8OkA1OkS
Amy Chon (1enonts ond Neighbots),
GIen Cummings (M1W1I), Dino levy
(UHA8), John Mongin (CUP), ond
kosten Woo (CUP)
1HL CLN1Lk IOk Uk8AN
PLDAGOG¥ (CUP) ptoduces
cteotive educotion obout pIoces
ond how they chonge.
www.onothetcupdeveIopment.otg
1LNAN1S AND NLIGH8OkS
is the Iotgest tenonts' tights otgo-
nizotion in New ¥otk Stote, with
15,000 membets. Iot mote thon
30 yeots, thtough gtosstoots otgo-
nizing, 1&N hos totged o powettuI
movement in the üght to ptesetve
ottotdobIe housing, sttengthen
tenont ptotections, ond sustoin
divetse ond IivobIe communities.
www.tondn.otg
UHA8 is o nonptoüt otgonizotion
thot heIps Iow-income tenonts
conttoI theit housing thtough
the cteotion ot Iimited-equity
coopetotives.UHA8 oIso heIps
tenonts ptesetve existing ottotd-
obIe housing by empoweting them
to moke ptooctive decisions
obout the tutute ot theit homes.
www.uhob.otg
1&N ond UHA8 ote pott ot the
Pottnetship to Ptesetve AttotdobIe
Housing.
M1W1I is o gtophic design studio
specioIizing in pubIicotions,
envitonmentoI gtophics, ond identity
systems. M1W1I engoges in
coIIobototive ptojects with pottnets
in othet discipIines, such os
otchitectute, industtioI design, ond
utbon pIonning. www.mtwtt.otg
1HANkS 1O: PouIo Ctespo
(Ptott Centet tot Community
DeveIopment), Don DeSIoovet,
Som Stotk, voIetio MogiIevich,
ond 1om Wotets.
Suppott tot this ptoject wos ptovided
by the New ¥otk Stote CounciI on
the Atts (N¥SCA) ond the New ¥otk
Depottment ot CuItutoI Attoits.
© 2009
Ptedototy
Lquity
1HL
SUkvIvAl
GUIDL
SP¥
Duting the housing boom,
specuIotots Iooked tot buiIdings
thot they couId buy ond teseII
ot o ptoüt.
1hey totgeted buiIdings coveted
by govetnment ptogtoms thot
keep tents ottotdobIe. 1hen they
ttied to moximize theit ptoüts by
pushing out tent-teguIoted tenonts
ond toising tents ot by seIIing the
buiIdings to othet specuIotots.
8U¥
8ut otten the specuIotots didn't
hove oII the money (ot even ony
ot the money) to buy o buiIding.
How did they get the cosh?
Iitst, o specuIotot toised money
ttom ptivote investots by ptomising
o high tote ot tetutn in o shott
petiod ot time.
1hen the specuIotot used this
bose money to get o much
Iotget omount ttom o bonk.
1he stondotd totmuIo wos 20°
cosh ttom ptivote investots
ond 80° Ioon ttom o bonk.

SpecuIotots wete wiIIing to poy
huge ptices tot buiIdings becouse
they thought the voIue ot the
buiIdings couId onIy go up. 8onks
wete wiIIing to moke huge Ioons
becouse they thought they couId
shed the tisk ot bod Ioons. (Mote
on thot Iotet!)
Whot Is
Ptedototy
Lquity?
It's when specuIotots ovetpoy
tot ottotdobIe housing with
bottowed money, convett it
to housing tot tich peopIe,
ond ßip it to new buyets tot
o quick ptoüt.
It specuIotots succeed,
tenonts Iose theit homes,
ond New ¥otk City Ioses
ottotdobIe housing.
It specuIotots toiI ond con't
poy theit mottgoges, the
buiIdings go into totecIosute.
1enonts Iose theit homes ond
New ¥otk Ioses ottotdobIe
housing onywoy.
Nobody wins.
CONvLk1
Now the specuIotot hos to moke
some big chonges in otdet
to moke the buiIdings genetote
enough income to covet the
new debt.
1he specuIotot totces existing
tenonts out by ony meons
necessoty~hotossment, phony
eviction ptoceedings, cutbocks
in setvices...
1hen the specuIotot tties to get out
ot ottotdobIe housing ptogtoms
ond "tenovoteº newIy vocont
opottments to temove them ttom
N¥C's tent teguIotion Iows.
1he specuIotot convetts the
buiIding into condos ot tents
opottments to weoIthiet tenonts
tot mote money.
IlIP
1he specuIotot moy tty to seII
the buiIding to onothet specuIotot
tot o ptoüt.
8ut OOPS! IinoncioI ctisis.
Nobody wonts to buy on
ovetpticed buiIding onymote.
8ecouse ptedototy equity
specuIotots poid too much tot
buiIdings in the ütst pIoce,
they hove huge Ioons thot they
con't poy ott. 1he buiIdings ote
ovetIevetoged. Whot now?
1
Whot do
kivetton's
ünonces
Iook Iike
ottet
ptedototy
equity?
kivetton wos teünonced in 200ó
tot $250 miIIion in bottowed
money. 1hot's toughIy tout to
six times its voIue. 1he onnuoI
intetest on thot Ioon is obout
$13 miIIion. let's see how thot
odds up:
1he onnuoI intetest on the Ioon
is now mote thon kivetton's
gtoss income. And thete's
stiII $8.5 miIIion pet yeot in
opetoting costs.
1hot's o $9 miIIion lOSS
pet yeot.
Uh-oh.
1hete's no woy this buiIding
is soIvent unIess something
chonges.
Whot
wos
kivetton
wotth
betote
ptedototy
equity?
Iot tesponsibIe Iong-tetm
ownets, o buiIding is wotth
otound ten to ütteen times the
income it con net in o yeot.
let's bteok it down using
kivetton os on exompIe:
8y this coIcuIotion, kivetton
hod o net opetoting income ot
$4 miIIion. MuItipIy thot by ten
to ütteen, ond you get o voIue
ot $40-ó0 miIIion.
At thot ptice, the ownet couId
covet opetoting costs ond poy
ott the Ioon whiIe keeping the
buiIding ottotdobIe.
12.5M/¥k
lNCOML lkOM kLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
$4.0M/¥k
NLJ OPLkAJlNO lNCOML
$ $12.5M/¥k
lNCOML lkOM kLNJ
-
13.0M/¥k
lNJLkL8J PA¥MLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
($9.0M/¥k)
NLJ OPLkAJlNO LO88
One
LxompIe
HotIem's kivetton Apottments
wete deveIoped in 1944 os
ottotdobIe housing tot bIock
vetetons. In 2005, ovet 90°
ot kivetton's 1230 opottments
wete tent-teguIoted.
SpecuIotot lotty GIuck
bought kivetton in 2005~
the height ot the boom.
He Iotet teünonced tot on
osttonomicoI $250 miIIion.
Now, the deveIopment's
tentoI income con't even
covet the intetest poyments
on the Ioon!
1he buiIding is ovetIevetoged.
GIuck con't ßip the buiIding
in this motket.
Whot's going to hoppen?
2
P U k C H A S L k G L 1 S
8 U I l D I N G
1 o h e I p k e e p t h e b u i I d i n g o t t o t d -
o b I e , t h e p t e s e t v o t i o n p u t c h o s e t
g e t s o p t o p e t t y t o x o b o t e m e n t .
1 L N A N 1 S S 1 A ¥ I N
1 H L I k H O M L S
k i v e t t o n s t o y s o t t o t d o b I e !
k e d u c e
D e b t !
l n o r u o r t o s o v o o v o r l o v o r o g o u
b u l l u l n g s , t h o l r u o b t h o s t o b o
b r o u g h t l n l l n o w l t h t h o l r l n c o m o .
l o u o r o l r o s o u r c o s s h o u l u o n o b l o
b o n k s t o w r l t o u o w n o p o r t l o n o l
t h o u o b t ÷ b u t o n l y l o r s p o c u l o t o r s
w h o o g r o o t o n o w r o g u l o t l o n t h o t
w l l l k o o p t h o l r b u l l u l n g s o l l o r u o b l o .
. . . o n d
P t e s e t v e
w i t h
S h o t t S o I e s !
J h o g o v o r n m o n t s h o u l u o n c o u r o g o
s p o c u l o t o r s o n u b o n k s t o s o l l s h o r t
( l . o . , o t o l o s s ) t o º p r o s o r v o t l o n
p u r c h o s o r s º ÷ t o n o n t o n u g o v o r n m o n t
o p p r o v o u o w n o r s c o m m l t t o u t o
m o n o g l n g h o u s l n g l o r t h o l o n g t o r m .
G l U C k S L l l S S H O k 1
1 h e m o n e y t t o m t h e s o I e w o n ' t
c o v e t o I I h i s d e b t , b u t t h e b o n k
t o t g i v e s t h e t e m o i n d e t , o n d t h e
g o v e t n m e n t g i v e s G I u c k p o t t i o I
t o x t e I i e t . ( U s u o I I y , t o t g i v e n d e b t
i s t o x e d I i k e i n c o m e . )
8 A N k S G L 1 k L l I L I
1 o c o v e t p o t t o t t h e i t I o s s e s t t o m
t o t g i v i n g G I u c k ' s d e b t , t h e b o n k
g e t s o c c e s s t o t u n d s t t o m t h e
1 t o u b I e d A s s e t s k e I i e t P t o g t o m .
O v e t I e v e t o g e d b u i I d i n g s h o v e
m o t e d e b t t h o n t h e y c o n s u p p o t t .
S p e c u I o t o t s h o v e o n I y t h t e e o p t i o n s :
k A I S L k L N 1 S
1 o d o t h i s , t h e s p e c u I o t o t n e e d s
t o g e t t i d o t t h e t e n o n t s p t o t e c t e d
b y t e n t t e g u I o t i o n s . 1 h e o v e t o g e
t u t n o v e t t o t e t o t t e n t - t e g u I o t e d
o p o t t m e n t s i s 5 ° p e t y e o t . M o s t
s p e c u I o t o t s n e e d o m u c h h i g h e t
t o t e t o t u t n o p t o ü t , o n d t h e y ' I I
t o t c e t e n o n t s o u t t o g e t i t .
C U 1 S L k v I C L S
I t t h e s p e c u I o t o t c o n ' t t e p I o c e h i s
c u t t e n t t e n o n t s w i t h p e o p I e w h o
p o y m o t e t e n t , h e ' I I t t y t o c u t h i s
e x p e n s e s ~ p t o b o b I y b y m o k i n g
d t o s t i c t e d u c t i o n s i n m o i n t e n o n c e ,
t e p o i t s , o n d o t h e t s e t v i c e s .
I O k L C l O S U k L
I t t h e s p e c u I o t o t s t i I I c o n ' t m o k e
t h e b u i I d i n g b t e o k e v e n o t c o m e
c I o s e , t h e b o n k w i I I t o t e c I o s e . I o t e -
c I o s u t e i s o I e n g t h y o n d u n c e t t o i n
I e g o I p t o c e s s t h o t i s b o d t o t t h e
s p e c u I o t o t , b u t e v e n w o t s e t o t
t e n o n t s . 1 h e y d i d n o t h i n g w t o n g ~
b u t c o u I d s t i I I I o s e t h e i t h o m e s !
I n o I o o n m o d i ü c o t i o n , t h e b o n k
t e d u c e s d e b t t o t s p e c u I o t o t s w h o
o g t e e t o n e w t e g u I o t i o n .
A t k i v e t t o n , t h e g o p b e t w e e n i n c o m e o n d e x p e n s e s w o s s o g t e o t t h o t o
I o o n m o d i ü c o t i o n p t o b o b I y c o u I d n ' t h e I p . 8 u t t h e t e o t e o t h e t b u i I d i n g s
w h e t e t h i s c o u I d w o t k .
8 A N k S k L D U C L l O A N S
I n e x c h o n g e t o t o c c e s s t o t e d e t o I s u p p o t t , b o n k s s h o u I d w t i t e d o w n ( i . e . ,
t o t g i v e ) o p o t t i o n o t t h e u n s u p p o t t o b I e d e b t t h o t t h e s p e c u I o t o t s o w e .
S P L C U l A 1 O k S G L 1 k L - k L G U l A 1 L D
I n e x c h o n g e t o t t h i s w t i t e - d o w n , s p e c u I o t o t s w o u I d h o v e t o e n t e t
i n t o n e w t e g u I o t o t y o g t e e m e n t s t h o t e n s u t e t h e ü n o n c i o I o n d
p h y s i c o I i n t e g t i t y o t t h e b u i I d i n g s o s o t t o t d o b I e h o u s i n g .
I n o p t e s e t v o t i o n s h o t t s o I e , t h e
s p e c u I o t o t s e I I s t h e b u i I d i n g t o o
b u y e t w h o w i I I k e e p t h e b u i I d i n g
o t t o t d o b I e .
1 h e s p e c u I o t o t I o s e s m o n e y b u t o v o i d s t o t e c I o s u t e . 1 e n o n t s s t o y i n
t h e i t h o m e s . H e t e ' s h o w o p t e s e t v o t i o n s h o t t s o I e w o u I d w o t k o t
k i v e t t o n :
H o w C o n
W e S o v e
O v e t I e v e t o g e d
8 u i I d i n g s ?
P r o u o t o r y o q u l t y h o s p u t m o r o t h o n
ó b , 0 0 0 u n l t s o l N o w ¥ o r k C l t y ' s
o l l o r u o b l o h o u s l n g o t r l s k l l l n o t h l n g
l s u o n o , r o n t s w l l l g o u p , s o r v l c o s w l l l
g o u o w n , o n u b u l l u l n g s w l l l g o l n t o
l o r o c l o s u r o .
) & - 1
) & - 1
N ¥ C 8 U I l D I N G S A 1 k I S k
( D A 1 A P k O v I D L D 8 ¥ S U k v L ¥ I k O M P A k 1 N L k S H I P 1 O P k L S L k v L A I I O k D A 8 l L H O U S I N G , 2 0 0 9 )
43
H o w C o n
W e S t o p
P t e d o t o t y
L q u i t y i n
t h e I u t u t e ?
l n o r u o r t o p r o v o n t t h l s l r o m h o p p o n l n g
o g o l n , w o n o o u t o l o o k o t h o w t h l s
h o p p o n o u l n t h o h r s t p l o c o .
1 ) I N C O M L I k O M
k L N 1 : $ 1 2 . 5 M
2 ) O P L k A 1 I N G
C O S 1 S : $ 8 . 5 M
3 ) 1 U k N O v L k
k A 1 L : 5 °
4 ) A N N U A l D L 8 1
S L k v I C L : $ 1 3 M
S i n c e t h e t e ' s n o w o y t h i s
b u i I d i n g c o n s u p p o t t o
$ 2 5 0 m i I I i o n I o o n w i t h
$ 1 3 m i I I i o n i n o n n u o I
i n t e t e s t p o y m e n t s :
l O A N v L 1 O L D !
U n d e t w t i t i n g i s t h e p t o c e s s
t h o t b o n k s u s e t o d e c i d e
w h e t h e t o t n o t t o o p p t o v e o
I o o n . 8 o n k s u s u o I I y c h e c k t h e
v o I u e o t t h e u n d e t I y i n g o s s e t
o n d t h e b o t t o w e t ' s o b i I i t y
t o t e p o y . 8 o n k s g o t I o x d u t i n g
W i t h n e w u n d e t w t i t i n g s t o n d o t d s ,
b o n k s w i I I I o o n m o t e t e s p o n s i b I y .
W i t h b e t t e t u n d e t w t i t i n g s t o n d o t d s ,
w h o t w o u I d h o v e h o p p e n e d o t
k i v e t t o n ? G I u c k w o u I d h o v e o s k e d
t o t o $ 2 5 0 m i I I i o n I o o n . 1 h e b o n k
w o u I d h o v e I o o k e d o t :
t h e b o o m , e s p e c i o I I y w i t h h i g h -
p t o ü I e s p e c u I o t o t s b o c k e d b y
p t i v o t e e q u i t y . 1 o p t e v e n t t h i s t t o m
h o p p e n i n g o g o i n , p t o p o s e d s o I e s
o t m u I t i t o m i I y o t t o t d o b I e h o u s i n g
s h o u I d b e t e v i e w e d w i t h n e w
u n d e t w t i t i n g s t o n d o t d s .
A c t u o I
I n c o m e
I t o m
k e n t s
A c t u o I
O p e t o t i n g
L x p e n s e s
A c t u o I 1 u t n o v e t k o t e s
1 H L S I 2 L O I A l O A N
S H O U l D 8 L l I M I 1 L D 8 ¥ :
u u r l n g t h o b o o m , b o n k s o s s u m o u t h o t
h o u s l n g p r l c o s w o u l u g o u p , o n u t h o t
s p o c u l o t o r s c o u l u o l w o y s b u y l o w o n u
s o l l h l g h . J h o y l o o n o u m o n o y t o s p o c u l o
t o r s w l t h o u t r o o l l y l o o k l n g l n t o b o s l c u o t o
W h y d i d b o n k s I e n d m o n e y t o s p e c u I o t o t s ?
l l k o r o n t o l l n c o m o , o p o r o t l n g o x p o n s o s ,
o n u t u r n o v o r r o t o s . 8 o n k s o l s o t h o u g h t
t h o y c o u l u s h o u t h o r l s k l r o m b o u l o o n s
t h r o u g h h n o n c l o l t o o l s l l k o m o r t g o g o
b o c k o u s o c u r l t l o s .
P o o p l o t h o u g h t m o r t g o g o b o c k o u s o c u r l t l o s w o r o s o l o ÷ b o c o u s o t h o r o ' s n o w o y
o b u n c h o l b o r r o w o r s w o u l u u o l o u l t o t t h o s o m o t l m o , r l g h t ` W k O N O l
I S S U L
A b o n k i s s u e s o m o t t g o g e t o o
b o t t o w e t . A m o t t g o g e i s t e o I I y
j u s t o t i g h t t o t e c e i v e o s t t e o m o t
p o y m e n t s t t o m o b o t t o w e t .
S L l l
1 h e i s s u i n g b o n k s e I I s t h e m o t t -
g o g e t o o n i n v e s t m e n t b o n k .
1 h o t w o y , i s s u i n g b o n k s d o n ' t
h o v e t o w o i t t o t m o n t h I y p o y -
m e n t s t o m o k e t h e i t m o n e y b o c k ,
o n d t h e y d o n ' t b e o t t h e t i s k o t
d e t o u I t .
8 U N D l L
1 h e i n v e s t m e n t b o n k b u n d I e s o
b u n c h o t m o t t g o g e s t o g e t h e t .
8 u n d I i n g m o t t g o g e s d i v e t s i ü e s
t h e t i s k o t d e t o u I t . L v e n i t o t e w
b o t t o w e t s d e t o u I t , t h e b u n d I e i s
s t i I I w o t t h m o n e y .
S l I C L
1 h e i n v e s t m e n t b o n k s e I I s s I i c e s
o t t h e b u n d I e t o i n v e s t o t s . 1 h e s e
s I i c e s o t e m o t t g o g e - b o c k e d
s e c u t i t i e s . I n v e s t o t s o t e b u y i n g
t h e t i g h t s t o o t t o c t i o n o t
t h e p o y m e n t s t t o m o b u n c h
o t m o t t g o g e s .
H O W D O M O k 1 G A G L - 8 A C k L D S L C U k I 1 I L S W O k k ?
J h o b o s t w o y t o s t o p p r o u o t o r y
o q u l t y l s t o r o s t r l c t l t s m o l n s o u r c o
o l l u n u l n g : b o n k s w l l l l n g t o m o k o
s p o c u l o t l v o l o o n s . k o m o m b o r ÷
o l g h t y p o r c o n t o l t h o l u n u l n g l o r
t h o s o u o o l s c o m o l r o m b o n k s l
l n t h o o l t o r m o t h o l t h o h n o n c l o l
c r l s l s , o l m o s t o v o r y o n o o g r o o s t h o t
b o n k s n o o u c l o s o r o v o r s l g h t .
l l t h o l n c o m o l r o m o b u l l u l n g c o n ' t
c o v o r o p o r o t l n g o x p o n s o s o n u
p o y o l l t h o l o o n , r o g u l o t o r s s h o u l u
h o v o t h o u l s c r o t l o n t o v o t o t h o l o o n .
J h l s w l l l u r y u p c o p l t o l l o r p r o u o t o r y
o q u l t y s p o c u l o t o r s o n u c l o o r t h o
w o y l o r r o s p o n s l b l o , l o n g t o r m o w n o r s .
k e g u I o t e t h e 8 o n k s !
ó
Whot Is
1his About?
Ptedototy equity.
keoI-estote specuIotots spent
exotbitont sums to buy up
ottotdobIe housing oII ovet
N¥C. Now the buiIdings they
bought ote ot tisk ot detouIt.
1ens ot thousonds ot tomiIies
stond to Iose theit homes,
ond N¥C stonds to Iose tens
ot thousonds ot ottotdobIe
opottments. 1his postet
expIoins the ptobIem ond
how to üx it.
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MAkING POlIC¥ PU8lIC is
o ptogtom ot the Centet tot Utbon
Pedogogy (CUP) thot poits poIicy
odvocotes ond gtophic designets
to ptoduce toId-out postets Iike
this one. CUP chooses ptogtom
potticiponts thtough o juty ptocess
ond tociIitotes theit coIIobototion.
www.mokingpoIicypubIic.net
COllA8OkA1OkS
Amy Chon (1enonts ond Neighbots),
GIen Cummings (M1W1I), Dino levy
(UHA8), John Mongin (CUP), ond
kosten Woo (CUP)
1HL CLN1Lk IOk Uk8AN
PLDAGOG¥ (CUP) ptoduces
cteotive educotion obout pIoces
ond how they chonge.
www.onothetcupdeveIopment.otg
1LNAN1S AND NLIGH8OkS
is the Iotgest tenonts' tights otgo-
nizotion in New ¥otk Stote, with
15,000 membets. Iot mote thon
30 yeots, thtough gtosstoots otgo-
nizing, 1&N hos totged o powettuI
movement in the üght to ptesetve
ottotdobIe housing, sttengthen
tenont ptotections, ond sustoin
divetse ond IivobIe communities.
www.tondn.otg
UHA8 is o nonptoüt otgonizotion
thot heIps Iow-income tenonts
conttoI theit housing thtough
the cteotion ot Iimited-equity
coopetotives.UHA8 oIso heIps
tenonts ptesetve existing ottotd-
obIe housing by empoweting them
to moke ptooctive decisions
obout the tutute ot theit homes.
www.uhob.otg
1&N ond UHA8 ote pott ot the
Pottnetship to Ptesetve AttotdobIe
Housing.
M1W1I is o gtophic design studio
specioIizing in pubIicotions,
envitonmentoI gtophics, ond identity
systems. M1W1I engoges in
coIIobototive ptojects with pottnets
in othet discipIines, such os
otchitectute, industtioI design, ond
utbon pIonning. www.mtwtt.otg
1HANkS 1O: PouIo Ctespo
(Ptott Centet tot Community
DeveIopment), Don DeSIoovet,
Som Stotk, voIetio MogiIevich,
ond 1om Wotets.
Suppott tot this ptoject wos ptovided
by the New ¥otk Stote CounciI on
the Atts (N¥SCA) ond the New ¥otk
Depottment ot CuItutoI Attoits.
© 2009
Ptedototy
Lquity
1HL
SUkvIvAl
GUIDL
SP¥
Duting the housing boom,
specuIotots Iooked tot buiIdings
thot they couId buy ond teseII
ot o ptoüt.
1hey totgeted buiIdings coveted
by govetnment ptogtoms thot
keep tents ottotdobIe. 1hen they
ttied to moximize theit ptoüts by
pushing out tent-teguIoted tenonts
ond toising tents ot by seIIing the
buiIdings to othet specuIotots.
8U¥
8ut otten the specuIotots didn't
hove oII the money (ot even ony
ot the money) to buy o buiIding.
How did they get the cosh?
Iitst, o specuIotot toised money
ttom ptivote investots by ptomising
o high tote ot tetutn in o shott
petiod ot time.
1hen the specuIotot used this
bose money to get o much
Iotget omount ttom o bonk.
1he stondotd totmuIo wos 20°
cosh ttom ptivote investots
ond 80° Ioon ttom o bonk.

SpecuIotots wete wiIIing to poy
huge ptices tot buiIdings becouse
they thought the voIue ot the
buiIdings couId onIy go up. 8onks
wete wiIIing to moke huge Ioons
becouse they thought they couId
shed the tisk ot bod Ioons. (Mote
on thot Iotet!)
Whot Is
Ptedototy
Lquity?
