Turning Foreclosed Sale Condos Into Moderate-Income Housing

Time icon September 2nd, 2009 by Autor Joseph Smith

The increasing number of half-empty and half-finished condominium projects has prompted officials in New York state and city to develop programs to turn foreclosed sale apartments into affordable housing for moderate-income families.

However, the programs are facing some difficulties such as limited budgets and lack of financial incentives to lenders and developers. Added to these hurdles is the challenge of selling low-priced apartments which could result to complications for buyers whose loans depend on the financial status of the building.

Industry experts said that empty buildings are not good for the market and the economy. But they said that turning these empty buildings into affordable housing for moderate-income families brings a lot of problems.

They pointed out that there could be a negative effect on property values, apart and separate from changes in market conditions.

Meanwhile, New York State Housing Finance Agency Chief Executive Officer Priscilla Almodovar said that an affordable housing plan would likely include providing state-financed mortgages to help potential buyers purchase units in condominium buildings where market-rate buyers have already made some acquisition. This means that developers should reduce the market price of the condominium units.

Another state and city program involves allocating $5 million as grants. Under the program, about 125 homebuyers will each receive $40,000. For example, a three-member family earning $107,520 is eligible to purchase an apartment worth $411,000 using the $40,000 funding that the state will provide to the developer.

Similarly, a couple or single person earning not more than $92,160 is eligible to purchase an apartment worth $380,000 using the grant. Almodovar said that the program would take a lot of fine-tuning because the state has no experience with converting unfinished and vacant buildings into housing units that are moderately priced.

On the other hand, Assemblyman Hakeem Jeffries has introduced a legislation that aims to help developers refinance distressed loans, with a maximum worth of $150 million. This proposal is aimed at making it easy to convert troubled condominiums and rental projects into apartments for rent to moderate-income families.

To become eligible for the program, a loan should have been taken out between 2004 and 2008. The refinanced loans would require a developer to add housing units that are moderately priced, which Jeffries hope would account for 50 percent of the building units.

In Brooklyn, there are 66 condominium projects in some phase of development and foreclosure.

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