Feds Halt Major Housing Sale

March 2, 2007 — -- The federal housing secretary halted the proposed $1.3 billion sale of Brooklyn's Starrett City -- the nation's largest federally subsidized apartment complex -- to a firm with a history of housing violations.

Alphonso Jackson, secretary of the U.S. Department of Housing and Urban Developments, said the purchase of the 5,881-unit complex by Clipper Equity would have put its mainly low- and middle-income residents at risk of losing their homes and way of life. HUD could block the purchase because about 90 percent of Starrett City's residents receive federal rent subsidies.

"This is one of the model housing programs in the country," Jackson said. "We cannot stand by and watch the story dissipate, watch as churches and synagogues are razed, replaced by new high-rise buildings."

The proposed sale comes during a historic residential real estate boom in New York City that has made it difficult for many to afford the rising costs of low- and middle-income housing. Last year Stuyvesant Town and Peter Cooper Village -- two subsidized housing complexes in Manhattan -- sold for $5.4 billion. Some residents there now face rent increases of more than 30 percent.

Even though it is half as large as those complexes, Starrett City has its own shopping center, schools, churches, synagogues, power plant and armed security force.Most tenants pay between $200 and $400 a month for the federally subsidized apartments and live on annual gross incomes of about $20,000 to $40,000.

Sen. Charles Schumer (D-N.Y.), Attorney General Andrew Cuomo -- a former HUD secretary -- and Rep. Edolphus Towns (D-N.Y.) pressured Jackson to void the sale to Clipper, because they feared the lofty sale price would drive up unit costs.

Clipper Equity, led by New York landlord David Bistricer, agreed to purchase Starrett City for $500 million more than the next lowest bidder, which could have raised the average unit cost from $90,000 to $200,000, according to Schumer.

Schumer said he is concerned that transactions like the proposed purchase of Starrett City will make New York City a place for the very rich and the very poor.

"New York has always provided ladders for people to climb their way up," Schumer said. "And Starrett is one of those ladders."

Cuomo said they also had serious concerns about Bistricer's record as a landlord. Bistricer had at least 8,792 uncorrected housing violations and in 1998 was barred from selling real estate securities in New York state.

"My office has been arguing strenuously that the proposed purchaser, who has a 6-inch file in this office of complaints and court orders for abuse … of tenants, was not a bona fide purchaser," Cuomo said.

Jackson said Starrett could still be sold, and a new proposal from Clipper would be entertained if it preserved the affordability and quality of life of the development's residents.

``I'll listen to that proposal,'' he said.

And all future bidding for Starrett is going to be clean, clear and fair, assured Schumer. He said this past bidding was unfair because the sellers -- Starrett City Associates -- charged $200,000 just to bid, which left out many community groups that could not afford the fee.

"They are not the only ones involved in this sale," Schumer said. "The goal cannot be just about how much money the owners make."