It's when specuIotots ovetpoy
tot ottotdobIe housing with
bottowed money, convett it
to housing tot tich peopIe,
ond ßip it to new buyets tot
o quick ptoüt.
It specuIotots succeed,
tenonts Iose theit homes,
ond New ¥otk City Ioses
ottotdobIe housing.
It specuIotots toiI ond con't
poy theit mottgoges, the
buiIdings go into totecIosute.
1enonts Iose theit homes ond
New ¥otk Ioses ottotdobIe
housing onywoy.
Nobody wins.
CONvLk1
Now the specuIotot hos to moke
some big chonges in otdet
to moke the buiIdings genetote
enough income to covet the
new debt.
1he specuIotot totces existing
tenonts out by ony meons
necessoty~hotossment, phony
eviction ptoceedings, cutbocks
in setvices...
1hen the specuIotot tties to get out
ot ottotdobIe housing ptogtoms
ond "tenovoteº newIy vocont
opottments to temove them ttom
N¥C's tent teguIotion Iows.
1he specuIotot convetts the
buiIding into condos ot tents
opottments to weoIthiet tenonts
tot mote money.
IlIP
1he specuIotot moy tty to seII
the buiIding to onothet specuIotot
tot o ptoüt.
8ut OOPS! IinoncioI ctisis.
Nobody wonts to buy on
ovetpticed buiIding onymote.
8ecouse ptedototy equity
specuIotots poid too much tot
buiIdings in the ütst pIoce,
they hove huge Ioons thot they
con't poy ott. 1he buiIdings ote
ovetIevetoged. Whot now?
1
Whot do
kivetton's
ünonces
Iook Iike
ottet
ptedototy
equity?
kivetton wos teünonced in 200ó
tot $250 miIIion in bottowed
money. 1hot's toughIy tout to
six times its voIue. 1he onnuoI
intetest on thot Ioon is obout
$13 miIIion. let's see how thot
odds up:
1he onnuoI intetest on the Ioon
is now mote thon kivetton's
gtoss income. And thete's
stiII $8.5 miIIion pet yeot in
opetoting costs.
1hot's o $9 miIIion lOSS
pet yeot.
Uh-oh.
1hete's no woy this buiIding
is soIvent unIess something
chonges.
Whot
wos
kivetton
wotth
betote
ptedototy
equity?
Iot tesponsibIe Iong-tetm
ownets, o buiIding is wotth
otound ten to ütteen times the
income it con net in o yeot.
let's bteok it down using
kivetton os on exompIe:
8y this coIcuIotion, kivetton
hod o net opetoting income ot
$4 miIIion. MuItipIy thot by ten
to ütteen, ond you get o voIue
ot $40-ó0 miIIion.
At thot ptice, the ownet couId
covet opetoting costs ond poy
ott the Ioon whiIe keeping the
buiIding ottotdobIe.
12.5M/¥k
lNCOML lkOM kLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
$4.0M/¥k
NLJ OPLkAJlNO lNCOML
$ $12.5M/¥k
lNCOML lkOM kLNJ
-
13.0M/¥k
lNJLkL8J PA¥MLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
($9.0M/¥k)
NLJ OPLkAJlNO LO88
One
LxompIe
HotIem's kivetton Apottments
wete deveIoped in 1944 os
ottotdobIe housing tot bIock
vetetons. In 2005, ovet 90°
ot kivetton's 1230 opottments
wete tent-teguIoted.
SpecuIotot lotty GIuck
bought kivetton in 2005~
the height ot the boom.
He Iotet teünonced tot on
osttonomicoI $250 miIIion.
Now, the deveIopment's
tentoI income con't even
covet the intetest poyments
on the Ioon!
1he buiIding is ovetIevetoged.
GIuck con't ßip the buiIding
in this motket.
Whot's going to hoppen?
2
P U k C H A S L k G L 1 S
8 U I l D I N G
1 o h e I p k e e p t h e b u i I d i n g o t t o t d -
o b I e , t h e p t e s e t v o t i o n p u t c h o s e t
g e t s o p t o p e t t y t o x o b o t e m e n t .
1 L N A N 1 S S 1 A ¥ I N
1 H L I k H O M L S
k i v e t t o n s t o y s o t t o t d o b I e !
k e d u c e
D e b t !
l n o r u o r t o s o v o o v o r l o v o r o g o u
b u l l u l n g s , t h o l r u o b t h o s t o b o
b r o u g h t l n l l n o w l t h t h o l r l n c o m o .
l o u o r o l r o s o u r c o s s h o u l u o n o b l o
b o n k s t o w r l t o u o w n o p o r t l o n o l
t h o u o b t ÷ b u t o n l y l o r s p o c u l o t o r s
w h o o g r o o t o n o w r o g u l o t l o n t h o t
w l l l k o o p t h o l r b u l l u l n g s o l l o r u o b l o .
. . . o n d
P t e s e t v e
w i t h
S h o t t S o I e s !
J h o g o v o r n m o n t s h o u l u o n c o u r o g o
s p o c u l o t o r s o n u b o n k s t o s o l l s h o r t
( l . o . , o t o l o s s ) t o º p r o s o r v o t l o n
p u r c h o s o r s º ÷ t o n o n t o n u g o v o r n m o n t
o p p r o v o u o w n o r s c o m m l t t o u t o
m o n o g l n g h o u s l n g l o r t h o l o n g t o r m .
G l U C k S L l l S S H O k 1
1 h e m o n e y t t o m t h e s o I e w o n ' t
c o v e t o I I h i s d e b t , b u t t h e b o n k
t o t g i v e s t h e t e m o i n d e t , o n d t h e
g o v e t n m e n t g i v e s G I u c k p o t t i o I
t o x t e I i e t . ( U s u o I I y , t o t g i v e n d e b t
i s t o x e d I i k e i n c o m e . )
8 A N k S G L 1 k L l I L I
1 o c o v e t p o t t o t t h e i t I o s s e s t t o m
t o t g i v i n g G I u c k ' s d e b t , t h e b o n k
g e t s o c c e s s t o t u n d s t t o m t h e
1 t o u b I e d A s s e t s k e I i e t P t o g t o m .
O v e t I e v e t o g e d b u i I d i n g s h o v e
m o t e d e b t t h o n t h e y c o n s u p p o t t .
S p e c u I o t o t s h o v e o n I y t h t e e o p t i o n s :
k A I S L k L N 1 S
1 o d o t h i s , t h e s p e c u I o t o t n e e d s
t o g e t t i d o t t h e t e n o n t s p t o t e c t e d
b y t e n t t e g u I o t i o n s . 1 h e o v e t o g e
t u t n o v e t t o t e t o t t e n t - t e g u I o t e d
o p o t t m e n t s i s 5 ° p e t y e o t . M o s t
s p e c u I o t o t s n e e d o m u c h h i g h e t
t o t e t o t u t n o p t o ü t , o n d t h e y ' I I
t o t c e t e n o n t s o u t t o g e t i t .
C U 1 S L k v I C L S
I t t h e s p e c u I o t o t c o n ' t t e p I o c e h i s
c u t t e n t t e n o n t s w i t h p e o p I e w h o
p o y m o t e t e n t , h e ' I I t t y t o c u t h i s
e x p e n s e s ~ p t o b o b I y b y m o k i n g
d t o s t i c t e d u c t i o n s i n m o i n t e n o n c e ,
t e p o i t s , o n d o t h e t s e t v i c e s .
I O k L C l O S U k L
I t t h e s p e c u I o t o t s t i I I c o n ' t m o k e
t h e b u i I d i n g b t e o k e v e n o t c o m e
c I o s e , t h e b o n k w i I I t o t e c I o s e . I o t e -
c I o s u t e i s o I e n g t h y o n d u n c e t t o i n
I e g o I p t o c e s s t h o t i s b o d t o t t h e
s p e c u I o t o t , b u t e v e n w o t s e t o t
t e n o n t s . 1 h e y d i d n o t h i n g w t o n g ~
b u t c o u I d s t i I I I o s e t h e i t h o m e s !
I n o I o o n m o d i ü c o t i o n , t h e b o n k
t e d u c e s d e b t t o t s p e c u I o t o t s w h o
o g t e e t o n e w t e g u I o t i o n .
A t k i v e t t o n , t h e g o p b e t w e e n i n c o m e o n d e x p e n s e s w o s s o g t e o t t h o t o
I o o n m o d i ü c o t i o n p t o b o b I y c o u I d n ' t h e I p . 8 u t t h e t e o t e o t h e t b u i I d i n g s
w h e t e t h i s c o u I d w o t k .
8 A N k S k L D U C L l O A N S
I n e x c h o n g e t o t o c c e s s t o t e d e t o I s u p p o t t , b o n k s s h o u I d w t i t e d o w n ( i . e . ,
t o t g i v e ) o p o t t i o n o t t h e u n s u p p o t t o b I e d e b t t h o t t h e s p e c u I o t o t s o w e .
S P L C U l A 1 O k S G L 1 k L - k L G U l A 1 L D
I n e x c h o n g e t o t t h i s w t i t e - d o w n , s p e c u I o t o t s w o u I d h o v e t o e n t e t
i n t o n e w t e g u I o t o t y o g t e e m e n t s t h o t e n s u t e t h e ü n o n c i o I o n d
p h y s i c o I i n t e g t i t y o t t h e b u i I d i n g s o s o t t o t d o b I e h o u s i n g .
I n o p t e s e t v o t i o n s h o t t s o I e , t h e
s p e c u I o t o t s e I I s t h e b u i I d i n g t o o
b u y e t w h o w i I I k e e p t h e b u i I d i n g
o t t o t d o b I e .
1 h e s p e c u I o t o t I o s e s m o n e y b u t o v o i d s t o t e c I o s u t e . 1 e n o n t s s t o y i n
t h e i t h o m e s . H e t e ' s h o w o p t e s e t v o t i o n s h o t t s o I e w o u I d w o t k o t
k i v e t t o n :
H o w C o n
W e S o v e
O v e t I e v e t o g e d
8 u i I d i n g s ?
P r o u o t o r y o q u l t y h o s p u t m o r o t h o n
ó b , 0 0 0 u n l t s o l N o w ¥ o r k C l t y ' s
o l l o r u o b l o h o u s l n g o t r l s k l l l n o t h l n g
l s u o n o , r o n t s w l l l g o u p , s o r v l c o s w l l l
g o u o w n , o n u b u l l u l n g s w l l l g o l n t o
l o r o c l o s u r o .
) & - 1
) & - 1
N ¥ C 8 U I l D I N G S A 1 k I S k
( D A 1 A P k O v I D L D 8 ¥ S U k v L ¥ I k O M P A k 1 N L k S H I P 1 O P k L S L k v L A I I O k D A 8 l L H O U S I N G , 2 0 0 9 )
43
H o w C o n
W e S t o p
P t e d o t o t y
L q u i t y i n
t h e I u t u t e ?
l n o r u o r t o p r o v o n t t h l s l r o m h o p p o n l n g
o g o l n , w o n o o u t o l o o k o t h o w t h l s
h o p p o n o u l n t h o h r s t p l o c o .
1 ) I N C O M L I k O M
k L N 1 : $ 1 2 . 5 M
2 ) O P L k A 1 I N G
C O S 1 S : $ 8 . 5 M
3 ) 1 U k N O v L k
k A 1 L : 5 °
4 ) A N N U A l D L 8 1
S L k v I C L : $ 1 3 M
S i n c e t h e t e ' s n o w o y t h i s
b u i I d i n g c o n s u p p o t t o
$ 2 5 0 m i I I i o n I o o n w i t h
$ 1 3 m i I I i o n i n o n n u o I
i n t e t e s t p o y m e n t s :
l O A N v L 1 O L D !
U n d e t w t i t i n g i s t h e p t o c e s s
t h o t b o n k s u s e t o d e c i d e
w h e t h e t o t n o t t o o p p t o v e o
I o o n . 8 o n k s u s u o I I y c h e c k t h e
v o I u e o t t h e u n d e t I y i n g o s s e t
o n d t h e b o t t o w e t ' s o b i I i t y
t o t e p o y . 8 o n k s g o t I o x d u t i n g
W i t h n e w u n d e t w t i t i n g s t o n d o t d s ,
b o n k s w i I I I o o n m o t e t e s p o n s i b I y .
W i t h b e t t e t u n d e t w t i t i n g s t o n d o t d s ,
w h o t w o u I d h o v e h o p p e n e d o t
k i v e t t o n ? G I u c k w o u I d h o v e o s k e d
t o t o $ 2 5 0 m i I I i o n I o o n . 1 h e b o n k
w o u I d h o v e I o o k e d o t :
t h e b o o m , e s p e c i o I I y w i t h h i g h -
p t o ü I e s p e c u I o t o t s b o c k e d b y
p t i v o t e e q u i t y . 1 o p t e v e n t t h i s t t o m
h o p p e n i n g o g o i n , p t o p o s e d s o I e s
o t m u I t i t o m i I y o t t o t d o b I e h o u s i n g
s h o u I d b e t e v i e w e d w i t h n e w
u n d e t w t i t i n g s t o n d o t d s .
A c t u o I
I n c o m e
I t o m
k e n t s
A c t u o I
O p e t o t i n g
L x p e n s e s
A c t u o I 1 u t n o v e t k o t e s
1 H L S I 2 L O I A l O A N
S H O U l D 8 L l I M I 1 L D 8 ¥ :
u u r l n g t h o b o o m , b o n k s o s s u m o u t h o t
h o u s l n g p r l c o s w o u l u g o u p , o n u t h o t
s p o c u l o t o r s c o u l u o l w o y s b u y l o w o n u
s o l l h l g h . J h o y l o o n o u m o n o y t o s p o c u l o
t o r s w l t h o u t r o o l l y l o o k l n g l n t o b o s l c u o t o
W h y d i d b o n k s I e n d m o n e y t o s p e c u I o t o t s ?
l l k o r o n t o l l n c o m o , o p o r o t l n g o x p o n s o s ,
o n u t u r n o v o r r o t o s . 8 o n k s o l s o t h o u g h t
t h o y c o u l u s h o u t h o r l s k l r o m b o u l o o n s
t h r o u g h h n o n c l o l t o o l s l l k o m o r t g o g o
b o c k o u s o c u r l t l o s .
P o o p l o t h o u g h t m o r t g o g o b o c k o u s o c u r l t l o s w o r o s o l o ÷ b o c o u s o t h o r o ' s n o w o y
o b u n c h o l b o r r o w o r s w o u l u u o l o u l t o t t h o s o m o t l m o , r l g h t ` W k O N O l
I S S U L
A b o n k i s s u e s o m o t t g o g e t o o
b o t t o w e t . A m o t t g o g e i s t e o I I y
j u s t o t i g h t t o t e c e i v e o s t t e o m o t
p o y m e n t s t t o m o b o t t o w e t .
S L l l
1 h e i s s u i n g b o n k s e I I s t h e m o t t -
g o g e t o o n i n v e s t m e n t b o n k .
1 h o t w o y , i s s u i n g b o n k s d o n ' t
h o v e t o w o i t t o t m o n t h I y p o y -
m e n t s t o m o k e t h e i t m o n e y b o c k ,
o n d t h e y d o n ' t b e o t t h e t i s k o t
d e t o u I t .
8 U N D l L
1 h e i n v e s t m e n t b o n k b u n d I e s o
b u n c h o t m o t t g o g e s t o g e t h e t .
8 u n d I i n g m o t t g o g e s d i v e t s i ü e s
t h e t i s k o t d e t o u I t . L v e n i t o t e w
b o t t o w e t s d e t o u I t , t h e b u n d I e i s
s t i I I w o t t h m o n e y .
S l I C L
1 h e i n v e s t m e n t b o n k s e I I s s I i c e s
o t t h e b u n d I e t o i n v e s t o t s . 1 h e s e
s I i c e s o t e m o t t g o g e - b o c k e d
s e c u t i t i e s . I n v e s t o t s o t e b u y i n g
t h e t i g h t s t o o t t o c t i o n o t
t h e p o y m e n t s t t o m o b u n c h
o t m o t t g o g e s .
H O W D O M O k 1 G A G L - 8 A C k L D S L C U k I 1 I L S W O k k ?
J h o b o s t w o y t o s t o p p r o u o t o r y
o q u l t y l s t o r o s t r l c t l t s m o l n s o u r c o
o l l u n u l n g : b o n k s w l l l l n g t o m o k o
s p o c u l o t l v o l o o n s . k o m o m b o r ÷
o l g h t y p o r c o n t o l t h o l u n u l n g l o r
t h o s o u o o l s c o m o l r o m b o n k s l
l n t h o o l t o r m o t h o l t h o h n o n c l o l
c r l s l s , o l m o s t o v o r y o n o o g r o o s t h o t
b o n k s n o o u c l o s o r o v o r s l g h t .
l l t h o l n c o m o l r o m o b u l l u l n g c o n ' t
c o v o r o p o r o t l n g o x p o n s o s o n u
p o y o l l t h o l o o n , r o g u l o t o r s s h o u l u
h o v o t h o u l s c r o t l o n t o v o t o t h o l o o n .
J h l s w l l l u r y u p c o p l t o l l o r p r o u o t o r y
o q u l t y s p o c u l o t o r s o n u c l o o r t h o
w o y l o r r o s p o n s l b l o , l o n g t o r m o w n o r s .
k e g u I o t e t h e 8 o n k s !
ó
W h o t I s
1 h i s A b o u t ?
P t e d o t o t y e q u i t y .
k e o I - e s t o t e s p e c u I o t o t s s p e n t
e x o t b i t o n t s u m s t o b u y u p
o t t o t d o b I e h o u s i n g o I I o v e t
N ¥ C . N o w t h e b u i I d i n g s t h e y
b o u g h t o t e o t t i s k o t d e t o u I t .
1 e n s o t t h o u s o n d s o t t o m i I i e s
s t o n d t o I o s e t h e i t h o m e s ,
o n d N ¥ C s t o n d s t o I o s e t e n s
o t t h o u s o n d s o t o t t o t d o b I e
o p o t t m e n t s . 1 h i s p o s t e t
e x p I o i n s t h e p t o b I e m o n d
h o w t o ü x i t .
4 " 7 &
0 6 3 ) 0 . & 4
8 & % & . " / %
5 3 " / 4 1 " 3 & / $ :
& M F D U F E 0 G G J D J B M T
) P V T J O H & Y Q F S U T
" E W P D B U F T
. F N C F S T P G
U I F . F E J B
5 F O B O U T
4 5 " :
0 3 ( " / * ; & %
) 0 6 4 * / (
' 0 3 1 & 0 1 - &
/ 0 5 1 3 0 ' * 5
' 0 - - 0 8
5 ) & . 0 / & :
M A k I N G P O l I C ¥ P U 8 l I C i s
o p t o g t o m o t t h e C e n t e t t o t U t b o n
P e d o g o g y ( C U P ) t h o t p o i t s p o I i c y
o d v o c o t e s o n d g t o p h i c d e s i g n e t s
t o p t o d u c e t o I d - o u t p o s t e t s I i k e
t h i s o n e . C U P c h o o s e s p t o g t o m
p o t t i c i p o n t s t h t o u g h o j u t y p t o c e s s
o n d t o c i I i t o t e s t h e i t c o I I o b o t o t i o n .
w w w . m o k i n g p o I i c y p u b I i c . n e t
C O l l A 8 O k A 1 O k S
A m y C h o n ( 1 e n o n t s o n d N e i g h b o t s ) ,
G I e n C u m m i n g s ( M 1 W 1 I ) , D i n o l e v y
( U H A 8 ) , J o h n M o n g i n ( C U P ) , o n d
k o s t e n W o o ( C U P )
1 H L C L N 1 L k I O k U k 8 A N
P L D A G O G ¥ ( C U P ) p t o d u c e s
c t e o t i v e e d u c o t i o n o b o u t p I o c e s
o n d h o w t h e y c h o n g e .
w w w . o n o t h e t c u p d e v e I o p m e n t . o t g
1 L N A N 1 S A N D N L I G H 8 O k S
i s t h e I o t g e s t t e n o n t s ' t i g h t s o t g o -
n i z o t i o n i n N e w ¥ o t k S t o t e , w i t h
1 5 , 0 0 0 m e m b e t s . I o t m o t e t h o n
3 0 y e o t s , t h t o u g h g t o s s t o o t s o t g o -
n i z i n g , 1 & N h o s t o t g e d o p o w e t t u I
m o v e m e n t i n t h e ü g h t t o p t e s e t v e
o t t o t d o b I e h o u s i n g , s t t e n g t h e n
t e n o n t p t o t e c t i o n s , o n d s u s t o i n
d i v e t s e o n d I i v o b I e c o m m u n i t i e s .
w w w . t o n d n . o t g
U H A 8 i s o n o n p t o ü t o t g o n i z o t i o n
t h o t h e I p s I o w - i n c o m e t e n o n t s
c o n t t o I t h e i t h o u s i n g t h t o u g h
t h e c t e o t i o n o t I i m i t e d - e q u i t y
c o o p e t o t i v e s . U H A 8 o I s o h e I p s
t e n o n t s p t e s e t v e e x i s t i n g o t t o t d -
o b I e h o u s i n g b y e m p o w e t i n g t h e m
t o m o k e p t o o c t i v e d e c i s i o n s
o b o u t t h e t u t u t e o t t h e i t h o m e s .
w w w . u h o b . o t g
1 & N o n d U H A 8 o t e p o t t o t t h e
P o t t n e t s h i p t o P t e s e t v e A t t o t d o b I e
H o u s i n g .
M 1 W 1 I i s o g t o p h i c d e s i g n s t u d i o
s p e c i o I i z i n g i n p u b I i c o t i o n s ,
e n v i t o n m e n t o I g t o p h i c s , o n d i d e n t i t y
s y s t e m s . M 1 W 1 I e n g o g e s i n
c o I I o b o t o t i v e p t o j e c t s w i t h p o t t n e t s
i n o t h e t d i s c i p I i n e s , s u c h o s
o t c h i t e c t u t e , i n d u s t t i o I d e s i g n , o n d
u t b o n p I o n n i n g . w w w . m t w t t . o t g
1 H A N k S 1 O : P o u I o C t e s p o
( P t o t t C e n t e t t o t C o m m u n i t y
D e v e I o p m e n t ) , D o n D e S I o o v e t ,
S o m S t o t k , v o I e t i o M o g i I e v i c h ,
o n d 1 o m W o t e t s .
S u p p o t t t o t t h i s p t o j e c t w o s p t o v i d e d
b y t h e N e w ¥ o t k S t o t e C o u n c i I o n
t h e A t t s ( N ¥ S C A ) o n d t h e N e w ¥ o t k
D e p o t t m e n t o t C u I t u t o I A t t o i t s .
© 2 0 0 9
P t e d o t o t y
L q u i t y
1 H L
S U k v I v A l
G U I D L
S P ¥
D u t i n g t h e h o u s i n g b o o m ,
s p e c u I o t o t s I o o k e d t o t b u i I d i n g s
t h o t t h e y c o u I d b u y o n d t e s e I I
o t o p t o ü t .
1 h e y t o t g e t e d b u i I d i n g s c o v e t e d
b y g o v e t n m e n t p t o g t o m s t h o t
k e e p t e n t s o t t o t d o b I e . 1 h e n t h e y
t t i e d t o m o x i m i z e t h e i t p t o ü t s b y
p u s h i n g o u t t e n t - t e g u I o t e d t e n o n t s
o n d t o i s i n g t e n t s o t b y s e I I i n g t h e
b u i I d i n g s t o o t h e t s p e c u I o t o t s .
8 U ¥
8 u t o t t e n t h e s p e c u I o t o t s d i d n ' t
h o v e o I I t h e m o n e y ( o t e v e n o n y
o t t h e m o n e y ) t o b u y o b u i I d i n g .
H o w d i d t h e y g e t t h e c o s h ?
I i t s t , o s p e c u I o t o t t o i s e d m o n e y
t t o m p t i v o t e i n v e s t o t s b y p t o m i s i n g
o h i g h t o t e o t t e t u t n i n o s h o t t
p e t i o d o t t i m e .
1 h e n t h e s p e c u I o t o t u s e d t h i s
b o s e m o n e y t o g e t o m u c h
I o t g e t o m o u n t t t o m o b o n k .
1 h e s t o n d o t d t o t m u I o w o s 2 0 °
c o s h t t o m p t i v o t e i n v e s t o t s
o n d 8 0 ° I o o n t t o m o b o n k .

S p e c u I o t o t s w e t e w i I I i n g t o p o y
h u g e p t i c e s t o t b u i I d i n g s b e c o u s e
t h e y t h o u g h t t h e v o I u e o t t h e
b u i I d i n g s c o u I d o n I y g o u p . 8 o n k s
w e t e w i I I i n g t o m o k e h u g e I o o n s
b e c o u s e t h e y t h o u g h t t h e y c o u I d
s h e d t h e t i s k o t b o d I o o n s . ( M o t e
o n t h o t I o t e t ! )
W h o t I s
P t e d o t o t y
L q u i t y ?
