The Wall St. Bailout: What Does it Mean for Tenants?

The Wall Street bailout bill enacted this month contains two important protections for tenants afflicted by predatory-equity landlords, but an affordable- housing trust fund was one of the first victims in congressional negotiations. The bill guarantees that all subsidies and rent protections will remain in place in properties where the federal government intervenes.

“This eliminates the danger that rent stabilization would be preempted by federal law in buildings where the Treasury buys the debt,” Tom Waters of the Community Service Society wrote in an e-mail to local advocates. It also requires that the financial restructuring of any distressed assets ensure that operating costs and adequate maintenance are covered.

“This is not everything we asked for, but it is an important victory for tenants that could end up impacting tens of thousands of families in New York City alone,” Waters wrote.

The proposed affordable-housing fund fell to right-wing pressure. The negotiators deleted a section of the bill that would have given a percentage of the profits from the sale of distressed assets purchased by the government to such a fund. Republicans complained that state and local governments might funnel money from the fund to the community or organizing group ACORN, according to The Politico blog.

ACORN has become a far-right bugaboo in this campaign. The National Review Online calls the group “Barack Obama’s most important radical connection.” New York housing groups concentrated on trying to protect tenants in buildings affected by the bailout. In late September, a coalition of more than 30 housing and community organizations, including Met Council, sent Congress a letter urging it to ensure that tenants’ rights are preserved and that tenants and community groups have a voice in determining the future of those properties.

“The banks did not just make risky loans to people buying single-family homes. They also made these loans to predatory equity speculators who were buying up affordable subsidized and rent-regulated housing at financially unsupportable prices,” the letter said.

“If Congress approves the Bush bank bailout, tenants’ taxpayer money will be used to bail out banks that invested in speculation on buildings like Stuyvesant Town and Peter Cooper Village, the Riverton, Independence Plaza, and hundreds of other rent-regulated, Mitchell-Lama, Section 8, and unregulated buildings all over New York.”

If the federal government acquires multifamily buildings as part of the bailout, Waters wrote, tenants and community groups should be recognized as affected parties. If the federal entity handling the property restructures debt or sells the building, it should do so at a price that won’t impose unaffordable rents or displace tenants, but will provide enough money for rehabilitation, maintenance, and other operating expenses. Tenants and their chosen nonprofit partners should get the first opportunity to purchase any property, and any other buyer should be properly qualified and financially sound.

“These same institutions who are being bailed out refuse to realistically modify loans before foreclosure and insist on evicting families after foreclosure, even when families are willing to buy at appraised value,” Steve Meacham, an organizer at City Life/Vida Urbana in Boston, said in a statement.

City Life/Vida Urbana has been trying to block post-foreclosure evictions for the year and a half. Meacham wrote that financial corporations getting bailed out should be forced to modify loans to what the building is actually worth on the market, sell foreclosed property to occupants or community development groups at that appraised value, stop all no-fault evictions, and accept the rent from occupants until the building is sold. Other proposals people have mentioned include giving local governments the right of first refusal to acquire any rental property that becomes federally owned.

This article originally appeared in the October 2008 edition of the Tenant/Inquilino, the newspaper of the Met Council on Housing.