Saturday, February 11, 2012

Financially-Strapped Multi-Unit NYC Residential Apartment Houses Sap Value From Neighboring Rental Buildings

In New York City, Crain's New York Business reports:

  • Overleveraged residential buildings, properties that are not generating enough rental income to cover their mortgage payments and overall maintenance costs, as well as multi-family buildings that have gone through foreclosure are having a negative impact on neighboring properties, according to a new study released Thursday.

  • Buildings within a 500-foot radius of overleveraged properties face a higher risk of physical deterioration and an increase in building code violations, said the study by the Citizens Housing and Planning Council and Enterprise Community Partners.

  • The study, called "The Impact of Multifamily Foreclosures and Over-Mortgaging in Neighborhoods in New York City" looked at more than 1,100 multi-family buildings in Brooklyn, Bronx, Manhattan and Queens that were within 250 to 500 feet of overleveraged properties.

  • Our study suggests that proximity to an over-mortgaged building increases the likelihood of increased code violations, with New York City's Department of Housing Preservation and Development stepping in to carry out additional emergency repairs,” said Harold Shultz, senior fellow of Citizens Housing and Planning Council, in a statement. “As a result, the city should continue its efforts to closely monitor and prevent deterioration in those communities troubled by over-mortgaged multifamily buildings.”

  • Buildings within a 500-foot radius of overleveraged building spend almost twice as much money on emergency repair expenditures conducted by the city, compared to buildings beyond that distance. In 2010, the study estimates that a building that neighbors a distressed property has roughly $1.9 million more in emergency repair charges than those beyond a 500-foot radius.

  • Meanwhile, buildings within 250 feet of troubled properties had a tendency to have major housing code violations compared to buildings further away. These properties had a 13.7% increase in Class C, considered the most hazardous, code violations from 2008 and 2010.(1)

Source: Distressed buildings bring down their neighbors (A new study reveals buildings located 500 feet away from overleveraged and foreclosed properties face risk of deterioration and increased costs to maintain them).

(1) See also:

  • The Real Deal: Foreclosures are contagious in NYC apartment buildings, too,
  • The Wall Street Journal: City Feels Foreclosure Affects:

    "In single-family neighborhoods, you see empty homes and swimming pools filled with algae, in a way that you don't see them in multifamily neighborhoods," said Harold Shultz, a senior fellow at the housing and planning council.

    Instead, the parallel effect on neighboring apartment buildings can be measured in landlords making fewer repairs and a corresponding increase in housing-code violations, according to Mr. Shultz.

    The problem in New York City is widespread, but concentrated in northern Manhattan, the central and west Bronx and central Brooklyn, according to the report.

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