I t ' s w h e n s p e c u I o t o t s o v e t p o y
t o t o t t o t d o b I e h o u s i n g w i t h
b o t t o w e d m o n e y , c o n v e t t i t
t o h o u s i n g t o t t i c h p e o p I e ,
o n d ß i p i t t o n e w b u y e t s t o t
o q u i c k p t o ü t .
I t s p e c u I o t o t s s u c c e e d ,
t e n o n t s I o s e t h e i t h o m e s ,
o n d N e w ¥ o t k C i t y I o s e s
o t t o t d o b I e h o u s i n g .
I t s p e c u I o t o t s t o i I o n d c o n ' t
p o y t h e i t m o t t g o g e s , t h e
b u i I d i n g s g o i n t o t o t e c I o s u t e .
1 e n o n t s I o s e t h e i t h o m e s o n d
N e w ¥ o t k I o s e s o t t o t d o b I e
h o u s i n g o n y w o y .
N o b o d y w i n s .
C O N v L k 1
N o w t h e s p e c u I o t o t h o s t o m o k e
s o m e b i g c h o n g e s i n o t d e t
t o m o k e t h e b u i I d i n g s g e n e t o t e
e n o u g h i n c o m e t o c o v e t t h e
n e w d e b t .
1 h e s p e c u I o t o t t o t c e s e x i s t i n g
t e n o n t s o u t b y o n y m e o n s
n e c e s s o t y ~ h o t o s s m e n t , p h o n y
e v i c t i o n p t o c e e d i n g s , c u t b o c k s
i n s e t v i c e s . . .
1 h e n t h e s p e c u I o t o t t t i e s t o g e t o u t
o t o t t o t d o b I e h o u s i n g p t o g t o m s
o n d " t e n o v o t e º n e w I y v o c o n t
o p o t t m e n t s t o t e m o v e t h e m t t o m
N ¥ C ' s t e n t t e g u I o t i o n I o w s .
1 h e s p e c u I o t o t c o n v e t t s t h e
b u i I d i n g i n t o c o n d o s o t t e n t s
o p o t t m e n t s t o w e o I t h i e t t e n o n t s
t o t m o t e m o n e y .
I l I P
1 h e s p e c u I o t o t m o y t t y t o s e I I
t h e b u i I d i n g t o o n o t h e t s p e c u I o t o t
t o t o p t o ü t .
8 u t O O P S ! I i n o n c i o I c t i s i s .
N o b o d y w o n t s t o b u y o n
o v e t p t i c e d b u i I d i n g o n y m o t e .
8 e c o u s e p t e d o t o t y e q u i t y
s p e c u I o t o t s p o i d t o o m u c h t o t
b u i I d i n g s i n t h e ü t s t p I o c e ,
t h e y h o v e h u g e I o o n s t h o t t h e y
c o n ' t p o y o t t . 1 h e b u i I d i n g s o t e
o v e t I e v e t o g e d . W h o t n o w ?
1
W h o t d o
k i v e t t o n ' s
ü n o n c e s
I o o k I i k e
o t t e t
p t e d o t o t y
e q u i t y ?
k i v e t t o n w o s t e ü n o n c e d i n 2 0 0 ó
t o t $ 2 5 0 m i I I i o n i n b o t t o w e d
m o n e y . 1 h o t ' s t o u g h I y t o u t t o
s i x t i m e s i t s v o I u e . 1 h e o n n u o I
i n t e t e s t o n t h o t I o o n i s o b o u t
$ 1 3 m i I I i o n . l e t ' s s e e h o w t h o t
o d d s u p :
1 h e o n n u o I i n t e t e s t o n t h e I o o n
i s n o w m o t e t h o n k i v e t t o n ' s
g t o s s i n c o m e . A n d t h e t e ' s
s t i I I $ 8 . 5 m i I I i o n p e t y e o t i n
o p e t o t i n g c o s t s .
1 h o t ' s o $ 9 m i I I i o n l O S S
p e t y e o t .
U h - o h .
1 h e t e ' s n o w o y t h i s b u i I d i n g
i s s o I v e n t u n I e s s s o m e t h i n g
c h o n g e s .
W h o t
w o s
k i v e t t o n
w o t t h
b e t o t e
p t e d o t o t y
e q u i t y ?
I o t t e s p o n s i b I e I o n g - t e t m
o w n e t s , o b u i I d i n g i s w o t t h
o t o u n d t e n t o ü t t e e n t i m e s t h e
i n c o m e i t c o n n e t i n o y e o t .
l e t ' s b t e o k i t d o w n u s i n g
k i v e t t o n o s o n e x o m p I e :
8 y t h i s c o I c u I o t i o n , k i v e t t o n
h o d o n e t o p e t o t i n g i n c o m e o t
$ 4 m i I I i o n . M u I t i p I y t h o t b y t e n
t o ü t t e e n , o n d y o u g e t o v o I u e
o t $ 4 0 - ó 0 m i I I i o n .
A t t h o t p t i c e , t h e o w n e t c o u I d
c o v e t o p e t o t i n g c o s t s o n d p o y
o t t t h e I o o n w h i I e k e e p i n g t h e
b u i I d i n g o t t o t d o b I e .
1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
$ 4 . 0 M / ¥ k
N L J O P L k A J l N O l N C O M L
$ $ 1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
1 3 . 0 M / ¥ k
l N J L k L 8 J P A ¥ M L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
( $ 9 . 0 M / ¥ k )
N L J O P L k A J l N O L O 8 8
O n e
L x o m p I e
H o t I e m ' s k i v e t t o n A p o t t m e n t s
w e t e d e v e I o p e d i n 1 9 4 4 o s
o t t o t d o b I e h o u s i n g t o t b I o c k
v e t e t o n s . I n 2 0 0 5 , o v e t 9 0 °
o t k i v e t t o n ' s 1 2 3 0 o p o t t m e n t s
w e t e t e n t - t e g u I o t e d .
S p e c u I o t o t l o t t y G I u c k
b o u g h t k i v e t t o n i n 2 0 0 5 ~
t h e h e i g h t o t t h e b o o m .
H e I o t e t t e ü n o n c e d t o t o n
o s t t o n o m i c o I $ 2 5 0 m i I I i o n .
N o w , t h e d e v e I o p m e n t ' s
t e n t o I i n c o m e c o n ' t e v e n
c o v e t t h e i n t e t e s t p o y m e n t s
o n t h e I o o n !
1 h e b u i I d i n g i s o v e t I e v e t o g e d .
G I u c k c o n ' t ß i p t h e b u i I d i n g
i n t h i s m o t k e t .
W h o t ' s g o i n g t o h o p p e n ?
2
PUkCHASLk GL1S
8UIlDING
1o heIp keep the buiIding ottotd-
obIe, the ptesetvotion putchoset
gets o ptopetty tox obotement.
1LNAN1S S1A¥ IN
1HLIk HOMLS
kivetton stoys ottotdobIe!
keduce
Debt!
ln oruor to sovo ovorlovorogou
bullulngs, tholr uobt hos to bo
brought ln llno wlth tholr lncomo.
louorol rosourcos shoulu onoblo
bonks to wrlto uown o portlon ol
tho uobt÷but only lor spoculotors
who ogroo to now rogulotlon thot
wlll koop tholr bullulngs olloruoblo.
...ond
Ptesetve
with
Shott SoIes!
Jho govornmont shoulu oncourogo
spoculotors onu bonks to soll short
(l.o., ot o loss) to ºprosorvotlon
purchosorsº÷tonont onu govornmont
opprovou ownors commlttou to
monoglng houslng lor tho long torm.
GlUCk SLllS SHOk1
1he money ttom the soIe won't
covet oII his debt, but the bonk
totgives the temoindet, ond the
govetnment gives GIuck pottioI
tox teIiet. (UsuoIIy, totgiven debt
is toxed Iike income.)
8ANkS GL1 kLlILI
1o covet pott ot theit Iosses ttom
totgiving GIuck's debt, the bonk
gets occess to tunds ttom the
1toubIed Assets keIiet Ptogtom.
OvetIevetoged buiIdings hove
mote debt thon they con suppott.
SpecuIotots hove onIy thtee options:
kAISL kLN1S
1o do this, the specuIotot needs
to get tid ot the tenonts ptotected
by tent teguIotions. 1he ovetoge
tutnovet tote tot tent-teguIoted
opottments is 5° pet yeot. Most
specuIotots need o much highet
tote to tutn o ptoüt, ond they'II
totce tenonts out to get it.
CU1 SLkvICLS
It the specuIotot con't tepIoce his
cuttent tenonts with peopIe who
poy mote tent, he'II tty to cut his
expenses~ptobobIy by moking
dtostic teductions in mointenonce,
tepoits, ond othet setvices.
IOkLClOSUkL
It the specuIotot stiII con't moke
the buiIding bteok even ot come
cIose, the bonk wiII totecIose. Iote-
cIosute is o Iengthy ond uncettoin
IegoI ptocess thot is bod tot the
specuIotot, but even wotse tot
tenonts. 1hey did nothing wtong~
but couId stiII Iose theit homes!
In o Ioon modiücotion, the bonk
teduces debt tot specuIotots who
ogtee to new teguIotion.
At kivetton, the gop between income ond expenses wos so gteot thot o
Ioon modiücotion ptobobIy couIdn't heIp. 8ut thete ote othet buiIdings
whete this couId wotk.
8ANkS kLDUCL lOANS
In exchonge tot occess to tedetoI suppott, bonks shouId wtite down (i.e.,
totgive) o pottion ot the unsuppottobIe debt thot the specuIotots owe.
SPLCUlA1OkS GL1 kL-kLGUlA1LD
In exchonge tot this wtite-down, specuIotots wouId hove to entet
into new teguIototy ogteements thot ensute the ünoncioI ond
physicoI integtity ot the buiIdings os ottotdobIe housing.
In o ptesetvotion shott soIe, the
specuIotot seIIs the buiIding to o
buyet who wiII keep the buiIding
ottotdobIe.
1he specuIotot Ioses money but ovoids totecIosute. 1enonts stoy in
theit homes. Hete's how o ptesetvotion shott soIe wouId wotk ot
kivetton:
How Con
We Sove
OvetIevetoged
8uiIdings?
Prouotory oqulty hos put moro thon
ób,000 unlts ol Now ¥ork Clty's
olloruoblo houslng ot rlskl ll nothlng
ls uono, ronts wlll go up, sorvlcos wlll
go uown, onu bullulngs wlll go lnto
loroclosuro.
)&-1
)&-1
N¥C 8UIlDINGS A1 kISk
(DA1A PkOvIDLD 8¥ SUkvL¥ IkOM PAk1NLkSHIP 1O PkLSLkvL AIIOkDA8lL HOUSING, 2009)
4 3
How Con
We Stop
Ptedototy
Lquity in
the Iutute?
ln oruor to provont thls lrom hopponlng
ogoln, wo noou to look ot how thls
hopponou ln tho hrst ploco.
1) INCOML IkOM
kLN1: $12.5M
2) OPLkA1ING
COS1S: $8.5M
3) 1UkNOvLk
kA1L: 5°
4) ANNUAl DL81
SLkvICL: $13M
Since thete's no woy this
buiIding con suppott o
$250 miIIion Ioon with
$13 miIIion in onnuoI
intetest poyments:
lOAN vL1OLD!
Undetwtiting is the ptocess
thot bonks use to decide
whethet ot not to opptove o
Ioon. 8onks usuoIIy check the
voIue ot the undetIying osset
ond the bottowet's obiIity
to tepoy. 8onks got Iox duting
With new undetwtiting stondotds,
bonks wiII Ioon mote tesponsibIy.
With bettet undetwtiting stondotds,
whot wouId hove hoppened ot
kivetton? GIuck wouId hove osked
tot o $250 miIIion Ioon. 1he bonk
wouId hove Iooked ot:
the boom, especioIIy with high-
ptoüIe specuIotots bocked by
ptivote equity. 1o ptevent this ttom
hoppening ogoin, ptoposed soIes
ot muItitomiIy ottotdobIe housing
shouId be teviewed with new
undetwtiting stondotds.
ActuoI
Income
Itom
kents
ActuoI
Opetoting
Lxpenses
ActuoI 1utnovet kotes
1HL SI2L OI A lOAN
SHOUlD 8L lIMI1LD 8¥:
uurlng tho boom, bonks ossumou thot
houslng prlcos woulu go up, onu thot
spoculotors coulu olwoys buy low onu
soll hlgh. Jhoy loonou monoy to spoculo
tors wlthout roolly looklng lnto boslc uoto
Why did bonks Iend money to specuIotots?
llko rontol lncomo, oporotlng oxponsos,
onu turnovor rotos. 8onks olso thought
thoy coulu shou tho rlsk lrom bou loons
through hnonclol tools llko mortgogo
bockou socurltlos.
Pooplo thought mortgogobockou socurltlos woro solo÷bocouso thoro's no woy
o bunch ol borrowors woulu uoloult ot tho somo tlmo, rlght` WkONOl
ISSUL
A bonk issues o mottgoge to o
bottowet. A mottgoge is teoIIy
just o tight to teceive o stteom ot
poyments ttom o bottowet.
SLll
1he issuing bonk seIIs the mott-
goge to on investment bonk.
1hot woy, issuing bonks don't
hove to woit tot monthIy poy-
ments to moke theit money bock,
ond they don't beot the tisk ot
detouIt.
8UNDlL
1he investment bonk bundIes o
bunch ot mottgoges togethet.
8undIing mottgoges divetsiües
the tisk ot detouIt. Lven it o tew
bottowets detouIt, the bundIe is
stiII wotth money.
SlICL
1he investment bonk seIIs sIices
ot the bundIe to investots. 1hese
sIices ote mottgoge-bocked
secutities. Investots ote buying
the tights to o ttoction ot
the poyments ttom o bunch
ot mottgoges.
HOW DO MOk1GAGL-8ACkLD SLCUkI1ILS WOkk?
Jho bost woy to stop prouotory
oqulty ls to rostrlct lts moln sourco
ol lunulng: bonks wllllng to moko
spoculotlvo loons. komombor÷
olghty porcont ol tho lunulng lor
thoso uools como lrom bonksl
ln tho oltormoth ol tho hnonclol
crlsls, olmost ovoryono ogroos thot
bonks noou closor ovorslght.
ll tho lncomo lrom o bullulng con't
covor oporotlng oxponsos onu
poy oll tho loon, rogulotors shoulu
hovo tho ulscrotlon to voto tho loon.
Jhls wlll ury up copltol lor prouotory
oqulty spoculotors onu cloor tho
woy lor rosponslblo, longtorm ownors.
keguIote the 8onks!
ó
W h o t I s
1 h i s A b o u t ?
P t e d o t o t y e q u i t y .
k e o I - e s t o t e s p e c u I o t o t s s p e n t
e x o t b i t o n t s u m s t o b u y u p
o t t o t d o b I e h o u s i n g o I I o v e t
N ¥ C . N o w t h e b u i I d i n g s t h e y
b o u g h t o t e o t t i s k o t d e t o u I t .
1 e n s o t t h o u s o n d s o t t o m i I i e s
s t o n d t o I o s e t h e i t h o m e s ,
o n d N ¥ C s t o n d s t o I o s e t e n s
o t t h o u s o n d s o t o t t o t d o b I e
o p o t t m e n t s . 1 h i s p o s t e t
e x p I o i n s t h e p t o b I e m o n d
h o w t o ü x i t .
4 " 7 &
0 6 3 ) 0 . & 4
8 & % & . " / %
5 3 " / 4 1 " 3 & / $ :
& M F D U F E 0 G G J D J B M T
) P V T J O H & Y Q F S U T
" E W P D B U F T
. F N C F S T P G
U I F . F E J B
5 F O B O U T
4 5 " :
0 3 ( " / * ; & %
) 0 6 4 * / (
' 0 3 1 & 0 1 - &
/ 0 5 1 3 0 ' * 5
' 0 - - 0 8
5 ) & . 0 / & :
M A k I N G P O l I C ¥ P U 8 l I C i s
o p t o g t o m o t t h e C e n t e t t o t U t b o n
P e d o g o g y ( C U P ) t h o t p o i t s p o I i c y
o d v o c o t e s o n d g t o p h i c d e s i g n e t s
t o p t o d u c e t o I d - o u t p o s t e t s I i k e
t h i s o n e . C U P c h o o s e s p t o g t o m
p o t t i c i p o n t s t h t o u g h o j u t y p t o c e s s
o n d t o c i I i t o t e s t h e i t c o I I o b o t o t i o n .
w w w . m o k i n g p o I i c y p u b I i c . n e t
C O l l A 8 O k A 1 O k S
A m y C h o n ( 1 e n o n t s o n d N e i g h b o t s ) ,
G I e n C u m m i n g s ( M 1 W 1 I ) , D i n o l e v y
( U H A 8 ) , J o h n M o n g i n ( C U P ) , o n d
k o s t e n W o o ( C U P )
1 H L C L N 1 L k I O k U k 8 A N
P L D A G O G ¥ ( C U P ) p t o d u c e s
c t e o t i v e e d u c o t i o n o b o u t p I o c e s
o n d h o w t h e y c h o n g e .
w w w . o n o t h e t c u p d e v e I o p m e n t . o t g
1 L N A N 1 S A N D N L I G H 8 O k S
i s t h e I o t g e s t t e n o n t s ' t i g h t s o t g o -
n i z o t i o n i n N e w ¥ o t k S t o t e , w i t h
1 5 , 0 0 0 m e m b e t s . I o t m o t e t h o n
3 0 y e o t s , t h t o u g h g t o s s t o o t s o t g o -
n i z i n g , 1 & N h o s t o t g e d o p o w e t t u I
m o v e m e n t i n t h e ü g h t t o p t e s e t v e
o t t o t d o b I e h o u s i n g , s t t e n g t h e n
t e n o n t p t o t e c t i o n s , o n d s u s t o i n
d i v e t s e o n d I i v o b I e c o m m u n i t i e s .
w w w . t o n d n . o t g
U H A 8 i s o n o n p t o ü t o t g o n i z o t i o n
t h o t h e I p s I o w - i n c o m e t e n o n t s
c o n t t o I t h e i t h o u s i n g t h t o u g h
t h e c t e o t i o n o t I i m i t e d - e q u i t y
c o o p e t o t i v e s . U H A 8 o I s o h e I p s
t e n o n t s p t e s e t v e e x i s t i n g o t t o t d -
o b I e h o u s i n g b y e m p o w e t i n g t h e m
t o m o k e p t o o c t i v e d e c i s i o n s
o b o u t t h e t u t u t e o t t h e i t h o m e s .
w w w . u h o b . o t g
1 & N o n d U H A 8 o t e p o t t o t t h e
P o t t n e t s h i p t o P t e s e t v e A t t o t d o b I e
H o u s i n g .
M 1 W 1 I i s o g t o p h i c d e s i g n s t u d i o
s p e c i o I i z i n g i n p u b I i c o t i o n s ,
e n v i t o n m e n t o I g t o p h i c s , o n d i d e n t i t y
s y s t e m s . M 1 W 1 I e n g o g e s i n
c o I I o b o t o t i v e p t o j e c t s w i t h p o t t n e t s
i n o t h e t d i s c i p I i n e s , s u c h o s
o t c h i t e c t u t e , i n d u s t t i o I d e s i g n , o n d
u t b o n p I o n n i n g . w w w . m t w t t . o t g
1 H A N k S 1 O : P o u I o C t e s p o
( P t o t t C e n t e t t o t C o m m u n i t y
D e v e I o p m e n t ) , D o n D e S I o o v e t ,
S o m S t o t k , v o I e t i o M o g i I e v i c h ,
o n d 1 o m W o t e t s .
S u p p o t t t o t t h i s p t o j e c t w o s p t o v i d e d
b y t h e N e w ¥ o t k S t o t e C o u n c i I o n
t h e A t t s ( N ¥ S C A ) o n d t h e N e w ¥ o t k
D e p o t t m e n t o t C u I t u t o I A t t o i t s .
© 2 0 0 9
P t e d o t o t y
L q u i t y
1 H L
S U k v I v A l
G U I D L
S P ¥
D u t i n g t h e h o u s i n g b o o m ,
s p e c u I o t o t s I o o k e d t o t b u i I d i n g s
t h o t t h e y c o u I d b u y o n d t e s e I I
o t o p t o ü t .
1 h e y t o t g e t e d b u i I d i n g s c o v e t e d
b y g o v e t n m e n t p t o g t o m s t h o t
k e e p t e n t s o t t o t d o b I e . 1 h e n t h e y
t t i e d t o m o x i m i z e t h e i t p t o ü t s b y
p u s h i n g o u t t e n t - t e g u I o t e d t e n o n t s
o n d t o i s i n g t e n t s o t b y s e I I i n g t h e
b u i I d i n g s t o o t h e t s p e c u I o t o t s .
8 U ¥
8 u t o t t e n t h e s p e c u I o t o t s d i d n ' t
h o v e o I I t h e m o n e y ( o t e v e n o n y
o t t h e m o n e y ) t o b u y o b u i I d i n g .
H o w d i d t h e y g e t t h e c o s h ?
I i t s t , o s p e c u I o t o t t o i s e d m o n e y
t t o m p t i v o t e i n v e s t o t s b y p t o m i s i n g
o h i g h t o t e o t t e t u t n i n o s h o t t
p e t i o d o t t i m e .
1 h e n t h e s p e c u I o t o t u s e d t h i s
b o s e m o n e y t o g e t o m u c h
I o t g e t o m o u n t t t o m o b o n k .
1 h e s t o n d o t d t o t m u I o w o s 2 0 °
c o s h t t o m p t i v o t e i n v e s t o t s
o n d 8 0 ° I o o n t t o m o b o n k .

S p e c u I o t o t s w e t e w i I I i n g t o p o y
h u g e p t i c e s t o t b u i I d i n g s b e c o u s e
t h e y t h o u g h t t h e v o I u e o t t h e
b u i I d i n g s c o u I d o n I y g o u p . 8 o n k s
w e t e w i I I i n g t o m o k e h u g e I o o n s
b e c o u s e t h e y t h o u g h t t h e y c o u I d
s h e d t h e t i s k o t b o d I o o n s . ( M o t e
o n t h o t I o t e t ! )
W h o t I s
P t e d o t o t y
L q u i t y ?
I t ' s w h e n s p e c u I o t o t s o v e t p o y
t o t o t t o t d o b I e h o u s i n g w i t h
b o t t o w e d m o n e y , c o n v e t t i t
t o h o u s i n g t o t t i c h p e o p I e ,
o n d ß i p i t t o n e w b u y e t s t o t
o q u i c k p t o ü t .
I t s p e c u I o t o t s s u c c e e d ,
t e n o n t s I o s e t h e i t h o m e s ,
o n d N e w ¥ o t k C i t y I o s e s
o t t o t d o b I e h o u s i n g .
I t s p e c u I o t o t s t o i I o n d c o n ' t
p o y t h e i t m o t t g o g e s , t h e
b u i I d i n g s g o i n t o t o t e c I o s u t e .
1 e n o n t s I o s e t h e i t h o m e s o n d
N e w ¥ o t k I o s e s o t t o t d o b I e
h o u s i n g o n y w o y .
N o b o d y w i n s .
C O N v L k 1
N o w t h e s p e c u I o t o t h o s t o m o k e
s o m e b i g c h o n g e s i n o t d e t
t o m o k e t h e b u i I d i n g s g e n e t o t e
e n o u g h i n c o m e t o c o v e t t h e
n e w d e b t .
1 h e s p e c u I o t o t t o t c e s e x i s t i n g
t e n o n t s o u t b y o n y m e o n s
n e c e s s o t y ~ h o t o s s m e n t , p h o n y
e v i c t i o n p t o c e e d i n g s , c u t b o c k s
i n s e t v i c e s . . .
1 h e n t h e s p e c u I o t o t t t i e s t o g e t o u t
o t o t t o t d o b I e h o u s i n g p t o g t o m s
o n d " t e n o v o t e º n e w I y v o c o n t
o p o t t m e n t s t o t e m o v e t h e m t t o m
N ¥ C ' s t e n t t e g u I o t i o n I o w s .
1 h e s p e c u I o t o t c o n v e t t s t h e
b u i I d i n g i n t o c o n d o s o t t e n t s
o p o t t m e n t s t o w e o I t h i e t t e n o n t s
t o t m o t e m o n e y .
