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The $4.8 million price paid for the three brick buildings containing 75 apartments, on Avenue St. John in the South Bronx, shows how dramatically things have changed in the neighborhood. The buildings are only a few blocks from the blasted rubble where President Jimmy Carter walked in the late 1970s, pledging federal assistance in rebuilding. But most of the restoration that has turned the Bronx's once fire-ravaged homes into quality housing and garbage-strewn lots into gardens came from dedicated community groups, city leaders, and bankers willing to take a chance, not the feds, who largely went into housing isolation starting in the Reagan era.
The neighborhood turnabout made the complex, called Pueblo de Mayagüez, a valuable property once the Department of Housing and Urban Development foreclosed on the former owners and decided to put it up for sale. Just how valuable was demonstrated the first time HUD tried to sell it. That auction, held last December on the steps of the Bronx County courthouse, quickly turned into a fiasco when a bidding war broke out and a family of novice real estate entrepreneurs bid more than they'd intended.
"What happened, tell you the truth, was we had a price in mind and then some guy from California was bidding, so we kept going up," said Robert Garipian. Once things had calmed down, the Garipians realized their price of $5.2 million was more than the subsidized rents of the low-income residents could support. They quickly canceled the purchase.
A few months later, in July, HUD tried again and ran into problems of a different sort. This time the buildings' residents showed up on the courthouse steps to demonstrate, calling for HUD to let them form a tenant-owned cooperative instead. "Buyers beware," their signs read. "You're not wanted."
Police separated the protesters from the auction and the bidding went forward. Tenants timed the sale, and less than a minute later, Emmanuel Ku, a Queens-based landlord and Taiwan native who owns at least a dozen other city properties, emerged as high bidder.
City records show that Ku's buildings have more than 1,400 outstanding code violations. He has been fined 18 times for a total of $23,000 for failing to make repairs and provide basic services, including heat and hot water. The city is currently suing him over a 25-unit building on Frederick Douglass Boulevard in Harlem that has 205 open violations. Another pair of buildings, on Maujer Street in Brooklyn, show nearly 600 violations in just 15 apartments.
"I hear that he's a slumlord," said Kathy Guity, a tenant leader at Pueblo de Mayagüez who showed up to demonstrate against the sale and traveled to Washington to plead with HUD officials not to sell.
Ku denied it. "I don't milk buildings; I take risks," he said. "I'm the daredevil landlord. These buildings will be beautiful."
HUD officials said buyers are screened to see if they have broken HUD rules in the past, not for their maintenance histories. "If they come up clean, they can proceed. That's what happened in this instance," said spokesman Adam Glantz.
Guity and other residents at Pueblo de Mayagüez said they have already been through harrowing times with bad owners and were hoping to avoid a repeat performance. That was why when the Urban Homesteading Assistance Board, a 30-year-old organization that helps low-income tenants take over and run their own buildings, suggested the co-op idea, residents quickly embraced it.
The proposal also won city backing. In a letter just days before the second auction, officials from both the Department of Housing Preservation and Development and the Housing Authority implored HUD to give them extra time to come up with a workable solution for the tenants. Under usual HUD procedures, the feds go along with such requests, since municipalities have the right of first refusal on foreclosed properties. In this instance, however, HUD said no. The agency couldn't risk "further substantial holding costs," officials said.
The costs, however, may be relative. While market pressures make places like Pueblo de Mayagüez attractive investments, the city wrestles with a pressing need for affordable housing. Studies show New York has an estimated shortfall of 400,000 units of low-cost housing. Some 150,000 families live doubled up in cramped apartments. One of every four households pays more than half its income to the landlord. Around the corner from Pueblo de Mayagüez, apartments now rent for more than $1,200.
These are the odds that Guity, 39, figured she had beaten when she found her way 10 years ago to her two-bedroom apartment on the top floor of the four-story brick complex overlooking a playground and a community garden on the corner. The rent was affordable because the apartment carried a low-cost federal mortgage and rent subsidies from the Section 8 program. She sewed white lace curtains for the windows and hung family photos in the apartment's sunny front room. Her husband, Julio, commuted to his job as a building porter. Her three children played on the basketball courts across the street.
The family had good times and bad there. Not long after they moved in, conditions began to slide. The managers stopped making repairs. In bad weather, the roof leaked and the windows flew loose from the sashes. Worst of all were the drug dealers and users who saw the building's lack of security as a business opportunity and set up shop in the halls and on the roof. Guity watched the light fixtures shake as the pushers raced overhead.
Her reprieve from these conditions began when HUD foreclosed on its mortgage and took over management itself. At the time, the Clinton administration, under then HUD secretary Andrew Cuomo, had a policy of rescuing ailing projects and spending the funds necessary to bring them back. A management firm schooled in rescuing troubled buildings took over. Elevators were repaired; new kitchens and baths were installed. The outside of the building was painted a cheery yellow enamel.
Last December, however, Guity paused in the lobby to read a page of fine print that had been posted near the mailboxes. It was in English, not Spanish, the language of most tenants. It announced: "Notice of Default and Foreclosure Sale." This was followed by a series of sentences beginning with the word "Whereas."
For HUD, selling off Pueblo de Mayagüez is part of a nationwide drive to shed costly properties and recoup taxpayer funds. Continuing rent vouchers for residents will keep the complex affordable, officials said.
For UHAB and other groups pressing to hold on to affordable housing, the auctions are a wasteful scandal.
"Because of Ku's ridiculous purchase price, HUD will have to recalculate its Section 8 subsidies at the highest level," said Dina Levy, an organizer for UHAB. "It is going to cost taxpayers more over time, not less. Under our plan, rents would have cost less, not more."
The tenants haven't given up. The Legal Aid Society is pressing in federal court for a preliminary injunction against the building's transfer to Ku on the basis that HUD failed to provide a required 60-day notice to the residents. A hearing is to be held later this month.
UHAB is already working with another group of tenants, who may be next in the auction pipeline. A 36-unit building on Audubon Avenue in Washington Heights called Nueva Era Apartments is facing HUD foreclosure, and tenants there are considering asking that their building become a low-income cooperative.
HUD officials offered a glimmer of hope that future negotiations on foreclosed buildings could be more productive. "We are very open to talk about the transference of properties hereafter," said spokesman Glantz. "We are very interested in sitting down with the city and trying to work things out going forward."