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De Blasio’s Latest Sleazy Deal for Well-Connected Landlords

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De Blasio’s Latest Sleazy Deal for Well-Connected Landlords

New York Post April 15, 2019
Urban PolicyPublic Sector ReformHousingNYC

Just when you think Mayor de Blasio’s sleaze can’t get sleazier, it does. His latest real-estate scandal involves the city’s purchase of substandard housing from politically connected slumlords at well above market value. Corruption aside, this deal is terrible policy, ensuring that New York will spend even more money than the billions it forks over each year on its homeless problem.

Lest you think Hizzoner didn’t learn his lesson from previous scandals, he has. In his first term, he didn’t pay a price for his massive giveaway to a downtown condo developer, or for trying to kill the horse-carriage industry at the behest of property owners.

So in his lame-duck phase, he’s ratcheting up: City Hall is handing over $174 million to companies controlled by brothers Jay and Stuart Podolsky to purchase 729 apartments in 21 buildings across Brooklyn and The Bronx.

The buildings mostly serve as “cluster sites” for homeless families; the city wants to convert them into long-term affordable housing, run by nonprofits, for formerly homeless New Yorkers. Blas donor Frank Carone represents the sellers.

And a good deal Carone helped make: The purchase price is $30 million over the appraised value.

The city insists the price is “consistent with the current median price for a rent-stabilized apartment.” But many of these buildings are in disrepair, having been subject to neglect and hard use for years. They require tens of millions in gut reconstruction — to be financed by taxpayers.

Because the deal is a purchase and not a contract, it underwent no checks and balances from the city comptroller. Scott Stringer has subpoenaed documents, noting that “the explanations provided . . . raise more questions than answers.”

Indeed. To be sure, the goal is fine: Convert expensive homeless shelter apartments into long-term apartments. But there are far better ways to do that.

First, the city could have pursued eminent domain. Homeless services chief Steven Banks has told the comptroller’s office that it didn’t use this strategy, ­because a court might rule for a higher valuation.

Maybe, but not certain. Why not find out? The city is essentially saying it is embracing a risk — paying above-market prices — in order to avoid that risk.

That aside, the city has other options. Consider: The city pays rent to the Podolsky buildings on behalf of homeless tenants — $50 million over five years, nearly $2,000 on each monthly apartment rent.

Two years ago, after a radiator explosion in a similar cluster-site apartment killed two children, the city severed agreements with that provider, which it said was “noncompliant” with city codes.

Virtually all city contracts give the city authority to terminate for cause — and failure to live up to building standards is cause. A Post report found last week that the Podolsky buildings have more than 400 open violations, including dozens of “immediately hazardous” violations.

A hardball tactic would cite contract default, revoking the spigot of easy money.

What would the Podolskys do with 21 empty buildings? Rehab, or sell — but either way, they’ll end up on the housing market. Middle-class and working-class housing in older, smaller buildings is affordable housing.

Indeed, one of the absurdities of the city’s cluster-site homeless shelters — an ill-considered program that goes back to the Giuliani administration — is that owners sometimes harass paying long-term tenants to get them to leave. That way, the owners can win the city’s more lucrative homeless-shelter revenue.

So the city helps create the homeless problem it is trying to fix in the first place.

The city is supposedly afraid, too, that if it leaves the Podolsky buildings empty, the brothers will try to remove their units from rent regulations. But the threshold for deregulation is $2,700 — well above market rate in these neighborhoods.

But what if the Podolskys — or new owners — don’t keep the new apartments up to code? There’s an answer to that, too: City housing officials can do everything from levy fines to, in extreme cases, seizing a building’s management and rents.

Bottom line: There should be no payoff for owners whose business model is to neglect homeless tenants’ apartments as they rake in taxpayer cash, let alone a ­bizarre one-time windfall.

De Blasio has two years left to use this deal as a template, not an aberration. “I hope there will be more such deals,” Legal Aid Society attorney Judith Goldiner told Curbed New York. So do dozens of other cluster-site owners.

This piece originally appeared at New York Post

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Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal. Follow her on Twitter here.

Photo by PeskyMonkey / iStock

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