Decaying apartments symptom of collapse of housing values

NEW YORK — There was no heat or hot water, so for weeks Mary Fountain would fill a bowl and put it in the microwave, then strip off her extra layers to sponge herself clean.

Upstairs, her longtime neighbor, 70-year-old Gearaldine Davis, peers skeptically out at her balcony, hesitant to step onto the cracked concrete. The last time the city inspector came by, he told her he was afraid to walk out there.

This Bronx apartment building, where city housing violations have increased from 82 to nearly 600 in 16 months, is among thousands of rental properties from Los Angeles to Harlem showing a creeping decay as housing values collapse and funds for repairs dry up.

As landlords find themselves owing more than their properties are worth, some have simply walked away, leaving garbage to pile up. Others have disappeared into bankruptcy, with unpaid utility bills. Some have tried to reduce their losses by neglecting basic maintenance.

"There are 100,000 apartments teetering on the edge" in New York City alone, said Harold Shultz, senior fellow at the Citizens Housing and Planning Council.

Across the country, multifamily mortgages covering 340,000 apartment units and worth an estimated $28.8 billion were delinquent or in foreclosure at the end of 2009 — more than 18 times the sum from two years earlier — according to Real Capital Analytics.

Earlier this month, a congressional report warned that the deterioration of these properties could drag down the value of the surrounding neighborhoods. In New York, where these troubled investments centered on gentrifying areas of the Bronx and Harlem, advocates worry the problems could deliver lasting blows to neighborhoods that have long struggled.

Of New York City's 1 million rent-stabilized apartments, more than one-tenth are facing severe financial distress, says Rafael Cestero, commissioner of the city Department of Housing Preservation and Development. Of those, more than one-quarter have deteriorated visibly since the downturn began.

In much of the country the phrase "affordable housing" brings to mind government-owned housing projects relegated to the poor. But in pricey New York City, government-regulated rental apartments have long been a path to survival for middle-class workers.

The owners of the largest of the city's affordable-housing complexes, Stuyvesant Town and Peter Cooper Village, recently gave up the 11,000-unit property when they couldn't make their mortgage payments.

At 1520 Sedgwick Ave. in the Bronx, Davis can remember a time when the building was gleaming, when there were palm trees and telephones in the lobby for residents. In the 1970s, DJ Kool Herc spun records in the community room here, which officials later called the birthplace of hip-hop.

Now, the shine is gone. The community-room door is locked. And Davis recently stuffed every crack in her apartment with steel wool to keep out the rats.

In Chandler, Ariz., the landscape is different, but the story is similar.

The Phoenix suburb was home to some of the 25 properties that Bethany Holdings Group abandoned in California, Arizona, Texas and Colorado.

Trash began piling up on the properties; the pools were covered with green scum. If the city hadn't stepped in, the water would have stopped running, said Daniel Anderson, the city's senior code inspector. Midland Loan Services, which hired the receiver who took over about a dozen of the Bethany properties, did not return a call seeking comment. The listed number for Bethany Holdings has been disconnected.

In East Palo Alto, Calif., creditors are in the process of foreclosing on more than half of the city's rental units. Maintenance, repairs and security suffered at the 1,800 apartments until the city and court-appointed receiver David Wald stepped in, said Wald. A message left for Page Mill Properties, which controlled the properties, was not returned.

In Washington, D.C., The Urban Institute says 2,500 of the city's renter-occupied housing units were in foreclosure in July — double the number two years earlier. In Los Angeles, housing officials put the number at 5,900 last year, more than triple the 2007 figure. In Chicago, 1 in 8 apartment units no longer generate enough revenue to cover operating expenses, a DePaul University study said.