I l I P
1 h e s p e c u I o t o t m o y t t y t o s e I I
t h e b u i I d i n g t o o n o t h e t s p e c u I o t o t
t o t o p t o ü t .
8 u t O O P S ! I i n o n c i o I c t i s i s .
N o b o d y w o n t s t o b u y o n
o v e t p t i c e d b u i I d i n g o n y m o t e .
8 e c o u s e p t e d o t o t y e q u i t y
s p e c u I o t o t s p o i d t o o m u c h t o t
b u i I d i n g s i n t h e ü t s t p I o c e ,
t h e y h o v e h u g e I o o n s t h o t t h e y
c o n ' t p o y o t t . 1 h e b u i I d i n g s o t e
o v e t I e v e t o g e d . W h o t n o w ?
1
W h o t d o
k i v e t t o n ' s
ü n o n c e s
I o o k I i k e
o t t e t
p t e d o t o t y
e q u i t y ?
k i v e t t o n w o s t e ü n o n c e d i n 2 0 0 ó
t o t $ 2 5 0 m i I I i o n i n b o t t o w e d
m o n e y . 1 h o t ' s t o u g h I y t o u t t o
s i x t i m e s i t s v o I u e . 1 h e o n n u o I
i n t e t e s t o n t h o t I o o n i s o b o u t
$ 1 3 m i I I i o n . l e t ' s s e e h o w t h o t
o d d s u p :
1 h e o n n u o I i n t e t e s t o n t h e I o o n
i s n o w m o t e t h o n k i v e t t o n ' s
g t o s s i n c o m e . A n d t h e t e ' s
s t i I I $ 8 . 5 m i I I i o n p e t y e o t i n
o p e t o t i n g c o s t s .
1 h o t ' s o $ 9 m i I I i o n l O S S
p e t y e o t .
U h - o h .
1 h e t e ' s n o w o y t h i s b u i I d i n g
i s s o I v e n t u n I e s s s o m e t h i n g
c h o n g e s .
W h o t
w o s
k i v e t t o n
w o t t h
b e t o t e
p t e d o t o t y
e q u i t y ?
I o t t e s p o n s i b I e I o n g - t e t m
o w n e t s , o b u i I d i n g i s w o t t h
o t o u n d t e n t o ü t t e e n t i m e s t h e
i n c o m e i t c o n n e t i n o y e o t .
l e t ' s b t e o k i t d o w n u s i n g
k i v e t t o n o s o n e x o m p I e :
8 y t h i s c o I c u I o t i o n , k i v e t t o n
h o d o n e t o p e t o t i n g i n c o m e o t
$ 4 m i I I i o n . M u I t i p I y t h o t b y t e n
t o ü t t e e n , o n d y o u g e t o v o I u e
o t $ 4 0 - ó 0 m i I I i o n .
A t t h o t p t i c e , t h e o w n e t c o u I d
c o v e t o p e t o t i n g c o s t s o n d p o y
o t t t h e I o o n w h i I e k e e p i n g t h e
b u i I d i n g o t t o t d o b I e .
1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
$ 4 . 0 M / ¥ k
N L J O P L k A J l N O l N C O M L
$ $ 1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
1 3 . 0 M / ¥ k
l N J L k L 8 J P A ¥ M L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
( $ 9 . 0 M / ¥ k )
N L J O P L k A J l N O L O 8 8
O n e
L x o m p I e
H o t I e m ' s k i v e t t o n A p o t t m e n t s
w e t e d e v e I o p e d i n 1 9 4 4 o s
o t t o t d o b I e h o u s i n g t o t b I o c k
v e t e t o n s . I n 2 0 0 5 , o v e t 9 0 °
o t k i v e t t o n ' s 1 2 3 0 o p o t t m e n t s
w e t e t e n t - t e g u I o t e d .
S p e c u I o t o t l o t t y G I u c k
b o u g h t k i v e t t o n i n 2 0 0 5 ~
t h e h e i g h t o t t h e b o o m .
H e I o t e t t e ü n o n c e d t o t o n
o s t t o n o m i c o I $ 2 5 0 m i I I i o n .
N o w , t h e d e v e I o p m e n t ' s
t e n t o I i n c o m e c o n ' t e v e n
c o v e t t h e i n t e t e s t p o y m e n t s
o n t h e I o o n !
1 h e b u i I d i n g i s o v e t I e v e t o g e d .
G I u c k c o n ' t ß i p t h e b u i I d i n g
i n t h i s m o t k e t .
W h o t ' s g o i n g t o h o p p e n ?
2
PUkCHASLk GL1S
8UIlDING
1o heIp keep the buiIding ottotd-
obIe, the ptesetvotion putchoset
gets o ptopetty tox obotement.
1LNAN1S S1A¥ IN
1HLIk HOMLS
kivetton stoys ottotdobIe!
keduce
Debt!
ln oruor to sovo ovorlovorogou
bullulngs, tholr uobt hos to bo
brought ln llno wlth tholr lncomo.
louorol rosourcos shoulu onoblo
bonks to wrlto uown o portlon ol
tho uobt÷but only lor spoculotors
who ogroo to now rogulotlon thot
wlll koop tholr bullulngs olloruoblo.
...ond
Ptesetve
with
Shott SoIes!
Jho govornmont shoulu oncourogo
spoculotors onu bonks to soll short
(l.o., ot o loss) to ºprosorvotlon
purchosorsº÷tonont onu govornmont
opprovou ownors commlttou to
monoglng houslng lor tho long torm.
GlUCk SLllS SHOk1
1he money ttom the soIe won't
covet oII his debt, but the bonk
totgives the temoindet, ond the
govetnment gives GIuck pottioI
tox teIiet. (UsuoIIy, totgiven debt
is toxed Iike income.)
8ANkS GL1 kLlILI
1o covet pott ot theit Iosses ttom
totgiving GIuck's debt, the bonk
gets occess to tunds ttom the
1toubIed Assets keIiet Ptogtom.
OvetIevetoged buiIdings hove
mote debt thon they con suppott.
SpecuIotots hove onIy thtee options:
kAISL kLN1S
1o do this, the specuIotot needs
to get tid ot the tenonts ptotected
by tent teguIotions. 1he ovetoge
tutnovet tote tot tent-teguIoted
opottments is 5° pet yeot. Most
specuIotots need o much highet
tote to tutn o ptoüt, ond they'II
totce tenonts out to get it.
CU1 SLkvICLS
It the specuIotot con't tepIoce his
cuttent tenonts with peopIe who
poy mote tent, he'II tty to cut his
expenses~ptobobIy by moking
dtostic teductions in mointenonce,
tepoits, ond othet setvices.
IOkLClOSUkL
It the specuIotot stiII con't moke
the buiIding bteok even ot come
cIose, the bonk wiII totecIose. Iote-
cIosute is o Iengthy ond uncettoin
IegoI ptocess thot is bod tot the
specuIotot, but even wotse tot
tenonts. 1hey did nothing wtong~
but couId stiII Iose theit homes!
In o Ioon modiücotion, the bonk
teduces debt tot specuIotots who
ogtee to new teguIotion.
At kivetton, the gop between income ond expenses wos so gteot thot o
Ioon modiücotion ptobobIy couIdn't heIp. 8ut thete ote othet buiIdings
whete this couId wotk.
8ANkS kLDUCL lOANS
In exchonge tot occess to tedetoI suppott, bonks shouId wtite down (i.e.,
totgive) o pottion ot the unsuppottobIe debt thot the specuIotots owe.
SPLCUlA1OkS GL1 kL-kLGUlA1LD
In exchonge tot this wtite-down, specuIotots wouId hove to entet
into new teguIototy ogteements thot ensute the ünoncioI ond
physicoI integtity ot the buiIdings os ottotdobIe housing.
In o ptesetvotion shott soIe, the
specuIotot seIIs the buiIding to o
buyet who wiII keep the buiIding
ottotdobIe.
1he specuIotot Ioses money but ovoids totecIosute. 1enonts stoy in
theit homes. Hete's how o ptesetvotion shott soIe wouId wotk ot
kivetton:
How Con
We Sove
OvetIevetoged
8uiIdings?
Prouotory oqulty hos put moro thon
ób,000 unlts ol Now ¥ork Clty's
olloruoblo houslng ot rlskl ll nothlng
ls uono, ronts wlll go up, sorvlcos wlll
go uown, onu bullulngs wlll go lnto
loroclosuro.
)&-1
)&-1
N¥C 8UIlDINGS A1 kISk
(DA1A PkOvIDLD 8¥ SUkvL¥ IkOM PAk1NLkSHIP 1O PkLSLkvL AIIOkDA8lL HOUSING, 2009)
4 3
How Con
We Stop
Ptedototy
Lquity in
the Iutute?
ln oruor to provont thls lrom hopponlng
ogoln, wo noou to look ot how thls
hopponou ln tho hrst ploco.
1) INCOML IkOM
kLN1: $12.5M
2) OPLkA1ING
COS1S: $8.5M
3) 1UkNOvLk
kA1L: 5°
4) ANNUAl DL81
SLkvICL: $13M
Since thete's no woy this
buiIding con suppott o
$250 miIIion Ioon with
$13 miIIion in onnuoI
intetest poyments:
lOAN vL1OLD!
Undetwtiting is the ptocess
thot bonks use to decide
whethet ot not to opptove o
Ioon. 8onks usuoIIy check the
voIue ot the undetIying osset
ond the bottowet's obiIity
to tepoy. 8onks got Iox duting
With new undetwtiting stondotds,
bonks wiII Ioon mote tesponsibIy.
With bettet undetwtiting stondotds,
whot wouId hove hoppened ot
kivetton? GIuck wouId hove osked
tot o $250 miIIion Ioon. 1he bonk
wouId hove Iooked ot:
the boom, especioIIy with high-
ptoüIe specuIotots bocked by
ptivote equity. 1o ptevent this ttom
hoppening ogoin, ptoposed soIes
ot muItitomiIy ottotdobIe housing
shouId be teviewed with new
undetwtiting stondotds.
ActuoI
Income
Itom
kents
ActuoI
Opetoting
Lxpenses
ActuoI 1utnovet kotes
1HL SI2L OI A lOAN
SHOUlD 8L lIMI1LD 8¥:
uurlng tho boom, bonks ossumou thot
houslng prlcos woulu go up, onu thot
spoculotors coulu olwoys buy low onu
soll hlgh. Jhoy loonou monoy to spoculo
tors wlthout roolly looklng lnto boslc uoto
Why did bonks Iend money to specuIotots?
llko rontol lncomo, oporotlng oxponsos,
onu turnovor rotos. 8onks olso thought
thoy coulu shou tho rlsk lrom bou loons
through hnonclol tools llko mortgogo
bockou socurltlos.
Pooplo thought mortgogobockou socurltlos woro solo÷bocouso thoro's no woy
o bunch ol borrowors woulu uoloult ot tho somo tlmo, rlght` WkONOl
ISSUL
A bonk issues o mottgoge to o
bottowet. A mottgoge is teoIIy
just o tight to teceive o stteom ot
poyments ttom o bottowet.
SLll
1he issuing bonk seIIs the mott-
goge to on investment bonk.
1hot woy, issuing bonks don't
hove to woit tot monthIy poy-
ments to moke theit money bock,
ond they don't beot the tisk ot
detouIt.
8UNDlL
1he investment bonk bundIes o
bunch ot mottgoges togethet.
8undIing mottgoges divetsiües
the tisk ot detouIt. Lven it o tew
bottowets detouIt, the bundIe is
stiII wotth money.
SlICL
1he investment bonk seIIs sIices
ot the bundIe to investots. 1hese
sIices ote mottgoge-bocked
secutities. Investots ote buying
the tights to o ttoction ot
the poyments ttom o bunch
ot mottgoges.
HOW DO MOk1GAGL-8ACkLD SLCUkI1ILS WOkk?
Jho bost woy to stop prouotory
oqulty ls to rostrlct lts moln sourco
ol lunulng: bonks wllllng to moko
spoculotlvo loons. komombor÷
olghty porcont ol tho lunulng lor
thoso uools como lrom bonksl
ln tho oltormoth ol tho hnonclol
crlsls, olmost ovoryono ogroos thot
bonks noou closor ovorslght.
ll tho lncomo lrom o bullulng con't
covor oporotlng oxponsos onu
poy oll tho loon, rogulotors shoulu
hovo tho ulscrotlon to voto tho loon.
Jhls wlll ury up copltol lor prouotory
oqulty spoculotors onu cloor tho
woy lor rosponslblo, longtorm ownors.
keguIote the 8onks!
ó
W h o t I s
1 h i s A b o u t ?
P t e d o t o t y e q u i t y .
k e o I - e s t o t e s p e c u I o t o t s s p e n t
e x o t b i t o n t s u m s t o b u y u p
o t t o t d o b I e h o u s i n g o I I o v e t
N ¥ C . N o w t h e b u i I d i n g s t h e y
b o u g h t o t e o t t i s k o t d e t o u I t .
1 e n s o t t h o u s o n d s o t t o m i I i e s
s t o n d t o I o s e t h e i t h o m e s ,
o n d N ¥ C s t o n d s t o I o s e t e n s
o t t h o u s o n d s o t o t t o t d o b I e
o p o t t m e n t s . 1 h i s p o s t e t
e x p I o i n s t h e p t o b I e m o n d
h o w t o ü x i t .
4 " 7 &
0 6 3 ) 0 . & 4
8 & % & . " / %
5 3 " / 4 1 " 3 & / $ :
& M F D U F E 0 G G J D J B M T
) P V T J O H & Y Q F S U T
" E W P D B U F T
. F N C F S T P G
U I F . F E J B
5 F O B O U T
4 5 " :
0 3 ( " / * ; & %
) 0 6 4 * / (
' 0 3 1 & 0 1 - &
/ 0 5 1 3 0 ' * 5
' 0 - - 0 8
5 ) & . 0 / & :
M A k I N G P O l I C ¥ P U 8 l I C i s
o p t o g t o m o t t h e C e n t e t t o t U t b o n
P e d o g o g y ( C U P ) t h o t p o i t s p o I i c y
o d v o c o t e s o n d g t o p h i c d e s i g n e t s
t o p t o d u c e t o I d - o u t p o s t e t s I i k e
t h i s o n e . C U P c h o o s e s p t o g t o m
p o t t i c i p o n t s t h t o u g h o j u t y p t o c e s s
o n d t o c i I i t o t e s t h e i t c o I I o b o t o t i o n .
w w w . m o k i n g p o I i c y p u b I i c . n e t
C O l l A 8 O k A 1 O k S
A m y C h o n ( 1 e n o n t s o n d N e i g h b o t s ) ,
G I e n C u m m i n g s ( M 1 W 1 I ) , D i n o l e v y
( U H A 8 ) , J o h n M o n g i n ( C U P ) , o n d
k o s t e n W o o ( C U P )
1 H L C L N 1 L k I O k U k 8 A N
P L D A G O G ¥ ( C U P ) p t o d u c e s
c t e o t i v e e d u c o t i o n o b o u t p I o c e s
o n d h o w t h e y c h o n g e .
w w w . o n o t h e t c u p d e v e I o p m e n t . o t g
1 L N A N 1 S A N D N L I G H 8 O k S
i s t h e I o t g e s t t e n o n t s ' t i g h t s o t g o -
n i z o t i o n i n N e w ¥ o t k S t o t e , w i t h
1 5 , 0 0 0 m e m b e t s . I o t m o t e t h o n
3 0 y e o t s , t h t o u g h g t o s s t o o t s o t g o -
n i z i n g , 1 & N h o s t o t g e d o p o w e t t u I
m o v e m e n t i n t h e ü g h t t o p t e s e t v e
o t t o t d o b I e h o u s i n g , s t t e n g t h e n
t e n o n t p t o t e c t i o n s , o n d s u s t o i n
d i v e t s e o n d I i v o b I e c o m m u n i t i e s .
w w w . t o n d n . o t g
U H A 8 i s o n o n p t o ü t o t g o n i z o t i o n
t h o t h e I p s I o w - i n c o m e t e n o n t s
c o n t t o I t h e i t h o u s i n g t h t o u g h
t h e c t e o t i o n o t I i m i t e d - e q u i t y
c o o p e t o t i v e s . U H A 8 o I s o h e I p s
t e n o n t s p t e s e t v e e x i s t i n g o t t o t d -
o b I e h o u s i n g b y e m p o w e t i n g t h e m
t o m o k e p t o o c t i v e d e c i s i o n s
o b o u t t h e t u t u t e o t t h e i t h o m e s .
w w w . u h o b . o t g
1 & N o n d U H A 8 o t e p o t t o t t h e
P o t t n e t s h i p t o P t e s e t v e A t t o t d o b I e
H o u s i n g .
M 1 W 1 I i s o g t o p h i c d e s i g n s t u d i o
s p e c i o I i z i n g i n p u b I i c o t i o n s ,
e n v i t o n m e n t o I g t o p h i c s , o n d i d e n t i t y
s y s t e m s . M 1 W 1 I e n g o g e s i n
c o I I o b o t o t i v e p t o j e c t s w i t h p o t t n e t s
i n o t h e t d i s c i p I i n e s , s u c h o s
o t c h i t e c t u t e , i n d u s t t i o I d e s i g n , o n d
u t b o n p I o n n i n g . w w w . m t w t t . o t g
1 H A N k S 1 O : P o u I o C t e s p o
( P t o t t C e n t e t t o t C o m m u n i t y
D e v e I o p m e n t ) , D o n D e S I o o v e t ,
S o m S t o t k , v o I e t i o M o g i I e v i c h ,
o n d 1 o m W o t e t s .
S u p p o t t t o t t h i s p t o j e c t w o s p t o v i d e d
b y t h e N e w ¥ o t k S t o t e C o u n c i I o n
t h e A t t s ( N ¥ S C A ) o n d t h e N e w ¥ o t k
D e p o t t m e n t o t C u I t u t o I A t t o i t s .
© 2 0 0 9
P t e d o t o t y
L q u i t y
1 H L
S U k v I v A l
G U I D L
S P ¥
D u t i n g t h e h o u s i n g b o o m ,
s p e c u I o t o t s I o o k e d t o t b u i I d i n g s
t h o t t h e y c o u I d b u y o n d t e s e I I
o t o p t o ü t .
1 h e y t o t g e t e d b u i I d i n g s c o v e t e d
b y g o v e t n m e n t p t o g t o m s t h o t
k e e p t e n t s o t t o t d o b I e . 1 h e n t h e y
t t i e d t o m o x i m i z e t h e i t p t o ü t s b y
p u s h i n g o u t t e n t - t e g u I o t e d t e n o n t s
o n d t o i s i n g t e n t s o t b y s e I I i n g t h e
b u i I d i n g s t o o t h e t s p e c u I o t o t s .
8 U ¥
8 u t o t t e n t h e s p e c u I o t o t s d i d n ' t
h o v e o I I t h e m o n e y ( o t e v e n o n y
o t t h e m o n e y ) t o b u y o b u i I d i n g .
H o w d i d t h e y g e t t h e c o s h ?
I i t s t , o s p e c u I o t o t t o i s e d m o n e y
t t o m p t i v o t e i n v e s t o t s b y p t o m i s i n g
o h i g h t o t e o t t e t u t n i n o s h o t t
p e t i o d o t t i m e .
1 h e n t h e s p e c u I o t o t u s e d t h i s
b o s e m o n e y t o g e t o m u c h
I o t g e t o m o u n t t t o m o b o n k .
1 h e s t o n d o t d t o t m u I o w o s 2 0 °
c o s h t t o m p t i v o t e i n v e s t o t s
o n d 8 0 ° I o o n t t o m o b o n k .

S p e c u I o t o t s w e t e w i I I i n g t o p o y
h u g e p t i c e s t o t b u i I d i n g s b e c o u s e
t h e y t h o u g h t t h e v o I u e o t t h e
b u i I d i n g s c o u I d o n I y g o u p . 8 o n k s
w e t e w i I I i n g t o m o k e h u g e I o o n s
b e c o u s e t h e y t h o u g h t t h e y c o u I d
s h e d t h e t i s k o t b o d I o o n s . ( M o t e
o n t h o t I o t e t ! )
W h o t I s
P t e d o t o t y
L q u i t y ?
I t ' s w h e n s p e c u I o t o t s o v e t p o y
t o t o t t o t d o b I e h o u s i n g w i t h
b o t t o w e d m o n e y , c o n v e t t i t
t o h o u s i n g t o t t i c h p e o p I e ,
o n d ß i p i t t o n e w b u y e t s t o t
o q u i c k p t o ü t .
I t s p e c u I o t o t s s u c c e e d ,
t e n o n t s I o s e t h e i t h o m e s ,
o n d N e w ¥ o t k C i t y I o s e s
o t t o t d o b I e h o u s i n g .
I t s p e c u I o t o t s t o i I o n d c o n ' t
p o y t h e i t m o t t g o g e s , t h e
b u i I d i n g s g o i n t o t o t e c I o s u t e .
1 e n o n t s I o s e t h e i t h o m e s o n d
N e w ¥ o t k I o s e s o t t o t d o b I e
h o u s i n g o n y w o y .
N o b o d y w i n s .
C O N v L k 1
N o w t h e s p e c u I o t o t h o s t o m o k e
s o m e b i g c h o n g e s i n o t d e t
t o m o k e t h e b u i I d i n g s g e n e t o t e
e n o u g h i n c o m e t o c o v e t t h e
n e w d e b t .
1 h e s p e c u I o t o t t o t c e s e x i s t i n g
t e n o n t s o u t b y o n y m e o n s
n e c e s s o t y ~ h o t o s s m e n t , p h o n y
e v i c t i o n p t o c e e d i n g s , c u t b o c k s
i n s e t v i c e s . . .
1 h e n t h e s p e c u I o t o t t t i e s t o g e t o u t
o t o t t o t d o b I e h o u s i n g p t o g t o m s
o n d " t e n o v o t e º n e w I y v o c o n t
o p o t t m e n t s t o t e m o v e t h e m t t o m
N ¥ C ' s t e n t t e g u I o t i o n I o w s .
1 h e s p e c u I o t o t c o n v e t t s t h e
b u i I d i n g i n t o c o n d o s o t t e n t s
o p o t t m e n t s t o w e o I t h i e t t e n o n t s
t o t m o t e m o n e y .
I l I P
1 h e s p e c u I o t o t m o y t t y t o s e I I
t h e b u i I d i n g t o o n o t h e t s p e c u I o t o t
t o t o p t o ü t .
8 u t O O P S ! I i n o n c i o I c t i s i s .
N o b o d y w o n t s t o b u y o n
o v e t p t i c e d b u i I d i n g o n y m o t e .
8 e c o u s e p t e d o t o t y e q u i t y
s p e c u I o t o t s p o i d t o o m u c h t o t
b u i I d i n g s i n t h e ü t s t p I o c e ,
t h e y h o v e h u g e I o o n s t h o t t h e y
c o n ' t p o y o t t . 1 h e b u i I d i n g s o t e
o v e t I e v e t o g e d . W h o t n o w ?
1
W h o t d o
k i v e t t o n ' s
ü n o n c e s
I o o k I i k e
o t t e t
p t e d o t o t y
e q u i t y ?
k i v e t t o n w o s t e ü n o n c e d i n 2 0 0 ó
t o t $ 2 5 0 m i I I i o n i n b o t t o w e d
m o n e y . 1 h o t ' s t o u g h I y t o u t t o
s i x t i m e s i t s v o I u e . 1 h e o n n u o I
i n t e t e s t o n t h o t I o o n i s o b o u t
$ 1 3 m i I I i o n . l e t ' s s e e h o w t h o t
o d d s u p :
1 h e o n n u o I i n t e t e s t o n t h e I o o n
i s n o w m o t e t h o n k i v e t t o n ' s
g t o s s i n c o m e . A n d t h e t e ' s
s t i I I $ 8 . 5 m i I I i o n p e t y e o t i n
o p e t o t i n g c o s t s .
1 h o t ' s o $ 9 m i I I i o n l O S S
p e t y e o t .
U h - o h .
1 h e t e ' s n o w o y t h i s b u i I d i n g
i s s o I v e n t u n I e s s s o m e t h i n g
c h o n g e s .
W h o t
w o s
k i v e t t o n
w o t t h
b e t o t e
p t e d o t o t y
e q u i t y ?
I o t t e s p o n s i b I e I o n g - t e t m
o w n e t s , o b u i I d i n g i s w o t t h
o t o u n d t e n t o ü t t e e n t i m e s t h e
i n c o m e i t c o n n e t i n o y e o t .
l e t ' s b t e o k i t d o w n u s i n g
k i v e t t o n o s o n e x o m p I e :
8 y t h i s c o I c u I o t i o n , k i v e t t o n
h o d o n e t o p e t o t i n g i n c o m e o t
$ 4 m i I I i o n . M u I t i p I y t h o t b y t e n
t o ü t t e e n , o n d y o u g e t o v o I u e
o t $ 4 0 - ó 0 m i I I i o n .
