Volume 75, Number 6 | June 29 - July 5, 2005

Tenants want to make profit, but nonprofit stands in way

Villager photo
From left, Frank Lang, Thomas Yu and Chris Kui of Asian Americans for Equality explain AAFE’s plans to take over two East Village housing development finance corporations.

By Johanna Petersson

Building by building, the Lower East Side’s affordable housing stock is transforming along with the influx of residents with deeper pockets. In many cases, tenants together with affordable-housing advocates are battling rent increases, eviction and owners opting out of Mitchell-Lama agreements. But in some cases, it’s the tenants that want out, claiming it is their right to manage their own buildings.

The latter is the case at 528 E. 11th St. and 390 E. Eighth St. The two buildings are housing development finance corporations, where the tenants, headed by Luis Rivera, a resident at 528 E. 11th St., claim to be the rightful board of the H.D.F.C. On the other side, Tom Fenniman, Carlos “Chino” Garcia and David Mancusco of Interfaith Adopt-a-Building claim they are the board of the H.D.F.C., together with Asian Americans for Equality, an affordable housing organization I.A.B. recently invited in as a managing partner.

An H.D.F.C. is normally an affordable, limited-equity rental or co-op. In this case, the buildings have been rentals owned and run by a nonprofit organization, I.A.B., since 1981.

After negotiations broke down on how to transfer the ownership of the buildings to the tenants in 2003 and 2004, the battle has come to focus on gaining control over the H.D.F.C. board, in order to secure ownership and determine the fate of the buildings.

As tenants started to withhold rent, a legal battle ensued with AAFE and those claiming to be the rightful board of the H.D.F.C. taking the tenants to court. Last week, a judge ruled that the tenants’ money should be placed in a separate fund not controlled by any of the parties while they try to find a solution to their conflict.

Besides the legal dispute to determine the legitimate board members, the struggle is focusing on what kind of regulatory agreement the tenants should adopt, as well a flurry of accusations of mismanagement, fraud and even embezzlement in the past by I.A.B. The tenants say these problems have left the buildings in their current financial difficulties with large arrears of property tax, water and sewer bills. They also accuse I.A.B. of stalling the process of turning the buildings into a low-equity co-op.

On the other side, AAFE claims the tenants are not capable of managing their buildings as well as AAFE can.

No one denies that there were problems with both drugs and some tenants in the buildings during the 1980s and 1990s.

The tenants recently were offered but rejected an agreement for the buildings to be low-equity co-ops for 99 years — after which ownership would be transferred to the tenants — which would also indemnify the previous board and leave any debt as the tenants’ responsibility. Instead, some tenants favor a 30-year low-equity co-op — after which they would be allowed to sell their apartments at market rate — as well as assurances that no more debt will fall into their lap. In a low-equity co-op, if the tenants move out, they cannot sell the units for profit, but only at the price at which they purchased them, plus the cost of any improvements.

“We feel that since 1999 we have been in charge of these buildings, running them. And then now to offer us this agreement,” said Rivera. “Why should we take all the responsibility for I.A.B.’s mistakes? We keep uncovering more and more debt, but we will never being able to enjoy owning our apartments.”

According to Rivera, the city has offered to write off some of the property tax debt if the H.D.F.C. is turned into a 30-year low-equity co-op. All around them in the neighborhood, the tenants see H.D.F.C.’s turning into for-profit co-ops, he noted. It feels unfair that they are stuck in limbo, said Rivera.

Interfaith Adopt-a-Building, an organization founded with the purpose of creating and preserving affordable housing in the East Village and Lower East Side, has not filed financial reports with the state attorney general’s office since 1999. In February 2005, the organization filed for dissolution, a request currently under review by the attorney general’s office. Due to these financial and management issues, AAFE has taken over the role of I.A.B.

Garcia, current treasurer of I.A.B, did not respond to several phone calls for comment. However, he issued a joint statement with AAFE, saying, “We’re proud to join together in an effort to maintain affordable housing for [these] residents…. AAFE has a strong reputation and a proven track record in creating and maintaining affordable housing. Working together, we have created a responsible plan to preserve these apartments as affordable housing for low-income families.”

Garcia is also president of CHARAS, the cultural and community organization that formerly occupied the old P.S. 64 on E. Ninth St., when it was “El Bohio.”

Chris Kui, president of AAFE and an outspoken advocate for affordable housing, is concerned about the direction of the debate. AAFE’s point of view is that these buildings need to be stabilized financially, and that the tenants withholding rents and challenging the nonprofit organizations is not doing any good.

“Everything costs money, these are real costs, mending the roof,” Kui said. “There’s emergency repairs needed, maintenance, and all the debt accrued needs to be dealt with. But not all tenants seem aware of this. Some tenants will not be able to manage and might have to leave their homes if the buildings would be turned into a co-op. Our main priority is that these units should be maintained as affordable housing.”

As for the allegations of wrongdoing by I.A.B., Kui said when these problems surfaced, the board fired its executive director and deputy executive director and reported the information to the attorney general’s office.

“I thought that was a pretty responsible way of dealing with that,” said Kui.

Kui noted that if a nonprofit takes in less than $25,000 in funds per year it doesn’t have to file financial reports with the A.G.’s office.

The tenants say they just need more support from the Urban Homesteading Assistance Board, or UHAB, in orderto be able to take control of their buildings.

One affordable-housing advocate, however, expressed concern about the deal being offered the tenants. Debra Bechtel, director of the Brooklyn Law School Corporate and Real Estate Clinic, called the proposal for such a long agreement unusual.

“The 99-year agreement offered to the tenants is the first one of its kind, and AAFE and I.A.B don’t seem to realize that this is a sensitive issue and the tenants feel betrayed,” she said. Bechtel feels AAFE and I.A.B. are acting paternalistically. “I don’t understand the talk of the tenants not being ready,” she said. “They are no less ready than some tenants the city handed control over their building to last week, which I assisted. Will the tenants ever be ready?” she asked.

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