Blackstone Makes a $5bn Bet on Housing Low-Income Americans

Last month RiseBoro, a landlord learnt that AIG’s disputed stake in its building in the Bushwick section of Brooklyn would be sold to Blackstone, part of a pending $5bn deal that represents the investment group’s most politically charged incursion into the US housing market in the years after the mortgage crisis of 2008.

Joe Dejesus has stopped counting how often he has patched leaks and repaired walls at the rent-controlled Brooklyn housing block where he works as superintendent.

The community organisation that rents out the apartments had been preparing to install a new roof and heating system, but held off when an investment group stepped in to claim sweeping rights over the property, according to people familiar with the charity’s plans.

Instead the landlord, RiseBoro Community Partnership, is entering the third year of a legal battle with insurance company American International Group over who is the long-term owner of the imposing century-old block.

It is one of at least half a dozen fights between charities and powerful investment groups over affordable apartments funded by federal tax credits — a trend that activists say could displace families whose homes were built with billions of dollars of government subsidies.

Those homes are now coveted by private equity firms. Last month RiseBoro learnt that AIG’s disputed stake in its building in the Bushwick section of Brooklyn would be sold to Blackstone, part of a pending $5bn deal that represents the investment group’s most politically charged incursion into the US housing market in the years after the mortgage crisis of 2008.

Housing advocates worry that a private equity takeover of affordable housing could spell trouble. Some fear that housing charities will have to accede to crippling financial settlements with Wall Street investors, or face being stripped of their custodianship of housing assets that provide a bulwark against rising rents.

Others worry about what will happen if financial firms are in charge of affordable housing assets when rent control regulations finally run out. “Gentrification has been going through Bushwick quite rampantly,” Dejesus said. “I’m worried about the families in my building — where are these people supposed to go?”

Blackstone has said it intends to maintain affordability, even after federal and state rent controls on many of the 83,000 apartments that the firm is buying expire over the next 20 years.

But Wall Street’s newest land rush worries Bobby Rozen, who helped design the low-income housing tax credit programme when he was an adviser to Democratic Senator George Mitchell in the 1980s. “Private equity has discovered this sector of the housing market,” he said. “And they are attempting to earn big profits by taking money out of affordable housing in ways that were not contemplated by Congress.”

 Source: Business Telegraph 

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