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.