NYC FLIPPED OUT
Families, tenants displaced
Real estate speculators fueled the 2007 to 2009 recession with a wave of mortgage defaults — and now they’re plundering New York like it’s 2006 again.
Speculators, who buy homes at below-market prices and resell within a year — often at hefty markups — bought more than 2,000 one- to fourfamily homes in New York City in 2017, capping steady increases since 2011, with no slowdown in sight.
In a newreport released exclusively to The Post, the Center for NYC Neighborhoods examined the consequences of unchecked house flipping in a city already reeling from an affordable-housing crisis. Speculators are crowding out nonprofessional buyers of affordable homes, pressuring vulnerable families to forgo unrealized home equity and displacing residents of low- to moderate-income neighborhoods, including many communities of color. Since flipped homes usually have rental units, thousands of tenants are also being uprooted as rents soar post-flip.
“We’re very concerned about the impact flipping has, both for the wellbeing of families who own homes, and raised prices that … make New York City unaffordable,” said Caroline Nagy, Deputy Director for Policy and Research at the nonprofit Center for NYC Neighborhoods.
Unchecked flipping also poses grave risks for the larger economy. While many Americans still mistakenly attribute the start of the Great Recession to mortgage defaults by low-income subprime borrowers, speculators were actually at fault, according to a groundbreaking 2017 report by the National Bureau of Economic Research.
“In more economically depressed parts of the country, flipping is sometimes considered a boon because it puts dilapidated homes back on the market,” said the report. “However, in New York City, where prices are skyhigh and demand for homes far exceeds supply, flipping contributes to gentrification and displacement.
“Most of the increase in mortgage debt during the boom, and mortgage delinquencies during the crisis, is driven by mid- to high-credit-score borrowers,” who disproportionately defaulted on their loans during the crisis, NBER’s experts said, noting: “The rise in mortgage delinquencies is virtually exclusively accounted for by real-estate investors.”
State and local officials can combat flipping. Secretary of State Rossana Rosado can expand New York City’s cease-and-desist zones. Legislation in the state senate and assembly proposes slapping a steep tax on speculative transactions, and another assembly bill would require greater disclosure of the owners of limited-liability companies that buy or sell real estate.
“We desperately need LLC transparency in the NewYork City real estate market,” Nagy said.
While buying low and selling high is perfectly legal, CNYCN’s report alleges that some lawyers and brokers funnel unwary homeowners in foreclosure to professional flippers, rather than neutral third parties, for disadvantageous short sales.
Just last week, the US Attorney’s Office for the Southern District of New York announced guilty pleas by father-and-son flipping team Herzel and Amir Meiri for defrauding distressed homeowners in the Bronx, Brooklyn, and Queens from 2013 to 2015, leaving many homeless. The pair will be sentenced in July.
In the past five years, 9,000 homes were flipped in the five boroughs, affecting at least 15,000 individual housing units, including rentals. Flippers paid a median price-per-square-foot of just $212 last year, while comparable homes sold on the open market for a median price-per-square-foot of $368. A spot check of property records showed homes were resold in St. Albans, Queens, last year for 60 percent to 95 percent above prices flippers paid in 2016.
Now that speculators have helped push prices in central-Brooklyn neighborhoods such as BedfordStuyvesant to once-unimaginable heights, flipping’s epicenter has shifted to southeast Queens. St. Albans, birthplace of LL Cool J, was once home to many 20th-Century jazz legends, including Ella Fitzgerald.
Today it’s a prime target for speculators, with signs on telephone poles promising cash for houses and a way out of foreclosure. More than onethird of city homes flipped last year were in foreclosure, compared with just 12 percent of all homes sold.