A t t h o t p t i c e , t h e o w n e t c o u I d
c o v e t o p e t o t i n g c o s t s o n d p o y
o t t t h e I o o n w h i I e k e e p i n g t h e
b u i I d i n g o t t o t d o b I e .
1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
$ 4 . 0 M / ¥ k
N L J O P L k A J l N O l N C O M L
$ $ 1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
1 3 . 0 M / ¥ k
l N J L k L 8 J P A ¥ M L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
( $ 9 . 0 M / ¥ k )
N L J O P L k A J l N O L O 8 8
O n e
L x o m p I e
H o t I e m ' s k i v e t t o n A p o t t m e n t s
w e t e d e v e I o p e d i n 1 9 4 4 o s
o t t o t d o b I e h o u s i n g t o t b I o c k
v e t e t o n s . I n 2 0 0 5 , o v e t 9 0 °
o t k i v e t t o n ' s 1 2 3 0 o p o t t m e n t s
w e t e t e n t - t e g u I o t e d .
S p e c u I o t o t l o t t y G I u c k
b o u g h t k i v e t t o n i n 2 0 0 5 ~
t h e h e i g h t o t t h e b o o m .
H e I o t e t t e ü n o n c e d t o t o n
o s t t o n o m i c o I $ 2 5 0 m i I I i o n .
N o w , t h e d e v e I o p m e n t ' s
t e n t o I i n c o m e c o n ' t e v e n
c o v e t t h e i n t e t e s t p o y m e n t s
o n t h e I o o n !
1 h e b u i I d i n g i s o v e t I e v e t o g e d .
G I u c k c o n ' t ß i p t h e b u i I d i n g
i n t h i s m o t k e t .
W h o t ' s g o i n g t o h o p p e n ?
2
PUkCHASLk GL1S
8UIlDING
1o heIp keep the buiIding ottotd-
obIe, the ptesetvotion putchoset
gets o ptopetty tox obotement.
1LNAN1S S1A¥ IN
1HLIk HOMLS
kivetton stoys ottotdobIe!
keduce
Debt!
ln oruor to sovo ovorlovorogou
bullulngs, tholr uobt hos to bo
brought ln llno wlth tholr lncomo.
louorol rosourcos shoulu onoblo
bonks to wrlto uown o portlon ol
tho uobt÷but only lor spoculotors
who ogroo to now rogulotlon thot
wlll koop tholr bullulngs olloruoblo.
...ond
Ptesetve
with
Shott SoIes!
Jho govornmont shoulu oncourogo
spoculotors onu bonks to soll short
(l.o., ot o loss) to ºprosorvotlon
purchosorsº÷tonont onu govornmont
opprovou ownors commlttou to
monoglng houslng lor tho long torm.
GlUCk SLllS SHOk1
1he money ttom the soIe won't
covet oII his debt, but the bonk
totgives the temoindet, ond the
govetnment gives GIuck pottioI
tox teIiet. (UsuoIIy, totgiven debt
is toxed Iike income.)
8ANkS GL1 kLlILI
1o covet pott ot theit Iosses ttom
totgiving GIuck's debt, the bonk
gets occess to tunds ttom the
1toubIed Assets keIiet Ptogtom.
OvetIevetoged buiIdings hove
mote debt thon they con suppott.
SpecuIotots hove onIy thtee options:
kAISL kLN1S
1o do this, the specuIotot needs
to get tid ot the tenonts ptotected
by tent teguIotions. 1he ovetoge
tutnovet tote tot tent-teguIoted
opottments is 5° pet yeot. Most
specuIotots need o much highet
tote to tutn o ptoüt, ond they'II
totce tenonts out to get it.
CU1 SLkvICLS
It the specuIotot con't tepIoce his
cuttent tenonts with peopIe who
poy mote tent, he'II tty to cut his
expenses~ptobobIy by moking
dtostic teductions in mointenonce,
tepoits, ond othet setvices.
IOkLClOSUkL
It the specuIotot stiII con't moke
the buiIding bteok even ot come
cIose, the bonk wiII totecIose. Iote-
cIosute is o Iengthy ond uncettoin
IegoI ptocess thot is bod tot the
specuIotot, but even wotse tot
tenonts. 1hey did nothing wtong~
but couId stiII Iose theit homes!
In o Ioon modiücotion, the bonk
teduces debt tot specuIotots who
ogtee to new teguIotion.
At kivetton, the gop between income ond expenses wos so gteot thot o
Ioon modiücotion ptobobIy couIdn't heIp. 8ut thete ote othet buiIdings
whete this couId wotk.
8ANkS kLDUCL lOANS
In exchonge tot occess to tedetoI suppott, bonks shouId wtite down (i.e.,
totgive) o pottion ot the unsuppottobIe debt thot the specuIotots owe.
SPLCUlA1OkS GL1 kL-kLGUlA1LD
In exchonge tot this wtite-down, specuIotots wouId hove to entet
into new teguIototy ogteements thot ensute the ünoncioI ond
physicoI integtity ot the buiIdings os ottotdobIe housing.
In o ptesetvotion shott soIe, the
specuIotot seIIs the buiIding to o
buyet who wiII keep the buiIding
ottotdobIe.
1he specuIotot Ioses money but ovoids totecIosute. 1enonts stoy in
theit homes. Hete's how o ptesetvotion shott soIe wouId wotk ot
kivetton:
How Con
We Sove
OvetIevetoged
8uiIdings?
Prouotory oqulty hos put moro thon
ób,000 unlts ol Now ¥ork Clty's
olloruoblo houslng ot rlskl ll nothlng
ls uono, ronts wlll go up, sorvlcos wlll
go uown, onu bullulngs wlll go lnto
loroclosuro.
)&-1
)&-1
N¥C 8UIlDINGS A1 kISk
(DA1A PkOvIDLD 8¥ SUkvL¥ IkOM PAk1NLkSHIP 1O PkLSLkvL AIIOkDA8lL HOUSING, 2009)
4 3
How Con
We Stop
Ptedototy
Lquity in
the Iutute?
ln oruor to provont thls lrom hopponlng
ogoln, wo noou to look ot how thls
hopponou ln tho hrst ploco.
1) INCOML IkOM
kLN1: $12.5M
2) OPLkA1ING
COS1S: $8.5M
3) 1UkNOvLk
kA1L: 5°
4) ANNUAl DL81
SLkvICL: $13M
Since thete's no woy this
buiIding con suppott o
$250 miIIion Ioon with
$13 miIIion in onnuoI
intetest poyments:
lOAN vL1OLD!
Undetwtiting is the ptocess
thot bonks use to decide
whethet ot not to opptove o
Ioon. 8onks usuoIIy check the
voIue ot the undetIying osset
ond the bottowet's obiIity
to tepoy. 8onks got Iox duting
With new undetwtiting stondotds,
bonks wiII Ioon mote tesponsibIy.
With bettet undetwtiting stondotds,
whot wouId hove hoppened ot
kivetton? GIuck wouId hove osked
tot o $250 miIIion Ioon. 1he bonk
wouId hove Iooked ot:
the boom, especioIIy with high-
ptoüIe specuIotots bocked by
ptivote equity. 1o ptevent this ttom
hoppening ogoin, ptoposed soIes
ot muItitomiIy ottotdobIe housing
shouId be teviewed with new
undetwtiting stondotds.
ActuoI
Income
Itom
kents
ActuoI
Opetoting
Lxpenses
ActuoI 1utnovet kotes
1HL SI2L OI A lOAN
SHOUlD 8L lIMI1LD 8¥:
uurlng tho boom, bonks ossumou thot
houslng prlcos woulu go up, onu thot
spoculotors coulu olwoys buy low onu
soll hlgh. Jhoy loonou monoy to spoculo
tors wlthout roolly looklng lnto boslc uoto
Why did bonks Iend money to specuIotots?
llko rontol lncomo, oporotlng oxponsos,
onu turnovor rotos. 8onks olso thought
thoy coulu shou tho rlsk lrom bou loons
through hnonclol tools llko mortgogo
bockou socurltlos.
Pooplo thought mortgogobockou socurltlos woro solo÷bocouso thoro's no woy
o bunch ol borrowors woulu uoloult ot tho somo tlmo, rlght` WkONOl
ISSUL
A bonk issues o mottgoge to o
bottowet. A mottgoge is teoIIy
just o tight to teceive o stteom ot
poyments ttom o bottowet.
SLll
1he issuing bonk seIIs the mott-
goge to on investment bonk.
1hot woy, issuing bonks don't
hove to woit tot monthIy poy-
ments to moke theit money bock,
ond they don't beot the tisk ot
detouIt.
8UNDlL
1he investment bonk bundIes o
bunch ot mottgoges togethet.
8undIing mottgoges divetsiües
the tisk ot detouIt. Lven it o tew
bottowets detouIt, the bundIe is
stiII wotth money.
SlICL
1he investment bonk seIIs sIices
ot the bundIe to investots. 1hese
sIices ote mottgoge-bocked
secutities. Investots ote buying
the tights to o ttoction ot
the poyments ttom o bunch
ot mottgoges.
HOW DO MOk1GAGL-8ACkLD SLCUkI1ILS WOkk?
Jho bost woy to stop prouotory
oqulty ls to rostrlct lts moln sourco
ol lunulng: bonks wllllng to moko
spoculotlvo loons. komombor÷
olghty porcont ol tho lunulng lor
thoso uools como lrom bonksl
ln tho oltormoth ol tho hnonclol
crlsls, olmost ovoryono ogroos thot
bonks noou closor ovorslght.
ll tho lncomo lrom o bullulng con't
covor oporotlng oxponsos onu
poy oll tho loon, rogulotors shoulu
hovo tho ulscrotlon to voto tho loon.
Jhls wlll ury up copltol lor prouotory
oqulty spoculotors onu cloor tho
woy lor rosponslblo, longtorm ownors.
keguIote the 8onks!
ó
W h o t I s
1 h i s A b o u t ?
P t e d o t o t y e q u i t y .
k e o I - e s t o t e s p e c u I o t o t s s p e n t
e x o t b i t o n t s u m s t o b u y u p
o t t o t d o b I e h o u s i n g o I I o v e t
N ¥ C . N o w t h e b u i I d i n g s t h e y
b o u g h t o t e o t t i s k o t d e t o u I t .
1 e n s o t t h o u s o n d s o t t o m i I i e s
s t o n d t o I o s e t h e i t h o m e s ,
o n d N ¥ C s t o n d s t o I o s e t e n s
o t t h o u s o n d s o t o t t o t d o b I e
o p o t t m e n t s . 1 h i s p o s t e t
e x p I o i n s t h e p t o b I e m o n d
h o w t o ü x i t .
4 " 7 &
0 6 3 ) 0 . & 4
8 & % & . " / %
5 3 " / 4 1 " 3 & / $ :
& M F D U F E 0 G G J D J B M T
) P V T J O H & Y Q F S U T
" E W P D B U F T
. F N C F S T P G
U I F . F E J B
5 F O B O U T
4 5 " :
0 3 ( " / * ; & %
) 0 6 4 * / (
' 0 3 1 & 0 1 - &
/ 0 5 1 3 0 ' * 5
' 0 - - 0 8
5 ) & . 0 / & :
M A k I N G P O l I C ¥ P U 8 l I C i s
o p t o g t o m o t t h e C e n t e t t o t U t b o n
P e d o g o g y ( C U P ) t h o t p o i t s p o I i c y
o d v o c o t e s o n d g t o p h i c d e s i g n e t s
t o p t o d u c e t o I d - o u t p o s t e t s I i k e
t h i s o n e . C U P c h o o s e s p t o g t o m
p o t t i c i p o n t s t h t o u g h o j u t y p t o c e s s
o n d t o c i I i t o t e s t h e i t c o I I o b o t o t i o n .
w w w . m o k i n g p o I i c y p u b I i c . n e t
C O l l A 8 O k A 1 O k S
A m y C h o n ( 1 e n o n t s o n d N e i g h b o t s ) ,
G I e n C u m m i n g s ( M 1 W 1 I ) , D i n o l e v y
( U H A 8 ) , J o h n M o n g i n ( C U P ) , o n d
k o s t e n W o o ( C U P )
1 H L C L N 1 L k I O k U k 8 A N
P L D A G O G ¥ ( C U P ) p t o d u c e s
c t e o t i v e e d u c o t i o n o b o u t p I o c e s
o n d h o w t h e y c h o n g e .
w w w . o n o t h e t c u p d e v e I o p m e n t . o t g
1 L N A N 1 S A N D N L I G H 8 O k S
i s t h e I o t g e s t t e n o n t s ' t i g h t s o t g o -
n i z o t i o n i n N e w ¥ o t k S t o t e , w i t h
1 5 , 0 0 0 m e m b e t s . I o t m o t e t h o n
3 0 y e o t s , t h t o u g h g t o s s t o o t s o t g o -
n i z i n g , 1 & N h o s t o t g e d o p o w e t t u I
m o v e m e n t i n t h e ü g h t t o p t e s e t v e
o t t o t d o b I e h o u s i n g , s t t e n g t h e n
t e n o n t p t o t e c t i o n s , o n d s u s t o i n
d i v e t s e o n d I i v o b I e c o m m u n i t i e s .
w w w . t o n d n . o t g
U H A 8 i s o n o n p t o ü t o t g o n i z o t i o n
t h o t h e I p s I o w - i n c o m e t e n o n t s
c o n t t o I t h e i t h o u s i n g t h t o u g h
t h e c t e o t i o n o t I i m i t e d - e q u i t y
c o o p e t o t i v e s . U H A 8 o I s o h e I p s
t e n o n t s p t e s e t v e e x i s t i n g o t t o t d -
o b I e h o u s i n g b y e m p o w e t i n g t h e m
t o m o k e p t o o c t i v e d e c i s i o n s
o b o u t t h e t u t u t e o t t h e i t h o m e s .
w w w . u h o b . o t g
1 & N o n d U H A 8 o t e p o t t o t t h e
P o t t n e t s h i p t o P t e s e t v e A t t o t d o b I e
H o u s i n g .
M 1 W 1 I i s o g t o p h i c d e s i g n s t u d i o
s p e c i o I i z i n g i n p u b I i c o t i o n s ,
e n v i t o n m e n t o I g t o p h i c s , o n d i d e n t i t y
s y s t e m s . M 1 W 1 I e n g o g e s i n
c o I I o b o t o t i v e p t o j e c t s w i t h p o t t n e t s
i n o t h e t d i s c i p I i n e s , s u c h o s
o t c h i t e c t u t e , i n d u s t t i o I d e s i g n , o n d
u t b o n p I o n n i n g . w w w . m t w t t . o t g
1 H A N k S 1 O : P o u I o C t e s p o
( P t o t t C e n t e t t o t C o m m u n i t y
D e v e I o p m e n t ) , D o n D e S I o o v e t ,
S o m S t o t k , v o I e t i o M o g i I e v i c h ,
o n d 1 o m W o t e t s .
S u p p o t t t o t t h i s p t o j e c t w o s p t o v i d e d
b y t h e N e w ¥ o t k S t o t e C o u n c i I o n
t h e A t t s ( N ¥ S C A ) o n d t h e N e w ¥ o t k
D e p o t t m e n t o t C u I t u t o I A t t o i t s .
© 2 0 0 9
P t e d o t o t y
L q u i t y
1 H L
S U k v I v A l
G U I D L
S P ¥
D u t i n g t h e h o u s i n g b o o m ,
s p e c u I o t o t s I o o k e d t o t b u i I d i n g s
t h o t t h e y c o u I d b u y o n d t e s e I I
o t o p t o ü t .
1 h e y t o t g e t e d b u i I d i n g s c o v e t e d
b y g o v e t n m e n t p t o g t o m s t h o t
k e e p t e n t s o t t o t d o b I e . 1 h e n t h e y
t t i e d t o m o x i m i z e t h e i t p t o ü t s b y
p u s h i n g o u t t e n t - t e g u I o t e d t e n o n t s
o n d t o i s i n g t e n t s o t b y s e I I i n g t h e
b u i I d i n g s t o o t h e t s p e c u I o t o t s .
8 U ¥
8 u t o t t e n t h e s p e c u I o t o t s d i d n ' t
h o v e o I I t h e m o n e y ( o t e v e n o n y
o t t h e m o n e y ) t o b u y o b u i I d i n g .
H o w d i d t h e y g e t t h e c o s h ?
I i t s t , o s p e c u I o t o t t o i s e d m o n e y
t t o m p t i v o t e i n v e s t o t s b y p t o m i s i n g
o h i g h t o t e o t t e t u t n i n o s h o t t
p e t i o d o t t i m e .
1 h e n t h e s p e c u I o t o t u s e d t h i s
b o s e m o n e y t o g e t o m u c h
I o t g e t o m o u n t t t o m o b o n k .
1 h e s t o n d o t d t o t m u I o w o s 2 0 °
c o s h t t o m p t i v o t e i n v e s t o t s
o n d 8 0 ° I o o n t t o m o b o n k .

S p e c u I o t o t s w e t e w i I I i n g t o p o y
h u g e p t i c e s t o t b u i I d i n g s b e c o u s e
t h e y t h o u g h t t h e v o I u e o t t h e
b u i I d i n g s c o u I d o n I y g o u p . 8 o n k s
w e t e w i I I i n g t o m o k e h u g e I o o n s
b e c o u s e t h e y t h o u g h t t h e y c o u I d
s h e d t h e t i s k o t b o d I o o n s . ( M o t e
o n t h o t I o t e t ! )
W h o t I s
P t e d o t o t y
L q u i t y ?
I t ' s w h e n s p e c u I o t o t s o v e t p o y
t o t o t t o t d o b I e h o u s i n g w i t h
b o t t o w e d m o n e y , c o n v e t t i t
t o h o u s i n g t o t t i c h p e o p I e ,
o n d ß i p i t t o n e w b u y e t s t o t
o q u i c k p t o ü t .
I t s p e c u I o t o t s s u c c e e d ,
t e n o n t s I o s e t h e i t h o m e s ,
o n d N e w ¥ o t k C i t y I o s e s
o t t o t d o b I e h o u s i n g .
I t s p e c u I o t o t s t o i I o n d c o n ' t
p o y t h e i t m o t t g o g e s , t h e
b u i I d i n g s g o i n t o t o t e c I o s u t e .
1 e n o n t s I o s e t h e i t h o m e s o n d
N e w ¥ o t k I o s e s o t t o t d o b I e
h o u s i n g o n y w o y .
N o b o d y w i n s .
C O N v L k 1
N o w t h e s p e c u I o t o t h o s t o m o k e
s o m e b i g c h o n g e s i n o t d e t
t o m o k e t h e b u i I d i n g s g e n e t o t e
e n o u g h i n c o m e t o c o v e t t h e
n e w d e b t .
1 h e s p e c u I o t o t t o t c e s e x i s t i n g
t e n o n t s o u t b y o n y m e o n s
n e c e s s o t y ~ h o t o s s m e n t , p h o n y
e v i c t i o n p t o c e e d i n g s , c u t b o c k s
i n s e t v i c e s . . .
1 h e n t h e s p e c u I o t o t t t i e s t o g e t o u t
o t o t t o t d o b I e h o u s i n g p t o g t o m s
o n d " t e n o v o t e º n e w I y v o c o n t
o p o t t m e n t s t o t e m o v e t h e m t t o m
N ¥ C ' s t e n t t e g u I o t i o n I o w s .
1 h e s p e c u I o t o t c o n v e t t s t h e
b u i I d i n g i n t o c o n d o s o t t e n t s
o p o t t m e n t s t o w e o I t h i e t t e n o n t s
t o t m o t e m o n e y .
I l I P
1 h e s p e c u I o t o t m o y t t y t o s e I I
t h e b u i I d i n g t o o n o t h e t s p e c u I o t o t
t o t o p t o ü t .
8 u t O O P S ! I i n o n c i o I c t i s i s .
N o b o d y w o n t s t o b u y o n
o v e t p t i c e d b u i I d i n g o n y m o t e .
8 e c o u s e p t e d o t o t y e q u i t y
s p e c u I o t o t s p o i d t o o m u c h t o t
b u i I d i n g s i n t h e ü t s t p I o c e ,
t h e y h o v e h u g e I o o n s t h o t t h e y
c o n ' t p o y o t t . 1 h e b u i I d i n g s o t e
o v e t I e v e t o g e d . W h o t n o w ?
1
W h o t d o
k i v e t t o n ' s
ü n o n c e s
I o o k I i k e
o t t e t
p t e d o t o t y
e q u i t y ?
k i v e t t o n w o s t e ü n o n c e d i n 2 0 0 ó
t o t $ 2 5 0 m i I I i o n i n b o t t o w e d
m o n e y . 1 h o t ' s t o u g h I y t o u t t o
s i x t i m e s i t s v o I u e . 1 h e o n n u o I
i n t e t e s t o n t h o t I o o n i s o b o u t
$ 1 3 m i I I i o n . l e t ' s s e e h o w t h o t
o d d s u p :
1 h e o n n u o I i n t e t e s t o n t h e I o o n
i s n o w m o t e t h o n k i v e t t o n ' s
g t o s s i n c o m e . A n d t h e t e ' s
s t i I I $ 8 . 5 m i I I i o n p e t y e o t i n
o p e t o t i n g c o s t s .
1 h o t ' s o $ 9 m i I I i o n l O S S
p e t y e o t .
U h - o h .
1 h e t e ' s n o w o y t h i s b u i I d i n g
i s s o I v e n t u n I e s s s o m e t h i n g
c h o n g e s .
W h o t
w o s
k i v e t t o n
w o t t h
b e t o t e
p t e d o t o t y
e q u i t y ?
I o t t e s p o n s i b I e I o n g - t e t m
o w n e t s , o b u i I d i n g i s w o t t h
o t o u n d t e n t o ü t t e e n t i m e s t h e
i n c o m e i t c o n n e t i n o y e o t .
l e t ' s b t e o k i t d o w n u s i n g
k i v e t t o n o s o n e x o m p I e :
8 y t h i s c o I c u I o t i o n , k i v e t t o n
h o d o n e t o p e t o t i n g i n c o m e o t
$ 4 m i I I i o n . M u I t i p I y t h o t b y t e n
t o ü t t e e n , o n d y o u g e t o v o I u e
o t $ 4 0 - ó 0 m i I I i o n .
A t t h o t p t i c e , t h e o w n e t c o u I d
c o v e t o p e t o t i n g c o s t s o n d p o y
o t t t h e I o o n w h i I e k e e p i n g t h e
b u i I d i n g o t t o t d o b I e .
1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
$ 4 . 0 M / ¥ k
N L J O P L k A J l N O l N C O M L
$ $ 1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
1 3 . 0 M / ¥ k
l N J L k L 8 J P A ¥ M L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
( $ 9 . 0 M / ¥ k )
N L J O P L k A J l N O L O 8 8
O n e
L x o m p I e
H o t I e m ' s k i v e t t o n A p o t t m e n t s
w e t e d e v e I o p e d i n 1 9 4 4 o s
o t t o t d o b I e h o u s i n g t o t b I o c k
v e t e t o n s . I n 2 0 0 5 , o v e t 9 0 °
o t k i v e t t o n ' s 1 2 3 0 o p o t t m e n t s
w e t e t e n t - t e g u I o t e d .
S p e c u I o t o t l o t t y G I u c k
b o u g h t k i v e t t o n i n 2 0 0 5 ~
t h e h e i g h t o t t h e b o o m .
H e I o t e t t e ü n o n c e d t o t o n
o s t t o n o m i c o I $ 2 5 0 m i I I i o n .
N o w , t h e d e v e I o p m e n t ' s
t e n t o I i n c o m e c o n ' t e v e n
c o v e t t h e i n t e t e s t p o y m e n t s
o n t h e I o o n !
1 h e b u i I d i n g i s o v e t I e v e t o g e d .
G I u c k c o n ' t ß i p t h e b u i I d i n g
i n t h i s m o t k e t .
W h o t ' s g o i n g t o h o p p e n ?
2
PUkCHASLk GL1S
8UIlDING
1o heIp keep the buiIding ottotd-
obIe, the ptesetvotion putchoset
gets o ptopetty tox obotement.
1LNAN1S S1A¥ IN
1HLIk HOMLS
kivetton stoys ottotdobIe!
keduce
Debt!
ln oruor to sovo ovorlovorogou
bullulngs, tholr uobt hos to bo
brought ln llno wlth tholr lncomo.
louorol rosourcos shoulu onoblo
bonks to wrlto uown o portlon ol
tho uobt÷but only lor spoculotors
who ogroo to now rogulotlon thot
wlll koop tholr bullulngs olloruoblo.
