The New Face of Gentrification
In a small church rectory on East 106 Street, 27-year-old Oscar Dominguez contemplates his life in the United States. His face, hidden by the shadow of a white baseball cap, is more solemn than youthful. "It is the same, be it in Puebla or in New York," he says. "We have problems that are caused by the same economic system."
For Dominguez, who left his peasant community in Puebla state seven years ago for Los Angeles and then New York, a straight line has never been the shortest distance between two points. In 2004, threatened by displacement once again, he and other Mexican immigrants formed the Movement for Justice in El Barrio to prevent Steven Kessner-- named one of NYC's ten worst landlords by the Village Voice--from evicting low-income tenants. But when Kessner sold 47 East Harlem properties to the London-based Dawnay, Day Group for $490 million in March 2007, Dominguez and MJB found themselves at odds with a more formidable opponent.
Over the past four years, private investment firms like Dawnay, Day; Normandy Partners; and Vantage Properties have bought 90,000 units in working-class neighborhoods throughout the five boroughs, about 10 percent of the city's rent-regulated stock. According to a report by the Association for Neighborhood and Housing Development, the risky loans behind this new type of investment are extensively leveraged, raising concerns that another mortgage-backed securities crisis may strike the city's rental market. "In addition to passing along the risk of unreasonable loans to someone else," the report reads, "securitization in these multi-family rental buildings also encourages harassment because it creates a system where it is doubly profitable for the lending institution to make loans that are based on grossly inflated rent rolls."
"We're calling them predatory equity firms," says Matt Wade, a tenant organizer with the SRO Law Project. "They have been really aggressive in their business model." According to Benjamin Dulchin of ANHD, an average landlord in New York might expect a 7-8 percent return on his or her investment, as regulated annually by the City Rent Guidelines Board. Private equity firms, on the other hand, seek returns of 15-20 percent. "If you want to get your income much higher, something needs to give," Dulchin says. "What seems to be giving is that the vacancy rate is increasing."
To guarantee sizeable profits, these new landlords have resorted to some of the oldest tricks in the book. In El Barrio, MJB tenants claim Dawnay, Day has neglected life-threatening conditions, inherited with the run-down apartments the firm bought from Kessner. The Department of Housing Preservation and Development found nearly 3,000 code violations in Kessner's properties, but tenants who have sought to lodge complaints with their new landlord have been refused an audience at Dawnay, Day's East Harlem office. MJB staff member Juan Haro says tenants have also been charged for repairs that were never made and should be the responsibility of the property owner.
Dawnay, Day has wrongly assessed El Barrio tenants with late fees on timely rent payments, and has made buyout offers of $10,000--small change on an island where the average monthly rent exceeds $2,700. As the New York Times reported last month, similar efforts by other private equity firms have been effective. Turnover rates in buildings owned by Normandy Partners--which has property in the East Village, Queens, and the Bronx--have soared to over 30 percent, well above the city average of 5.6 percent for rent-regulated apartments.
A group of MJB members have filed suit, demanding Dawnay, Day cancel all false charges and allow tenants to pay rent and make complaints directly to the company. Some have already had their balances brought to zero. "We have documents that prove these charges to be false," says Victor Caletre, one of the tenants. "This is their strategy to force us to leave the apartments so they can renovate them and rent them out for four times more than what we are paying."
Although traditionally hesitant to work with politicians and other community groups, Dawnay, Day's arrival in El Barrio has prompted MJB to form many new alliances. In April, MJB launched an "International Campaign in Defense of El Barrio" with support from student, labor and immigrant organizations like Students for a Democratic Society and the London Coalition Against Poverty. For two months, Haro preached the "Down with Dawnay" gospel across the Atlantic in England, Scotland, Spain and France. "We plan to expose them on their own turf, not just in London, but everywhere they have property," says Haro. "Let everyone know what they're doing in El Barrio."
As other Harlem residents struggling against gentrification have learned, the challenges facing MJB are immense. Despite strong opposition from the Harlem Tenants Council, on April 30 the City Council approved a plan to rezone Harlem's "Main Street," 125 Street, displacing seventy-one local businesses and countless residents. The rezoning extends from river-to-river and will also affect parts of El Barrio. And with the invisible hand of private equity behind Dawnay, Day's stake in East Harlem, the rules of the game have changed. "It's not a brutish, nasty landlord in a battle with a tenant," says Dulchin, referring to the Steven Kessners of the city. "The same imbalances that allowed the subprime crisis to happen are now allowing a very aggressive investment strategy to destroy affordable housing."
Despite Dulchin's grim outlook, Dominguez still has hope. "The media likes these kinds of accomplishments," he said, recalling Kessner's flight from El Barrio. "But we think it's more important that the community speaks for itself, that it makes the act of organizing and demanding our rights something natural. That's how the community will take power."