The poster child for the foreclosure crisis has been a middle-income suburban family. But low-income urban renters also saw their buildings over-mortgaged at the height of the crisis, and now faceless hedge funds and nameless investors are replacing their desperate landlords — sometimes with disastrous consequences.
Six years after the foreclosure crisis helped tank the world's economy, investors are snatching up “distressed” properties — those that are in foreclosure or facing foreclosure — and seeking to turn a profit on them. Advocates for affordable housing worry that this profit comes at the expense of tenants.
Joanna Paulino knows this all too well. She lives in a lower-income neighborhood in the Bronx borough of New York City. Her home is a prewar building, a once attractive structure like many others in the city's outer boroughs. But after years of neglect, it is crumbling; there are more than 140 violations registered against the premises.
Paulino tried for years to get her landlord to fix the cracked floor tiles, the faulty electrical wiring, the mold that seems to grow from the walls and that she suspects makes her children ill. But recently, she hasn't known whom to contact. Responsibility for her building was handed off between the landlord who owned it when she moved in, the bank he was indebted to, the private equity fund that bought his debt from his bank, and the real estate holding company that currently owns the mortgage.
“If I had the money I would move,” Paulino said. “But I don't have the money. This is what I have, so this is what I will fight for.”
Over the last several months, Wall Street firms have snapped up an estimated 200,000 single-family homes with the intention of renting them out. The New York–based hedge fund Blackstone Group is now America’s largest landlord of rental homes after purchasing over 40,000 foreclosed single-family homes in 14 metro areas around the country, from Atlanta to Phoenix, to convert into rental properties. But certain investors are also snatching up “distressed” urban rental buildings like the one where Paulino lives in the South Bronx. Unbeknownst to many low-income renters, their buildings were over-mortgaged during the bubble. In New York, many of those buildings are due for refinancing now — making them vulnerable to acquisition by hedge funds. [...]
This article was reported in partnership with The Investigative Fund at The Nation Institute, now known as Type Investigations, with support from the Puffin Foundation.