...ond
Ptesetve
with
Shott SoIes!
Jho govornmont shoulu oncourogo
spoculotors onu bonks to soll short
(l.o., ot o loss) to ºprosorvotlon
purchosorsº÷tonont onu govornmont
opprovou ownors commlttou to
monoglng houslng lor tho long torm.
GlUCk SLllS SHOk1
1he money ttom the soIe won't
covet oII his debt, but the bonk
totgives the temoindet, ond the
govetnment gives GIuck pottioI
tox teIiet. (UsuoIIy, totgiven debt
is toxed Iike income.)
8ANkS GL1 kLlILI
1o covet pott ot theit Iosses ttom
totgiving GIuck's debt, the bonk
gets occess to tunds ttom the
1toubIed Assets keIiet Ptogtom.
OvetIevetoged buiIdings hove
mote debt thon they con suppott.
SpecuIotots hove onIy thtee options:
kAISL kLN1S
1o do this, the specuIotot needs
to get tid ot the tenonts ptotected
by tent teguIotions. 1he ovetoge
tutnovet tote tot tent-teguIoted
opottments is 5° pet yeot. Most
specuIotots need o much highet
tote to tutn o ptoüt, ond they'II
totce tenonts out to get it.
CU1 SLkvICLS
It the specuIotot con't tepIoce his
cuttent tenonts with peopIe who
poy mote tent, he'II tty to cut his
expenses~ptobobIy by moking
dtostic teductions in mointenonce,
tepoits, ond othet setvices.
IOkLClOSUkL
It the specuIotot stiII con't moke
the buiIding bteok even ot come
cIose, the bonk wiII totecIose. Iote-
cIosute is o Iengthy ond uncettoin
IegoI ptocess thot is bod tot the
specuIotot, but even wotse tot
tenonts. 1hey did nothing wtong~
but couId stiII Iose theit homes!
In o Ioon modiücotion, the bonk
teduces debt tot specuIotots who
ogtee to new teguIotion.
At kivetton, the gop between income ond expenses wos so gteot thot o
Ioon modiücotion ptobobIy couIdn't heIp. 8ut thete ote othet buiIdings
whete this couId wotk.
8ANkS kLDUCL lOANS
In exchonge tot occess to tedetoI suppott, bonks shouId wtite down (i.e.,
totgive) o pottion ot the unsuppottobIe debt thot the specuIotots owe.
SPLCUlA1OkS GL1 kL-kLGUlA1LD
In exchonge tot this wtite-down, specuIotots wouId hove to entet
into new teguIototy ogteements thot ensute the ünoncioI ond
physicoI integtity ot the buiIdings os ottotdobIe housing.
In o ptesetvotion shott soIe, the
specuIotot seIIs the buiIding to o
buyet who wiII keep the buiIding
ottotdobIe.
1he specuIotot Ioses money but ovoids totecIosute. 1enonts stoy in
theit homes. Hete's how o ptesetvotion shott soIe wouId wotk ot
kivetton:
How Con
We Sove
OvetIevetoged
8uiIdings?
Prouotory oqulty hos put moro thon
ób,000 unlts ol Now ¥ork Clty's
olloruoblo houslng ot rlskl ll nothlng
ls uono, ronts wlll go up, sorvlcos wlll
go uown, onu bullulngs wlll go lnto
loroclosuro.
)&-1
)&-1
N¥C 8UIlDINGS A1 kISk
(DA1A PkOvIDLD 8¥ SUkvL¥ IkOM PAk1NLkSHIP 1O PkLSLkvL AIIOkDA8lL HOUSING, 2009)
4 3
How Con
We Stop
Ptedototy
Lquity in
the Iutute?
ln oruor to provont thls lrom hopponlng
ogoln, wo noou to look ot how thls
hopponou ln tho hrst ploco.
1) INCOML IkOM
kLN1: $12.5M
2) OPLkA1ING
COS1S: $8.5M
3) 1UkNOvLk
kA1L: 5°
4) ANNUAl DL81
SLkvICL: $13M
Since thete's no woy this
buiIding con suppott o
$250 miIIion Ioon with
$13 miIIion in onnuoI
intetest poyments:
lOAN vL1OLD!
Undetwtiting is the ptocess
thot bonks use to decide
whethet ot not to opptove o
Ioon. 8onks usuoIIy check the
voIue ot the undetIying osset
ond the bottowet's obiIity
to tepoy. 8onks got Iox duting
With new undetwtiting stondotds,
bonks wiII Ioon mote tesponsibIy.
With bettet undetwtiting stondotds,
whot wouId hove hoppened ot
kivetton? GIuck wouId hove osked
tot o $250 miIIion Ioon. 1he bonk
wouId hove Iooked ot:
the boom, especioIIy with high-
ptoüIe specuIotots bocked by
ptivote equity. 1o ptevent this ttom
hoppening ogoin, ptoposed soIes
ot muItitomiIy ottotdobIe housing
shouId be teviewed with new
undetwtiting stondotds.
ActuoI
Income
Itom
kents
ActuoI
Opetoting
Lxpenses
ActuoI 1utnovet kotes
1HL SI2L OI A lOAN
SHOUlD 8L lIMI1LD 8¥:
uurlng tho boom, bonks ossumou thot
houslng prlcos woulu go up, onu thot
spoculotors coulu olwoys buy low onu
soll hlgh. Jhoy loonou monoy to spoculo
tors wlthout roolly looklng lnto boslc uoto
Why did bonks Iend money to specuIotots?
llko rontol lncomo, oporotlng oxponsos,
onu turnovor rotos. 8onks olso thought
thoy coulu shou tho rlsk lrom bou loons
through hnonclol tools llko mortgogo
bockou socurltlos.
Pooplo thought mortgogobockou socurltlos woro solo÷bocouso thoro's no woy
o bunch ol borrowors woulu uoloult ot tho somo tlmo, rlght` WkONOl
ISSUL
A bonk issues o mottgoge to o
bottowet. A mottgoge is teoIIy
just o tight to teceive o stteom ot
poyments ttom o bottowet.
SLll
1he issuing bonk seIIs the mott-
goge to on investment bonk.
1hot woy, issuing bonks don't
hove to woit tot monthIy poy-
ments to moke theit money bock,
ond they don't beot the tisk ot
detouIt.
8UNDlL
1he investment bonk bundIes o
bunch ot mottgoges togethet.
8undIing mottgoges divetsiües
the tisk ot detouIt. Lven it o tew
bottowets detouIt, the bundIe is
stiII wotth money.
SlICL
1he investment bonk seIIs sIices
ot the bundIe to investots. 1hese
sIices ote mottgoge-bocked
secutities. Investots ote buying
the tights to o ttoction ot
the poyments ttom o bunch
ot mottgoges.
HOW DO MOk1GAGL-8ACkLD SLCUkI1ILS WOkk?
Jho bost woy to stop prouotory
oqulty ls to rostrlct lts moln sourco
ol lunulng: bonks wllllng to moko
spoculotlvo loons. komombor÷
olghty porcont ol tho lunulng lor
thoso uools como lrom bonksl
ln tho oltormoth ol tho hnonclol
crlsls, olmost ovoryono ogroos thot
bonks noou closor ovorslght.
ll tho lncomo lrom o bullulng con't
covor oporotlng oxponsos onu
poy oll tho loon, rogulotors shoulu
hovo tho ulscrotlon to voto tho loon.
Jhls wlll ury up copltol lor prouotory
oqulty spoculotors onu cloor tho
woy lor rosponslblo, longtorm ownors.
keguIote the 8onks!
ó
W h o t I s
1 h i s A b o u t ?
P t e d o t o t y e q u i t y .
k e o I - e s t o t e s p e c u I o t o t s s p e n t
e x o t b i t o n t s u m s t o b u y u p
o t t o t d o b I e h o u s i n g o I I o v e t
N ¥ C . N o w t h e b u i I d i n g s t h e y
b o u g h t o t e o t t i s k o t d e t o u I t .
1 e n s o t t h o u s o n d s o t t o m i I i e s
s t o n d t o I o s e t h e i t h o m e s ,
o n d N ¥ C s t o n d s t o I o s e t e n s
o t t h o u s o n d s o t o t t o t d o b I e
o p o t t m e n t s . 1 h i s p o s t e t
e x p I o i n s t h e p t o b I e m o n d
h o w t o ü x i t .
4 " 7 &
0 6 3 ) 0 . & 4
8 & % & . " / %
5 3 " / 4 1 " 3 & / $ :
& M F D U F E 0 G G J D J B M T
) P V T J O H & Y Q F S U T
" E W P D B U F T
. F N C F S T P G
U I F . F E J B
5 F O B O U T
4 5 " :
0 3 ( " / * ; & %
) 0 6 4 * / (
' 0 3 1 & 0 1 - &
/ 0 5 1 3 0 ' * 5
' 0 - - 0 8
5 ) & . 0 / & :
M A k I N G P O l I C ¥ P U 8 l I C i s
o p t o g t o m o t t h e C e n t e t t o t U t b o n
P e d o g o g y ( C U P ) t h o t p o i t s p o I i c y
o d v o c o t e s o n d g t o p h i c d e s i g n e t s
t o p t o d u c e t o I d - o u t p o s t e t s I i k e
t h i s o n e . C U P c h o o s e s p t o g t o m
p o t t i c i p o n t s t h t o u g h o j u t y p t o c e s s
o n d t o c i I i t o t e s t h e i t c o I I o b o t o t i o n .
w w w . m o k i n g p o I i c y p u b I i c . n e t
C O l l A 8 O k A 1 O k S
A m y C h o n ( 1 e n o n t s o n d N e i g h b o t s ) ,
G I e n C u m m i n g s ( M 1 W 1 I ) , D i n o l e v y
( U H A 8 ) , J o h n M o n g i n ( C U P ) , o n d
k o s t e n W o o ( C U P )
1 H L C L N 1 L k I O k U k 8 A N
P L D A G O G ¥ ( C U P ) p t o d u c e s
c t e o t i v e e d u c o t i o n o b o u t p I o c e s
o n d h o w t h e y c h o n g e .
w w w . o n o t h e t c u p d e v e I o p m e n t . o t g
1 L N A N 1 S A N D N L I G H 8 O k S
i s t h e I o t g e s t t e n o n t s ' t i g h t s o t g o -
n i z o t i o n i n N e w ¥ o t k S t o t e , w i t h
1 5 , 0 0 0 m e m b e t s . I o t m o t e t h o n
3 0 y e o t s , t h t o u g h g t o s s t o o t s o t g o -
n i z i n g , 1 & N h o s t o t g e d o p o w e t t u I
m o v e m e n t i n t h e ü g h t t o p t e s e t v e
o t t o t d o b I e h o u s i n g , s t t e n g t h e n
t e n o n t p t o t e c t i o n s , o n d s u s t o i n
d i v e t s e o n d I i v o b I e c o m m u n i t i e s .
w w w . t o n d n . o t g
U H A 8 i s o n o n p t o ü t o t g o n i z o t i o n
t h o t h e I p s I o w - i n c o m e t e n o n t s
c o n t t o I t h e i t h o u s i n g t h t o u g h
t h e c t e o t i o n o t I i m i t e d - e q u i t y
c o o p e t o t i v e s . U H A 8 o I s o h e I p s
t e n o n t s p t e s e t v e e x i s t i n g o t t o t d -
o b I e h o u s i n g b y e m p o w e t i n g t h e m
t o m o k e p t o o c t i v e d e c i s i o n s
o b o u t t h e t u t u t e o t t h e i t h o m e s .
w w w . u h o b . o t g
1 & N o n d U H A 8 o t e p o t t o t t h e
P o t t n e t s h i p t o P t e s e t v e A t t o t d o b I e
H o u s i n g .
M 1 W 1 I i s o g t o p h i c d e s i g n s t u d i o
s p e c i o I i z i n g i n p u b I i c o t i o n s ,
e n v i t o n m e n t o I g t o p h i c s , o n d i d e n t i t y
s y s t e m s . M 1 W 1 I e n g o g e s i n
c o I I o b o t o t i v e p t o j e c t s w i t h p o t t n e t s
i n o t h e t d i s c i p I i n e s , s u c h o s
o t c h i t e c t u t e , i n d u s t t i o I d e s i g n , o n d
u t b o n p I o n n i n g . w w w . m t w t t . o t g
1 H A N k S 1 O : P o u I o C t e s p o
( P t o t t C e n t e t t o t C o m m u n i t y
D e v e I o p m e n t ) , D o n D e S I o o v e t ,
S o m S t o t k , v o I e t i o M o g i I e v i c h ,
o n d 1 o m W o t e t s .
S u p p o t t t o t t h i s p t o j e c t w o s p t o v i d e d
b y t h e N e w ¥ o t k S t o t e C o u n c i I o n
t h e A t t s ( N ¥ S C A ) o n d t h e N e w ¥ o t k
D e p o t t m e n t o t C u I t u t o I A t t o i t s .
© 2 0 0 9
P t e d o t o t y
L q u i t y
1 H L
S U k v I v A l
G U I D L
S P ¥
D u t i n g t h e h o u s i n g b o o m ,
s p e c u I o t o t s I o o k e d t o t b u i I d i n g s
t h o t t h e y c o u I d b u y o n d t e s e I I
o t o p t o ü t .
1 h e y t o t g e t e d b u i I d i n g s c o v e t e d
b y g o v e t n m e n t p t o g t o m s t h o t
k e e p t e n t s o t t o t d o b I e . 1 h e n t h e y
t t i e d t o m o x i m i z e t h e i t p t o ü t s b y
p u s h i n g o u t t e n t - t e g u I o t e d t e n o n t s
o n d t o i s i n g t e n t s o t b y s e I I i n g t h e
b u i I d i n g s t o o t h e t s p e c u I o t o t s .
8 U ¥
8 u t o t t e n t h e s p e c u I o t o t s d i d n ' t
h o v e o I I t h e m o n e y ( o t e v e n o n y
o t t h e m o n e y ) t o b u y o b u i I d i n g .
H o w d i d t h e y g e t t h e c o s h ?
I i t s t , o s p e c u I o t o t t o i s e d m o n e y
t t o m p t i v o t e i n v e s t o t s b y p t o m i s i n g
o h i g h t o t e o t t e t u t n i n o s h o t t
p e t i o d o t t i m e .
1 h e n t h e s p e c u I o t o t u s e d t h i s
b o s e m o n e y t o g e t o m u c h
I o t g e t o m o u n t t t o m o b o n k .
1 h e s t o n d o t d t o t m u I o w o s 2 0 °
c o s h t t o m p t i v o t e i n v e s t o t s
o n d 8 0 ° I o o n t t o m o b o n k .

S p e c u I o t o t s w e t e w i I I i n g t o p o y
h u g e p t i c e s t o t b u i I d i n g s b e c o u s e
t h e y t h o u g h t t h e v o I u e o t t h e
b u i I d i n g s c o u I d o n I y g o u p . 8 o n k s
w e t e w i I I i n g t o m o k e h u g e I o o n s
b e c o u s e t h e y t h o u g h t t h e y c o u I d
s h e d t h e t i s k o t b o d I o o n s . ( M o t e
o n t h o t I o t e t ! )
W h o t I s
P t e d o t o t y
L q u i t y ?
I t ' s w h e n s p e c u I o t o t s o v e t p o y
t o t o t t o t d o b I e h o u s i n g w i t h
b o t t o w e d m o n e y , c o n v e t t i t
t o h o u s i n g t o t t i c h p e o p I e ,
o n d ß i p i t t o n e w b u y e t s t o t
o q u i c k p t o ü t .
I t s p e c u I o t o t s s u c c e e d ,
t e n o n t s I o s e t h e i t h o m e s ,
o n d N e w ¥ o t k C i t y I o s e s
o t t o t d o b I e h o u s i n g .
I t s p e c u I o t o t s t o i I o n d c o n ' t
p o y t h e i t m o t t g o g e s , t h e
b u i I d i n g s g o i n t o t o t e c I o s u t e .
1 e n o n t s I o s e t h e i t h o m e s o n d
N e w ¥ o t k I o s e s o t t o t d o b I e
h o u s i n g o n y w o y .
N o b o d y w i n s .
C O N v L k 1
N o w t h e s p e c u I o t o t h o s t o m o k e
s o m e b i g c h o n g e s i n o t d e t
t o m o k e t h e b u i I d i n g s g e n e t o t e
e n o u g h i n c o m e t o c o v e t t h e
n e w d e b t .
1 h e s p e c u I o t o t t o t c e s e x i s t i n g
t e n o n t s o u t b y o n y m e o n s
n e c e s s o t y ~ h o t o s s m e n t , p h o n y
e v i c t i o n p t o c e e d i n g s , c u t b o c k s
i n s e t v i c e s . . .
1 h e n t h e s p e c u I o t o t t t i e s t o g e t o u t
o t o t t o t d o b I e h o u s i n g p t o g t o m s
o n d " t e n o v o t e º n e w I y v o c o n t
o p o t t m e n t s t o t e m o v e t h e m t t o m
N ¥ C ' s t e n t t e g u I o t i o n I o w s .
1 h e s p e c u I o t o t c o n v e t t s t h e
b u i I d i n g i n t o c o n d o s o t t e n t s
o p o t t m e n t s t o w e o I t h i e t t e n o n t s
t o t m o t e m o n e y .
I l I P
1 h e s p e c u I o t o t m o y t t y t o s e I I
t h e b u i I d i n g t o o n o t h e t s p e c u I o t o t
t o t o p t o ü t .
8 u t O O P S ! I i n o n c i o I c t i s i s .
N o b o d y w o n t s t o b u y o n
o v e t p t i c e d b u i I d i n g o n y m o t e .
8 e c o u s e p t e d o t o t y e q u i t y
s p e c u I o t o t s p o i d t o o m u c h t o t
b u i I d i n g s i n t h e ü t s t p I o c e ,
t h e y h o v e h u g e I o o n s t h o t t h e y
c o n ' t p o y o t t . 1 h e b u i I d i n g s o t e
o v e t I e v e t o g e d . W h o t n o w ?
1
W h o t d o
k i v e t t o n ' s
ü n o n c e s
I o o k I i k e
o t t e t
p t e d o t o t y
e q u i t y ?
k i v e t t o n w o s t e ü n o n c e d i n 2 0 0 ó
t o t $ 2 5 0 m i I I i o n i n b o t t o w e d
m o n e y . 1 h o t ' s t o u g h I y t o u t t o
s i x t i m e s i t s v o I u e . 1 h e o n n u o I
i n t e t e s t o n t h o t I o o n i s o b o u t
$ 1 3 m i I I i o n . l e t ' s s e e h o w t h o t
o d d s u p :
1 h e o n n u o I i n t e t e s t o n t h e I o o n
i s n o w m o t e t h o n k i v e t t o n ' s
g t o s s i n c o m e . A n d t h e t e ' s
s t i I I $ 8 . 5 m i I I i o n p e t y e o t i n
o p e t o t i n g c o s t s .
1 h o t ' s o $ 9 m i I I i o n l O S S
p e t y e o t .
U h - o h .
1 h e t e ' s n o w o y t h i s b u i I d i n g
i s s o I v e n t u n I e s s s o m e t h i n g
c h o n g e s .
W h o t
w o s
k i v e t t o n
w o t t h
b e t o t e
p t e d o t o t y
e q u i t y ?
I o t t e s p o n s i b I e I o n g - t e t m
o w n e t s , o b u i I d i n g i s w o t t h
o t o u n d t e n t o ü t t e e n t i m e s t h e
i n c o m e i t c o n n e t i n o y e o t .
l e t ' s b t e o k i t d o w n u s i n g
k i v e t t o n o s o n e x o m p I e :
8 y t h i s c o I c u I o t i o n , k i v e t t o n
h o d o n e t o p e t o t i n g i n c o m e o t
$ 4 m i I I i o n . M u I t i p I y t h o t b y t e n
t o ü t t e e n , o n d y o u g e t o v o I u e
o t $ 4 0 - ó 0 m i I I i o n .
A t t h o t p t i c e , t h e o w n e t c o u I d
c o v e t o p e t o t i n g c o s t s o n d p o y
o t t t h e I o o n w h i I e k e e p i n g t h e
b u i I d i n g o t t o t d o b I e .
1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
$ 4 . 0 M / ¥ k
N L J O P L k A J l N O l N C O M L
$ $ 1 2 . 5 M / ¥ k
l N C O M L l k O M k L N J
-
1 3 . 0 M / ¥ k
l N J L k L 8 J P A ¥ M L N J
-
8 . 5 M / ¥ k
O P L k A J l N O C O 8 J 8
( $ 9 . 0 M / ¥ k )
N L J O P L k A J l N O L O 8 8
O n e
L x o m p I e
H o t I e m ' s k i v e t t o n A p o t t m e n t s
w e t e d e v e I o p e d i n 1 9 4 4 o s
o t t o t d o b I e h o u s i n g t o t b I o c k
v e t e t o n s . I n 2 0 0 5 , o v e t 9 0 °
o t k i v e t t o n ' s 1 2 3 0 o p o t t m e n t s
w e t e t e n t - t e g u I o t e d .
S p e c u I o t o t l o t t y G I u c k
b o u g h t k i v e t t o n i n 2 0 0 5 ~
t h e h e i g h t o t t h e b o o m .
H e I o t e t t e ü n o n c e d t o t o n
o s t t o n o m i c o I $ 2 5 0 m i I I i o n .
N o w , t h e d e v e I o p m e n t ' s
t e n t o I i n c o m e c o n ' t e v e n
c o v e t t h e i n t e t e s t p o y m e n t s
o n t h e I o o n !
1 h e b u i I d i n g i s o v e t I e v e t o g e d .
G I u c k c o n ' t ß i p t h e b u i I d i n g
i n t h i s m o t k e t .
W h o t ' s g o i n g t o h o p p e n ?
2
PUkCHASLk GL1S
8UIlDING
1o heIp keep the buiIding ottotd-
obIe, the ptesetvotion putchoset
gets o ptopetty tox obotement.
1LNAN1S S1A¥ IN
1HLIk HOMLS
kivetton stoys ottotdobIe!
keduce
Debt!
ln oruor to sovo ovorlovorogou
bullulngs, tholr uobt hos to bo
brought ln llno wlth tholr lncomo.
louorol rosourcos shoulu onoblo
bonks to wrlto uown o portlon ol
tho uobt÷but only lor spoculotors
who ogroo to now rogulotlon thot
wlll koop tholr bullulngs olloruoblo.
...ond
Ptesetve
with
Shott SoIes!
Jho govornmont shoulu oncourogo
spoculotors onu bonks to soll short
(l.o., ot o loss) to ºprosorvotlon
purchosorsº÷tonont onu govornmont
opprovou ownors commlttou to
monoglng houslng lor tho long torm.
GlUCk SLllS SHOk1
1he money ttom the soIe won't
covet oII his debt, but the bonk
totgives the temoindet, ond the
govetnment gives GIuck pottioI
tox teIiet. (UsuoIIy, totgiven debt
is toxed Iike income.)
8ANkS GL1 kLlILI
1o covet pott ot theit Iosses ttom
totgiving GIuck's debt, the bonk
gets occess to tunds ttom the
1toubIed Assets keIiet Ptogtom.
OvetIevetoged buiIdings hove
mote debt thon they con suppott.
SpecuIotots hove onIy thtee options:
kAISL kLN1S
1o do this, the specuIotot needs
to get tid ot the tenonts ptotected
by tent teguIotions. 1he ovetoge
tutnovet tote tot tent-teguIoted
opottments is 5° pet yeot. Most
specuIotots need o much highet
tote to tutn o ptoüt, ond they'II
totce tenonts out to get it.
CU1 SLkvICLS
It the specuIotot con't tepIoce his
cuttent tenonts with peopIe who
poy mote tent, he'II tty to cut his
expenses~ptobobIy by moking
dtostic teductions in mointenonce,
tepoits, ond othet setvices.
IOkLClOSUkL
It the specuIotot stiII con't moke
the buiIding bteok even ot come
cIose, the bonk wiII totecIose. Iote-
cIosute is o Iengthy ond uncettoin
IegoI ptocess thot is bod tot the
specuIotot, but even wotse tot
tenonts. 1hey did nothing wtong~
but couId stiII Iose theit homes!
In o Ioon modiücotion, the bonk
teduces debt tot specuIotots who
ogtee to new teguIotion.
At kivetton, the gop between income ond expenses wos so gteot thot o
Ioon modiücotion ptobobIy couIdn't heIp. 8ut thete ote othet buiIdings
whete this couId wotk.
8ANkS kLDUCL lOANS
In exchonge tot occess to tedetoI suppott, bonks shouId wtite down (i.e.,
totgive) o pottion ot the unsuppottobIe debt thot the specuIotots owe.
SPLCUlA1OkS GL1 kL-kLGUlA1LD
In exchonge tot this wtite-down, specuIotots wouId hove to entet
into new teguIototy ogteements thot ensute the ünoncioI ond
physicoI integtity ot the buiIdings os ottotdobIe housing.
In o ptesetvotion shott soIe, the
specuIotot seIIs the buiIding to o
buyet who wiII keep the buiIding
ottotdobIe.
1he specuIotot Ioses money but ovoids totecIosute. 1enonts stoy in
theit homes. Hete's how o ptesetvotion shott soIe wouId wotk ot
kivetton:
How Con
We Sove
OvetIevetoged
8uiIdings?
Prouotory oqulty hos put moro thon
ób,000 unlts ol Now ¥ork Clty's
olloruoblo houslng ot rlskl ll nothlng
ls uono, ronts wlll go up, sorvlcos wlll
go uown, onu bullulngs wlll go lnto
loroclosuro.
)&-1
)&-1
N¥C 8UIlDINGS A1 kISk
(DA1A PkOvIDLD 8¥ SUkvL¥ IkOM PAk1NLkSHIP 1O PkLSLkvL AIIOkDA8lL HOUSING, 2009)
4 3
How Con
We Stop
Ptedototy
Lquity in
the Iutute?
ln oruor to provont thls lrom hopponlng
ogoln, wo noou to look ot how thls
hopponou ln tho hrst ploco.
1) INCOML IkOM
kLN1: $12.5M
2) OPLkA1ING
COS1S: $8.5M
3) 1UkNOvLk
kA1L: 5°
4) ANNUAl DL81
SLkvICL: $13M
Since thete's no woy this
buiIding con suppott o
$250 miIIion Ioon with
$13 miIIion in onnuoI
intetest poyments:
lOAN vL1OLD!
Undetwtiting is the ptocess
thot bonks use to decide
whethet ot not to opptove o
Ioon. 8onks usuoIIy check the
voIue ot the undetIying osset
ond the bottowet's obiIity
to tepoy. 8onks got Iox duting
With new undetwtiting stondotds,
bonks wiII Ioon mote tesponsibIy.
With bettet undetwtiting stondotds,
whot wouId hove hoppened ot
kivetton? GIuck wouId hove osked
tot o $250 miIIion Ioon. 1he bonk
wouId hove Iooked ot:
the boom, especioIIy with high-
ptoüIe specuIotots bocked by
ptivote equity. 1o ptevent this ttom
hoppening ogoin, ptoposed soIes
ot muItitomiIy ottotdobIe housing
shouId be teviewed with new
undetwtiting stondotds.
ActuoI
Income
Itom
kents
ActuoI
Opetoting
Lxpenses
ActuoI 1utnovet kotes
1HL SI2L OI A lOAN
SHOUlD 8L lIMI1LD 8¥:
uurlng tho boom, bonks ossumou thot
houslng prlcos woulu go up, onu thot
spoculotors coulu olwoys buy low onu
soll hlgh. Jhoy loonou monoy to spoculo
tors wlthout roolly looklng lnto boslc uoto
Why did bonks Iend money to specuIotots?
llko rontol lncomo, oporotlng oxponsos,
onu turnovor rotos. 8onks olso thought
thoy coulu shou tho rlsk lrom bou loons
through hnonclol tools llko mortgogo
bockou socurltlos.
Pooplo thought mortgogobockou socurltlos woro solo÷bocouso thoro's no woy
o bunch ol borrowors woulu uoloult ot tho somo tlmo, rlght` WkONOl
ISSUL
A bonk issues o mottgoge to o
bottowet. A mottgoge is teoIIy
just o tight to teceive o stteom ot
poyments ttom o bottowet.
SLll
1he issuing bonk seIIs the mott-
goge to on investment bonk.
1hot woy, issuing bonks don't
hove to woit tot monthIy poy-
ments to moke theit money bock,
ond they don't beot the tisk ot
detouIt.
8UNDlL
1he investment bonk bundIes o
bunch ot mottgoges togethet.
8undIing mottgoges divetsiües
the tisk ot detouIt. Lven it o tew
bottowets detouIt, the bundIe is
stiII wotth money.
SlICL
1he investment bonk seIIs sIices
ot the bundIe to investots. 1hese
sIices ote mottgoge-bocked
secutities. Investots ote buying
the tights to o ttoction ot
the poyments ttom o bunch
ot mottgoges.
HOW DO MOk1GAGL-8ACkLD SLCUkI1ILS WOkk?
Jho bost woy to stop prouotory
oqulty ls to rostrlct lts moln sourco
ol lunulng: bonks wllllng to moko
spoculotlvo loons. komombor÷
olghty porcont ol tho lunulng lor
thoso uools como lrom bonksl
ln tho oltormoth ol tho hnonclol
crlsls, olmost ovoryono ogroos thot
bonks noou closor ovorslght.
ll tho lncomo lrom o bullulng con't
covor oporotlng oxponsos onu
poy oll tho loon, rogulotors shoulu
hovo tho ulscrotlon to voto tho loon.
Jhls wlll ury up copltol lor prouotory
oqulty spoculotors onu cloor tho
woy lor rosponslblo, longtorm ownors.
keguIote the 8onks!
ó
4UPQ
1SFEBUPSZ
&RVJUZ
4BWF
"GGPSEBCMF
)PVTJOH
To Do:
What Can You Do
To Help Stop
Predatory Equity?

1) FinD the tab that
applies to you.
2) TEar oFF one of
these and hang it
up on your fridge.
3) CHECk oFF the items
one by one to help
stop predatory equity.
aDvoCaTES &
HouSing
ExPErTS
_ TEaCH people about
predatory equity.
_ organizE people
to help stop predatory
equity.
_ Hang this poster up
where people can
see it.
BankS
_ HELP rescue over-
leveraged buildings.
_ Don’T makE LoanS
to predatory
speculators.
_ Don’T let it happen
again.
ELECTED
oFFiCiaLS
_ PaSS laws to save
overleveraged
buildings.
_ PaSS laws to stop
predatory equity.
_ While you’re at it,
PaSS laws to save and
expand affordable
housing.
mEDia
_ TaLk to people who
know the facts.
_ WriTE articles about
what’s going on.
PrEDaTorY
EquiTY
invESTorS
_ FinD some other way
to make money.
TEnanTS
_ ConnECT with
the coalition at
www.tandn.org.
_ organizE other
tenants in your building.
_ TELL your elected
offcials to get moving.
_ PoST this poster up
where people can see.
inSTiTuTionaL
invESTorS
_ Don’T invEST in
predatory equity
schemes.

Whot Is
1his About?
Ptedototy equity.
keoI-estote specuIotots spent
exotbitont sums to buy up
ottotdobIe housing oII ovet
N¥C. Now the buiIdings they
bought ote ot tisk ot detouIt.
1ens ot thousonds ot tomiIies
stond to Iose theit homes,
ond N¥C stonds to Iose tens
ot thousonds ot ottotdobIe
opottments. 1his postet
expIoins the ptobIem ond
how to üx it.
4"7&
063)0.&4
8&%&."/%
53"/41"3&/$:
&MFDUFE0GGJDJBMT
)PVTJOH&YQFSUT
"EWPDBUFT
.FNCFSTPG
UIF.FEJB
5FOBOUT
45":
03("/*;&%
)064*/(
'031&01-&
/05130'*5
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5)&.0/&:
MAkING POlIC¥ PU8lIC is
o ptogtom ot the Centet tot Utbon
Pedogogy (CUP) thot poits poIicy
odvocotes ond gtophic designets
to ptoduce toId-out postets Iike
this one. CUP chooses ptogtom
potticiponts thtough o juty ptocess
ond tociIitotes theit coIIobototion.
www.mokingpoIicypubIic.net
COllA8OkA1OkS
Amy Chon (1enonts ond Neighbots),
GIen Cummings (M1W1I), Dino levy
(UHA8), John Mongin (CUP), ond
kosten Woo (CUP)
1HL CLN1Lk IOk Uk8AN
PLDAGOG¥ (CUP) ptoduces
cteotive educotion obout pIoces
ond how they chonge.
www.onothetcupdeveIopment.otg
1LNAN1S AND NLIGH8OkS
is the Iotgest tenonts' tights otgo-
nizotion in New ¥otk Stote, with
15,000 membets. Iot mote thon
30 yeots, thtough gtosstoots otgo-
nizing, 1&N hos totged o powettuI
movement in the üght to ptesetve
ottotdobIe housing, sttengthen
tenont ptotections, ond sustoin
divetse ond IivobIe communities.
www.tondn.otg
UHA8 is o nonptoüt otgonizotion
thot heIps Iow-income tenonts
conttoI theit housing thtough
the cteotion ot Iimited-equity
coopetotives.UHA8 oIso heIps
tenonts ptesetve existing ottotd-
obIe housing by empoweting them
to moke ptooctive decisions
obout the tutute ot theit homes.
www.uhob.otg
1&N ond UHA8 ote pott ot the
Pottnetship to Ptesetve AttotdobIe
Housing.
M1W1I is o gtophic design studio
specioIizing in pubIicotions,
envitonmentoI gtophics, ond identity
systems. M1W1I engoges in
coIIobototive ptojects with pottnets
in othet discipIines, such os
otchitectute, industtioI design, ond
utbon pIonning. www.mtwtt.otg
1HANkS 1O: PouIo Ctespo
(Ptott Centet tot Community
DeveIopment), Don DeSIoovet,
Som Stotk, voIetio MogiIevich,
ond 1om Wotets.
Suppott tot this ptoject wos ptovided
by the New ¥otk Stote CounciI on
the Atts (N¥SCA) ond the New ¥otk
Depottment ot CuItutoI Attoits.
© 2009
Ptedototy
Lquity
1HL
SUkvIvAl
GUIDL
SP¥
Duting the housing boom,
specuIotots Iooked tot buiIdings
thot they couId buy ond teseII
ot o ptoüt.
1hey totgeted buiIdings coveted
by govetnment ptogtoms thot
keep tents ottotdobIe. 1hen they
ttied to moximize theit ptoüts by
pushing out tent-teguIoted tenonts
ond toising tents ot by seIIing the
buiIdings to othet specuIotots.
8U¥
8ut otten the specuIotots didn't
hove oII the money (ot even ony
ot the money) to buy o buiIding.
How did they get the cosh?
Iitst, o specuIotot toised money
ttom ptivote investots by ptomising
o high tote ot tetutn in o shott
petiod ot time.
1hen the specuIotot used this
bose money to get o much
Iotget omount ttom o bonk.
1he stondotd totmuIo wos 20°
cosh ttom ptivote investots
ond 80° Ioon ttom o bonk.

SpecuIotots wete wiIIing to poy
huge ptices tot buiIdings becouse
they thought the voIue ot the
buiIdings couId onIy go up. 8onks
wete wiIIing to moke huge Ioons
becouse they thought they couId
shed the tisk ot bod Ioons. (Mote
on thot Iotet!)
Whot Is
Ptedototy
Lquity?
It's when specuIotots ovetpoy
tot ottotdobIe housing with
bottowed money, convett it
to housing tot tich peopIe,
ond ßip it to new buyets tot
o quick ptoüt.
It specuIotots succeed,
tenonts Iose theit homes,
ond New ¥otk City Ioses
ottotdobIe housing.
It specuIotots toiI ond con't
poy theit mottgoges, the
buiIdings go into totecIosute.
1enonts Iose theit homes ond
New ¥otk Ioses ottotdobIe
housing onywoy.
Nobody wins.
CONvLk1
Now the specuIotot hos to moke
some big chonges in otdet
to moke the buiIdings genetote
enough income to covet the
new debt.
1he specuIotot totces existing
tenonts out by ony meons
necessoty~hotossment, phony
eviction ptoceedings, cutbocks
in setvices...
1hen the specuIotot tties to get out
ot ottotdobIe housing ptogtoms
ond "tenovoteº newIy vocont
opottments to temove them ttom
N¥C's tent teguIotion Iows.
1he specuIotot convetts the
buiIding into condos ot tents
opottments to weoIthiet tenonts
tot mote money.
IlIP
1he specuIotot moy tty to seII
the buiIding to onothet specuIotot
tot o ptoüt.
8ut OOPS! IinoncioI ctisis.
Nobody wonts to buy on
ovetpticed buiIding onymote.
8ecouse ptedototy equity
specuIotots poid too much tot
buiIdings in the ütst pIoce,
they hove huge Ioons thot they
con't poy ott. 1he buiIdings ote
ovetIevetoged. Whot now?
1
Whot do
kivetton's
ünonces
Iook Iike
ottet
ptedototy
equity?
kivetton wos teünonced in 200ó
tot $250 miIIion in bottowed
money. 1hot's toughIy tout to
six times its voIue. 1he onnuoI
intetest on thot Ioon is obout
$13 miIIion. let's see how thot
odds up:
1he onnuoI intetest on the Ioon
is now mote thon kivetton's
gtoss income. And thete's
stiII $8.5 miIIion pet yeot in
opetoting costs.
1hot's o $9 miIIion lOSS
pet yeot.
Uh-oh.
1hete's no woy this buiIding
is soIvent unIess something
chonges.
Whot
wos
kivetton
wotth
betote
ptedototy
equity?
Iot tesponsibIe Iong-tetm
ownets, o buiIding is wotth
otound ten to ütteen times the
income it con net in o yeot.
let's bteok it down using
kivetton os on exompIe:
8y this coIcuIotion, kivetton
hod o net opetoting income ot
$4 miIIion. MuItipIy thot by ten
to ütteen, ond you get o voIue
ot $40-ó0 miIIion.
At thot ptice, the ownet couId
covet opetoting costs ond poy
ott the Ioon whiIe keeping the
buiIding ottotdobIe.
12.5M/¥k
lNCOML lkOM kLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
$4.0M/¥k
NLJ OPLkAJlNO lNCOML
$
$12.5M/¥k
lNCOML lkOM kLNJ
-
13.0M/¥k
lNJLkL8J PA¥MLNJ
-
8.5M/¥k
OPLkAJlNO CO8J8
($9.0M/¥k)
NLJ OPLkAJlNO LO88
One
LxompIe
HotIem's kivetton Apottments
wete deveIoped in 1944 os
ottotdobIe housing tot bIock
vetetons. In 2005, ovet 90°
ot kivetton's 1230 opottments
wete tent-teguIoted.
SpecuIotot lotty GIuck
bought kivetton in 2005
~

the height ot the boom.
He Iotet teünonced tot on
osttonomicoI $250 miIIion.
Now, the deveIopment's
tentoI income con't even
covet the intetest poyments
on the Ioon!
1he buiIding is ovetIevetoged.
GIuck con't ßip the buiIding
in this motket.
Whot's going to hoppen?
2
P U k C H A S L k G L 1 S
8 U I l D I N G
1 o h e I p k e e p t h e b u i I d i n g o t t o t d -
o b I e , t h e p t e s e t v o t i o n p u t c h o s e t
g e t s o p t o p e t t y t o x o b o t e m e n t .
1 L N A N 1 S S 1 A ¥ I N
1 H L I k H O M L S
k i v e t t o n s t o y s o t t o t d o b I e !
k e d u c e
D e b t !
l n o r u o r t o s o v o o v o r l o v o r o g o u
b u l l u l n g s , t h o l r u o b t h o s t o b o
b r o u g h t l n l l n o w l t h t h o l r l n c o m o .
l o u o r o l r o s o u r c o s s h o u l u o n o b l o
b o n k s t o w r l t o u o w n o p o r t l o n o l
t h o u o b t ÷ b u t o n l y l o r s p o c u l o t o r s
w h o o g r o o t o n o w r o g u l o t l o n t h o t
w l l l k o o p t h o l r b u l l u l n g s o l l o r u o b l o .
. . . o n d
P t e s e t v e
w i t h
S h o t t S o I e s !
J h o g o v o r n m o n t s h o u l u o n c o u r o g o
s p o c u l o t o r s o n u b o n k s t o s o l l s h o r t
( l . o . , o t o l o s s ) t o º p r o s o r v o t l o n
p u r c h o s o r s º ÷ t o n o n t o n u g o v o r n m o n t
o p p r o v o u o w n o r s c o m m l t t o u t o
m o n o g l n g h o u s l n g l o r t h o l o n g t o r m .
G l U C k S L l l S S H O k 1
1 h e m o n e y t t o m t h e s o I e w o n ' t
c o v e t o I I h i s d e b t , b u t t h e b o n k
t o t g i v e s t h e t e m o i n d e t , o n d t h e
g o v e t n m e n t g i v e s G I u c k p o t t i o I
t o x t e I i e t . ( U s u o I I y , t o t g i v e n d e b t
i s t o x e d I i k e i n c o m e . )
8 A N k S G L 1 k L l I L I
1 o c o v e t p o t t o t t h e i t I o s s e s t t o m
t o t g i v i n g G I u c k ' s d e b t , t h e b o n k
g e t s o c c e s s t o t u n d s t t o m t h e
1 t o u b I e d A s s e t s k e I i e t P t o g t o m .
O v e t I e v e t o g e d b u i I d i n g s h o v e
m o t e d e b t t h o n t h e y c o n s u p p o t t .
S p e c u I o t o t s h o v e o n I y t h t e e o p t i o n s :
k A I S L k L N 1 S
1 o d o t h i s , t h e s p e c u I o t o t n e e d s
t o g e t t i d o t t h e t e n o n t s p t o t e c t e d
b y t e n t t e g u I o t i o n s . 1 h e o v e t o g e
t u t n o v e t t o t e t o t t e n t - t e g u I o t e d
o p o t t m e n t s i s 5 ° p e t y e o t . M o s t
s p e c u I o t o t s n e e d o m u c h h i g h e t
t o t e t o t u t n o p t o ü t , o n d t h e y ' I I
t o t c e t e n o n t s o u t t o g e t i t .
C U 1 S L k v I C L S
I t t h e s p e c u I o t o t c o n ' t t e p I o c e h i s
c u t t e n t t e n o n t s w i t h p e o p I e w h o
p o y m o t e t e n t , h e ' I I t t y t o c u t h i s
e x p e n s e s ~ p t o b o b I y b y m o k i n g
d t o s t i c t e d u c t i o n s i n m o i n t e n o n c e ,
t e p o i t s , o n d o t h e t s e t v i c e s .
I O k L C l O S U k L
I t t h e s p e c u I o t o t s t i I I c o n ' t m o k e
t h e b u i I d i n g b t e o k e v e n o t c o m e
c I o s e , t h e b o n k w i I I t o t e c I o s e . I o t e -
c I o s u t e i s o I e n g t h y o n d u n c e t t o i n
I e g o I p t o c e s s t h o t i s b o d t o t t h e
s p e c u I o t o t , b u t e v e n w o t s e t o t
t e n o n t s . 1 h e y d i d n o t h i n g w t o n g ~
b u t c o u I d s t i I I I o s e t h e i t h o m e s !
I n o I o o n m o d i ü c o t i o n , t h e b o n k
t e d u c e s d e b t t o t s p e c u I o t o t s w h o
o g t e e t o n e w t e g u I o t i o n .
A t k i v e t t o n , t h e g o p b e t w e e n i n c o m e o n d e x p e n s e s w o s s o g t e o t t h o t o
I o o n m o d i ü c o t i o n p t o b o b I y c o u I d n ' t h e I p . 8 u t t h e t e o t e o t h e t b u i I d i n g s
w h e t e t h i s c o u I d w o t k .
8 A N k S k L D U C L l O A N S
I n e x c h o n g e t o t o c c e s s t o t e d e t o I s u p p o t t , b o n k s s h o u I d w t i t e d o w n ( i . e . ,
t o t g i v e ) o p o t t i o n o t t h e u n s u p p o t t o b I e d e b t t h o t t h e s p e c u I o t o t s o w e .
S P L C U l A 1 O k S G L 1 k L
-
k L G U l A 1 L D
I n e x c h o n g e t o t t h i s w t i t e - d o w n , s p e c u I o t o t s w o u I d h o v e t o e n t e t
i n t o n e w t e g u I o t o t y o g t e e m e n t s t h o t e n s u t e t h e ü n o n c i o I o n d
p h y s i c o I i n t e g t i t y o t t h e b u i I d i n g s o s o t t o t d o b I e h o u s i n g .
I n o p t e s e t v o t i o n s h o t t s o I e , t h e
s p e c u I o t o t s e I I s t h e b u i I d i n g t o o
b u y e t w h o w i I I k e e p t h e b u i I d i n g
o t t o t d o b I e .
1 h e s p e c u I o t o t I o s e s m o n e y b u t o v o i d s t o t e c I o s u t e . 1 e n o n t s s t o y i n
t h e i t h o m e s . H e t e ' s h o w o p t e s e t v o t i o n s h o t t s o I e w o u I d w o t k o t
k i v e t t o n :
H o w C o n
W e S o v e
O v e t I e v e t o g e d
8 u i I d i n g s ?
P r o u o t o r y o q u l t y h o s p u t m o r o t h o n
ó b , 0 0 0 u n l t s o l N o w ¥ o r k C l t y ' s
o l l o r u o b l o h o u s l n g o t r l s k l l l n o t h l n g
l s u o n o , r o n t s w l l l g o u p , s o r v l c o s w l l l
g o u o w n , o n u b u l l u l n g s w l l l g o l n t o
l o r o c l o s u r o .
) & - 1
) & - 1
N ¥ C 8 U I l D I N G S A 1 k I S k
( D A 1 A P k O v I D L D 8 ¥ S U k v L ¥ I k O M P A k 1 N L k S H I P 1 O P k L S L k v L A I I O k D A 8 l L H O U S I N G , 2 0 0 9 )
43
H o w C o n
W e S t o p
P t e d o t o t y
L q u i t y i n
t h e I u t u t e ?
l n o r u o r t o p r o v o n t t h l s l r o m h o p p o n l n g
o g o l n , w o n o o u t o l o o k o t h o w t h l s
h o p p o n o u l n t h o h r s t p l o c o .
1 ) I N C O M L I k O M
k L N 1 : $ 1 2 . 5 M
2 ) O P L k A 1 I N G
C O S 1 S : $ 8 . 5 M
3 ) 1 U k N O v L k
k A 1 L : 5 °
4 ) A N N U A l D L 8 1
S L k v I C L : $ 1 3 M
S i n c e t h e t e ' s n o w o y t h i s
b u i I d i n g c o n s u p p o t t o
$ 2 5 0 m i I I i o n I o o n w i t h
$ 1 3 m i I I i o n i n o n n u o I
i n t e t e s t p o y m e n t s :
l O A N v L 1 O L D !
U n d e t w t i t i n g i s t h e p t o c e s s
t h o t b o n k s u s e t o d e c i d e
w h e t h e t o t n o t t o o p p t o v e o
I o o n . 8 o n k s u s u o I I y c h e c k t h e
v o I u e o t t h e u n d e t I y i n g o s s e t
o n d t h e b o t t o w e t ' s o b i I i t y
t o t e p o y . 8 o n k s g o t I o x d u t i n g
W i t h n e w u n d e t w t i t i n g s t o n d o t d s ,
b o n k s w i I I I o o n m o t e t e s p o n s i b I y .
W i t h b e t t e t u n d e t w t i t i n g s t o n d o t d s ,
w h o t w o u I d h o v e h o p p e n e d o t
k i v e t t o n ? G I u c k w o u I d h o v e o s k e d
t o t o $ 2 5 0 m i I I i o n I o o n . 1 h e b o n k
w o u I d h o v e I o o k e d o t :
t h e b o o m , e s p e c i o I I y w i t h h i g h -
p t o ü I e s p e c u I o t o t s b o c k e d b y
p t i v o t e e q u i t y . 1 o p t e v e n t t h i s t t o m
h o p p e n i n g o g o i n , p t o p o s e d s o I e s
o t m u I t i t o m i I y o t t o t d o b I e h o u s i n g
s h o u I d b e t e v i e w e d w i t h n e w
u n d e t w t i t i n g s t o n d o t d s .
A c t u o I
I n c o m e
I t o m
k e n t s
A c t u o I
O p e t o t i n g
L x p e n s e s
A c t u o I 1 u t n o v e t k o t e s
1 H L S I 2 L O I A l O A N
S H O U l D 8 L l I M I 1 L D 8 ¥ :
u u r l n g t h o b o o m , b o n k s o s s u m o u t h o t
h o u s l n g p r l c o s w o u l u g o u p , o n u t h o t
s p o c u l o t o r s c o u l u o l w o y s b u y l o w o n u
s o l l h l g h . J h o y l o o n o u m o n o y t o s p o c u l o
t o r s w l t h o u t r o o l l y l o o k l n g l n t o b o s l c u o t o
W h y d i d b o n k s I e n d m o n e y t o s p e c u I o t o t s ?
l l k o r o n t o l l n c o m o , o p o r o t l n g o x p o n s o s ,
o n u t u r n o v o r r o t o s . 8 o n k s o l s o t h o u g h t
t h o y c o u l u s h o u t h o r l s k l r o m b o u l o o n s
t h r o u g h h n o n c l o l t o o l s l l k o m o r t g o g o
b o c k o u s o c u r l t l o s .
P o o p l o t h o u g h t m o r t g o g o b o c k o u s o c u r l t l o s w o r o s o l o ÷ b o c o u s o t h o r o ' s n o w o y
o b u n c h o l b o r r o w o r s w o u l u u o l o u l t o t t h o s o m o t l m o , r l g h t ` W k O N O l
I S S U L
A b o n k i s s u e s o m o t t g o g e t o o
b o t t o w e t . A m o t t g o g e i s t e o I I y
j u s t o t i g h t t o t e c e i v e o s t t e o m o t
p o y m e n t s t t o m o b o t t o w e t .
S L l l
1 h e i s s u i n g b o n k s e I I s t h e m o t t -
g o g e t o o n i n v e s t m e n t b o n k .
1 h o t w o y , i s s u i n g b o n k s d o n ' t
h o v e t o w o i t t o t m o n t h I y p o y -
m e n t s t o m o k e t h e i t m o n e y b o c k ,
o n d t h e y d o n ' t b e o t t h e t i s k o t
d e t o u I t .
8 U N D l L
1 h e i n v e s t m e n t b o n k b u n d I e s o
b u n c h o t m o t t g o g e s t o g e t h e t .
8 u n d I i n g m o t t g o g e s d i v e t s i ü e s
t h e t i s k o t d e t o u I t . L v e n i t o t e w
b o t t o w e t s d e t o u I t , t h e b u n d I e i s
s t i I I w o t t h m o n e y .
S l I C L
1 h e i n v e s t m e n t b o n k s e I I s s I i c e s
o t t h e b u n d I e t o i n v e s t o t s . 1 h e s e
s I i c e s o t e m o t t g o g e - b o c k e d
s e c u t i t i e s . I n v e s t o t s o t e b u y i n g
t h e t i g h t s t o o t t o c t i o n o t
t h e p o y m e n t s t t o m o b u n c h
o t m o t t g o g e s .
H O W D O M O k 1 G A G L - 8 A C k L D S L C U k I 1 I L S W O k k ?
J h o b o s t w o y t o s t o p p r o u o t o r y
o q u l t y l s t o r o s t r l c t l t s m o l n s o u r c o
o l l u n u l n g : b o n k s w l l l l n g t o m o k o
s p o c u l o t l v o l o o n s . k o m o m b o r ÷
o l g h t y p o r c o n t o l t h o l u n u l n g l o r
t h o s o u o o l s c o m o l r o m b o n k s l
l n t h o o l t o r m o t h o l t h o h n o n c l o l
c r l s l s , o l m o s t o v o r y o n o o g r o o s t h o t
b o n k s n o o u c l o s o r o v o r s l g h t .
l l t h o l n c o m o l r o m o b u l l u l n g c o n ' t
c o v o r o p o r o t l n g o x p o n s o s o n u
p o y o l l t h o l o o n , r o g u l o t o r s s h o u l u
h o v o t h o u l s c r o t l o n t o v o t o t h o l o o n .
J h l s w l l l u r y u p c o p l t o l l o r p r o u o t o r y
o q u l t y s p o c u l o t o r s o n u c l o o r t h o
w o y l o r r o s p o n s l b l o , l o n g t o r m o w n o r s .
k e g u I o t e t h e 8 o n k s !
ó
Whot Is
1his About?
Ptedototy equity.
keoI-estote specuIotots spent
exotbitont sums to buy up
ottotdobIe housing oII ovet
N¥C. Now the buiIdings they
bought ote ot tisk ot detouIt.
1ens ot thousonds ot tomiIies
stond to Iose theit homes,
ond N¥C stonds to Iose tens
ot thousonds ot ottotdobIe
opottments. 1his postet
expIoins the ptobIem ond
how to üx it.
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MAkING POlIC¥ PU8lIC is
o ptogtom ot the Centet tot Utbon
Pedogogy (CUP) thot poits poIicy
odvocotes ond gtophic designets
to ptoduce toId-out postets Iike
this one. CUP chooses ptogtom
potticiponts thtough o juty ptocess
ond tociIitotes theit coIIobototion.
www.mokingpoIicypubIic.net
COllA8OkA1OkS
Amy Chon (1enonts ond Neighbots),
GIen Cummings (M1W1I), Dino levy
(UHA8), John Mongin (CUP), ond
kosten Woo (CUP)
1HL CLN1Lk IOk Uk8AN
PLDAGOG¥ (CUP) ptoduces
cteotive educotion obout pIoces
ond how they chonge.
www.onothetcupdeveIopment.otg
1LNAN1S AND NLIGH8OkS
is the Iotgest tenonts' tights otgo-
nizotion in New ¥otk Stote, with
15,000 membets. Iot mote thon
30 yeots, thtough gtosstoots otgo-
nizing, 1&N hos totged o powettuI
movement in the üght to ptesetve
ottotdobIe housing, sttengthen
tenont ptotections, ond sustoin
divetse ond IivobIe communities.
www.tondn.otg
UHA8 is o nonptoüt otgonizotion
thot heIps Iow-income tenonts
conttoI theit housing thtough
the cteotion ot Iimited-equity
coopetotives.UHA8 oIso heIps
tenonts ptesetve existing ottotd-
obIe housing by empoweting them
to moke ptooctive decisions
obout the tutute ot theit homes.
www.uhob.otg
1&N ond UHA8 ote pott ot the
Pottnetship to Ptesetve AttotdobIe
Housing.
M1W1I is o gtophic design studio
specioIizing in pubIicotions,
envitonmentoI gtophics, ond identity
systems. M1W1I engoges in
coIIobototive ptojects with pottnets
in othet discipIines, such os
otchitectute, industtioI design, ond
utbon pIonning. www.mtwtt.otg
1HANkS 1O: PouIo Ctespo
(Ptott Centet tot Community
DeveIopment), Don DeSIoovet,
Som Stotk, voIetio MogiIevich,
ond 1om Wotets.
Suppott tot this ptoject wos ptovided
by the New ¥otk Stote CounciI on
the Atts (N¥SCA) ond the New ¥otk
Depottment ot CuItutoI Attoits.
© 2009
Ptedototy
Lquity
1HL
SUkvIvAl
GUIDL
SP¥
Duting the housing boom,
specuIotots Iooked tot buiIdings
thot they couId buy ond teseII
ot o ptoüt.
1hey totgeted buiIdings coveted
by govetnment ptogtoms thot
keep tents ottotdobIe. 1hen they
ttied to moximize theit ptoüts by
pushing out tent-teguIoted tenonts
ond toising tents ot by seIIing the
buiIdings to othet specuIotots.
8U¥
8ut otten the specuIotots didn't
hove oII the money (ot even ony
ot the money) to buy o buiIding.
How did they get the cosh?
Iitst, o specuIotot toised money
ttom ptivote investots by ptomising
o high tote ot tetutn in o shott
petiod ot time.
1hen the specuIotot used this
bose money to get o much
Iotget omount ttom o bonk.
1he stondotd totmuIo wos 20°
cosh ttom ptivote investots
ond 80° Ioon ttom o bonk.

SpecuIotots wete wiIIing to poy
huge ptices tot buiIdings becouse
they thought the voIue ot the
buiIdings couId onIy go up. 8onks
wete wiIIing to moke huge Ioons
becouse they thought they couId
shed the tisk ot bod Ioons. (Mote
on thot Iotet!)
Whot Is
Ptedototy
Lquity?
It's when specuIotots ovetpoy
tot ottotdobIe housing with
bottowed money, convett it
to housing tot tich peopIe,
ond ßip it to new buyets tot
o quick ptoüt.
It specuIotots succeed,
tenonts Iose theit homes,
ond New ¥otk City Ioses
ottotdobIe housing.
It specuIotots toiI ond con't
poy theit mottgoges, the
buiIdings go into totecIosute.
1enonts Iose theit homes ond
New ¥otk Ioses ottotdobIe
housing onywoy.
Nobody wins.
CONvLk1
Now the specuIotot hos to moke
some big chonges in otdet
to moke the buiIdings genetote
enough income to covet the
new debt.
1he specuIotot totces existing
tenonts out by ony meons
necessoty~hotossment, phony
eviction ptoceedings, cutbocks
in setvices...
1hen the specuIotot tties to get out
ot ottotdobIe housing ptogtoms
ond "tenovoteº newIy vocont
opottments to temove them ttom
N¥C's tent teguIotion Iows.
1he specuIotot convetts the
buiIding into condos ot tents
opottments to weoIthiet tenonts
tot mote money.
IlIP
1he specuIotot moy tty to seII
the buiIding to onothet specuIotot
tot o ptoüt.
8ut OOPS! IinoncioI ctisis.
Nobody wonts to buy on
ovetpticed buiIding onymote.
8ecouse ptedototy equity
specuIotots poid too much tot
buiIdings in the ütst pIoce,
they hove huge Ioons thot they
con't poy ott. 1he buiIdings ote
ovetIevetoged. Whot now?
1
Whot do
kivetton's
ünonces
Iook Iike
ottet
ptedototy
equity?
kivetton wos teünonced in 200ó
tot $250 miIIion in bottowed
money. 1hot's toughIy tout to
six times its voIue. 1he onnuoI
intetest on thot Ioon is obout
$13 miIIion. let's see how thot
odds up:
1he onnuoI intetest on the Ioon
is now mote thon kivetton's
gtoss income. And thete's
stiII $8.5 miIIion pet yeot in
opetoting costs.
1hot's o $9 miIIion lOSS
pet yeot.
Uh-oh.
1hete's no woy this buiIding
is soIvent unIess something
chonges.
Whot
wos
kivetton
wotth
betote
ptedototy
equity?
Iot tesponsibIe Iong-tetm
ownets, o buiIding is wotth
otound ten to ütteen times the
income it con net in o yeot.
let's bteok it down using
kivetton os on exompIe:
8y this coIcuIotion, kivetton
hod o net opetoting income ot
$4 miIIion. MuItipIy thot by ten
to ütteen, ond you get o voIue
ot $40-ó0 miIIion.
At thot ptice, the ownet couId
covet opetoting costs ond poy
ott the Ioon whiIe keeping the
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One
LxompIe
HotIem's kivetton Apottments
wete deveIoped in 1944 os
ottotdobIe housing tot bIock
vetetons. In 2005, ovet 90°
ot kivetton's 1230 opottments
wete tent-teguIoted.
SpecuIotot lotty GIuck
bought kivetton in 2005
~

the height ot the boom.
He Iotet teünonced tot on
osttonomicoI $250 miIIion.
Now, the deveIopment's
tentoI income con't even
covet the intetest poyments
on the Ioon!
1he buiIding is ovetIevetoged.
GIuck con't ßip the buiIding
in this motket.
Whot's going to hoppen?
2
P U k C H A S L k G L 1 S
8 U I l D I N G
1 o h e I p k e e p t h e b u i I d i n g o t t o t d -
o b I e , t h e p t e s e t v o t i o n p u t c h o s e t
g e t s o p t o p e t t y t o x o b o t e m e n t .
1 L N A N 1 S S 1 A ¥ I N
1 H L I k H O M L S
k i v e t t o n s t o y s o t t o t d o b I e !
k e d u c e
D e b t !
l n o r u o r t o s o v o o v o r l o v o r o g o u
b u l l u l n g s , t h o l r u o b t h o s t o b o
b r o u g h t l n l l n o w l t h t h o l r l n c o m o .
l o u o r o l r o s o u r c o s s h o u l u o n o b l o
b o n k s t o w r l t o u o w n o p o r t l o n o l
t h o u o b t ÷ b u t o n l y l o r s p o c u l o t o r s
w h o o g r o o t o n o w r o g u l o t l o n t h o t
w l l l k o o p t h o l r b u l l u l n g s o l l o r u o b l o .
. . . o n d
P t e s e t v e
w i t h
S h o t t S o I e s !
J h o g o v o r n m o n t s h o u l u o n c o u r o g o
s p o c u l o t o r s o n u b o n k s t o s o l l s h o r t
( l . o . , o t o l o s s ) t o º p r o s o r v o t l o n
p u r c h o s o r s º ÷ t o n o n t o n u g o v o r n m o n t
o p p r o v o u o w n o r s c o m m l t t o u t o
m o n o g l n g h o u s l n g l o r t h o l o n g t o r m .
G l U C k S L l l S S H O k 1
1 h e m o n e y t t o m t h e s o I e w o n ' t
c o v e t o I I h i s d e b t , b u t t h e b o n k
t o t g i v e s t h e t e m o i n d e t , o n d t h e
g o v e t n m e n t g i v e s G I u c k p o t t i o I
t o x t e I i e t . ( U s u o I I y , t o t g i v e n d e b t
i s t o x e d I i k e i n c o m e . )
8 A N k S G L 1 k L l I L I
1 o c o v e t p o t t o t t h e i t I o s s e s t t o m
t o t g i v i n g G I u c k ' s d e b t , t h e b o n k
g e t s o c c e s s t o t u n d s t t o m t h e
1 t o u b I e d A s s e t s k e I i e t P t o g t o m .
O v e t I e v e t o g e d b u i I d i n g s h o v e
m o t e d e b t t h o n t h e y c o n s u p p o t t .
S p e c u I o t o t s h o v e o n I y t h t e e o p t i o n s :
k A I S L k L N 1 S
1 o d o t h i s , t h e s p e c u I o t o t n e e d s
t o g e t t i d o t t h e t e n o n t s p t o t e c t e d
b y t e n t t e g u I o t i o n s . 1 h e o v e t o g e
t u t n o v e t t o t e t o t t e n t - t e g u I o t e d
o p o t t m e n t s i s 5 ° p e t y e o t . M o s t
s p e c u I o t o t s n e e d o m u c h h i g h e t
t o t e t o t u t n o p t o ü t , o n d t h e y ' I I
t o t c e t e n o n t s o u t t o g e t i t .
C U 1 S L k v I C L S
I t t h e s p e c u I o t o t c o n ' t t e p I o c e h i s
c u t t e n t t e n o n t s w i t h p e o p I e w h o
p o y m o t e t e n t , h e ' I I t t y t o c u t h i s
e x p e n s e s ~ p t o b o b I y b y m o k i n g
d t o s t i c t e d u c t i o n s i n m o i n t e n o n c e ,
t e p o i t s , o n d o t h e t s e t v i c e s .
I O k L C l O S U k L
I t t h e s p e c u I o t o t s t i I I c o n ' t m o k e
t h e b u i I d i n g b t e o k e v e n o t c o m e
c I o s e , t h e b o n k w i I I t o t e c I o s e . I o t e -
c I o s u t e i s o I e n g t h y o n d u n c e t t o i n
I e g o I p t o c e s s t h o t i s b o d t o t t h e
s p e c u I o t o t , b u t e v e n w o t s e t o t
t e n o n t s . 1 h e y d i d n o t h i n g w t o n g ~
b u t c o u I d s t i I I I o s e t h e i t h o m e s !
I n o I o o n m o d i ü c o t i o n , t h e b o n k
t e d u c e s d e b t t o t s p e c u I o t o t s w h o
o g t e e t o n e w t e g u I o t i o n .
A t k i v e t t o n , t h e g o p b e t w e e n i n c o m e o n d e x p e n s e s w o s s o g t e o t t h o t o
I o o n m o d i ü c o t i o n p t o b o b I y c o u I d n ' t h e I p . 8 u t t h e t e o t e o t h e t b u i I d i n g s
w h e t e t h i s c o u I d w o t k .
8 A N k S k L D U C L l O A N S
I n e x c h o n g e t o t o c c e s s t o t e d e t o I s u p p o t t , b o n k s s h o u I d w t i t e d o w n ( i . e . ,
t o t g i v e ) o p o t t i o n o t t h e u n s u p p o t t o b I e d e b t t h o t t h e s p e c u I o t o t s o w e .
S P L C U l A 1 O k S G L 1 k L
-
k L G U l A 1 L D
I n e x c h o n g e t o t t h i s w t i t e - d o w n , s p e c u I o t o t s w o u I d h o v e t o e n t e t
i n t o n e w t e g u I o t o t y o g t e e m e n t s t h o t e n s u t e t h e ü n o n c i o I o n d
p h y s i c o I i n t e g t i t y o t t h e b u i I d i n g s o s o t t o t d o b I e h o u s i n g .
I n o p t e s e t v o t i o n s h o t t s o I e , t h e
s p e c u I o t o t s e I I s t h e b u i I d i n g t o o
b u y e t w h o w i I I k e e p t h e b u i I d i n g
o t t o t d o b I e .
1 h e s p e c u I o t o t I o s e s m o n e y b u t o v o i d s t o t e c I o s u t e . 1 e n o n t s s t o y i n
t h e i t h o m e s . H e t e ' s h o w o p t e s e t v o t i o n s h o t t s o I e w o u I d w o t k o t
k i v e t t o n :
H o w C o n
W e S o v e
O v e t I e v e t o g e d
8 u i I d i n g s ?
P r o u o t o r y o q u l t y h o s p u t m o r o t h o n
ó b , 0 0 0 u n l t s o l N o w ¥ o r k C l t y ' s
o l l o r u o b l o h o u s l n g o t r l s k l l l n o t h l n g
l s u o n o , r o n t s w l l l g o u p , s o r v l c o s w l l l
g o u o w n , o n u b u l l u l n g s w l l l g o l n t o
l o r o c l o s u r o .
) & - 1
) & - 1
N ¥ C 8 U I l D I N G S A 1 k I S k
( D A 1 A P k O v I D L D 8 ¥ S U k v L ¥ I k O M P A k 1 N L k S H I P 1 O P k L S L k v L A I I O k D A 8 l L H O U S I N G , 2 0 0 9 )
43
H o w C o n
W e S t o p
P t e d o t o t y
L q u i t y i n
t h e I u t u t e ?
l n o r u o r t o p r o v o n t t h l s l r o m h o p p o n l n g
o g o l n , w o n o o u t o l o o k o t h o w t h l s
h o p p o n o u l n t h o h r s t p l o c o .
1 ) I N C O M L I k O M
k L N 1 : $ 1 2 . 5 M
2 ) O P L k A 1 I N G
C O S 1 S : $ 8 . 5 M
3 ) 1 U k N O v L k
k A 1 L : 5 °
4 ) A N N U A l D L 8 1
S L k v I C L : $ 1 3 M
S i n c e t h e t e ' s n o w o y t h i s
b u i I d i n g c o n s u p p o t t o
$ 2 5 0 m i I I i o n I o o n w i t h
$ 1 3 m i I I i o n i n o n n u o I
i n t e t e s t p o y m e n t s :
l O A N v L 1 O L D !
U n d e t w t i t i n g i s t h e p t o c e s s
t h o t b o n k s u s e t o d e c i d e
w h e t h e t o t n o t t o o p p t o v e o
I o o n . 8 o n k s u s u o I I y c h e c k t h e
v o I u e o t t h e u n d e t I y i n g o s s e t
o n d t h e b o t t o w e t ' s o b i I i t y
t o t e p o y . 8 o n k s g o t I o x d u t i n g
W i t h n e w u n d e t w t i t i n g s t o n d o t d s ,
b o n k s w i I I I o o n m o t e t e s p o n s i b I y .
W i t h b e t t e t u n d e t w t i t i n g s t o n d o t d s ,
w h o t w o u I d h o v e h o p p e n e d o t
k i v e t t o n ? G I u c k w o u I d h o v e o s k e d
t o t o $ 2 5 0 m i I I i o n I o o n . 1 h e b o n k
w o u I d h o v e I o o k e d o t :
t h e b o o m , e s p e c i o I I y w i t h h i g h -
p t o ü I e s p e c u I o t o t s b o c k e d b y
p t i v o t e e q u i t y . 1 o p t e v e n t t h i s t t o m
h o p p e n i n g o g o i n , p t o p o s e d s o I e s
o t m u I t i t o m i I y o t t o t d o b I e h o u s i n g
s h o u I d b e t e v i e w e d w i t h n e w
u n d e t w t i t i n g s t o n d o t d s .
A c t u o I
I n c o m e
I t o m
k e n t s
A c t u o I
O p e t o t i n g
L x p e n s e s
A c t u o I 1 u t n o v e t k o t e s
1 H L S I 2 L O I A l O A N
S H O U l D 8 L l I M I 1 L D 8 ¥ :
u u r l n g t h o b o o m , b o n k s o s s u m o u t h o t
h o u s l n g p r l c o s w o u l u g o u p , o n u t h o t
s p o c u l o t o r s c o u l u o l w o y s b u y l o w o n u
s o l l h l g h . J h o y l o o n o u m o n o y t o s p o c u l o
t o r s w l t h o u t r o o l l y l o o k l n g l n t o b o s l c u o t o
W h y d i d b o n k s I e n d m o n e y t o s p e c u I o t o t s ?
l l k o r o n t o l l n c o m o , o p o r o t l n g o x p o n s o s ,
o n u t u r n o v o r r o t o s . 8 o n k s o l s o t h o u g h t
t h o y c o u l u s h o u t h o r l s k l r o m b o u l o o n s
t h r o u g h h n o n c l o l t o o l s l l k o m o r t g o g o
b o c k o u s o c u r l t l o s .
P o o p l o t h o u g h t m o r t g o g o b o c k o u s o c u r l t l o s w o r o s o l o ÷ b o c o u s o t h o r o ' s n o w o y
o b u n c h o l b o r r o w o r s w o u l u u o l o u l t o t t h o s o m o t l m o , r l g h t ` W k O N O l
I S S U L
A b o n k i s s u e s o m o t t g o g e t o o
b o t t o w e t . A m o t t g o g e i s t e o I I y
j u s t o t i g h t t o t e c e i v e o s t t e o m o t
p o y m e n t s t t o m o b o t t o w e t .
S L l l
1 h e i s s u i n g b o n k s e I I s t h e m o t t -
g o g e t o o n i n v e s t m e n t b o n k .
1 h o t w o y , i s s u i n g b o n k s d o n ' t
h o v e t o w o i t t o t m o n t h I y p o y -
m e n t s t o m o k e t h e i t m o n e y b o c k ,
o n d t h e y d o n ' t b e o t t h e t i s k o t
d e t o u I t .
8 U N D l L
1 h e i n v e s t m e n t b o n k b u n d I e s o
b u n c h o t m o t t g o g e s t o g e t h e t .
8 u n d I i n g m o t t g o g e s d i v e t s i ü e s
t h e t i s k o t d e t o u I t . L v e n i t o t e w
b o t t o w e t s d e t o u I t , t h e b u n d I e i s
s t i I I w o t t h m o n e y .
S l I C L
1 h e i n v e s t m e n t b o n k s e I I s s I i c e s
o t t h e b u n d I e t o i n v e s t o t s . 1 h e s e
s I i c e s o t e m o t t g o g e - b o c k e d
s e c u t i t i e s . I n v e s t o t s o t e b u y i n g
t h e t i g h t s t o o t t o c t i o n o t
t h e p o y m e n t s t t o m o b u n c h
o t m o t t g o g e s .
H O W D O M O k 1 G A G L - 8 A C k L D S L C U k I 1 I L S W O k k ?
J h o b o s t w o y t o s t o p p r o u o t o r y
o q u l t y l s t o r o s t r l c t l t s m o l n s o u r c o
o l l u n u l n g : b o n k s w l l l l n g t o m o k o
s p o c u l o t l v o l o o n s . k o m o m b o r ÷
o l g h t y p o r c o n t o l t h o l u n u l n g l o r
t h o s o u o o l s c o m o l r o m b o n k s l
l n t h o o l t o r m o t h o l t h o h n o n c l o l
c r l s l s , o l m o s t o v o r y o n o o g r o o s t h o t
b o n k s n o o u c l o s o r o v o r s l g h t .
l l t h o l n c o m o l r o m o b u l l u l n g c o n ' t
c o v o r o p o r o t l n g o x p o n s o s o n u
p o y o l l t h o l o o n , r o g u l o t o r s s h o u l u
h o v o t h o u l s c r o t l o n t o v o t o t h o l o o n .
J h l s w l l l u r y u p c o p l t o l l o r p r o u o t o r y
o q u l t y s p o c u l o t o r s o n u c l o o r t h o
w o y l o r r o s p o n s l b l o , l o n g t o r m o w n o r s .
k e g u I o t e t h e 8 o n k s !
ó

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