Woes Mount at a Bronx Building Bought in a Bubble

by Sam Dolnick

It was in the community room on the ground floor of 1520 Sedgwick Avenue in the West Bronx that a young D.J. and his turntables helped to invent hip-hop, the music that spawned a global culture.

A generation later, eyes again turned to the hulking brick tower overlooking the Harlem River when tenants, politicians and housing advocates fought to keep the building in a state-run rent-protection program and out of the hands of real estate investors.

They lost the battle, and the building was sold in 2008. Now, more than a year later, housing code violations have piled up, and tenants are seething at the new landlords. Advocates and analysts say that the building’s problems could be a harbinger of a housing crisis in the city’s low-income neighborhoods, especially in the Bronx.

Here, it is not individual homes that are most under threat of foreclosure — it is whole apartment buildings occupied by hundreds of families. And it was not the residents who took out the heavy loans — it was investors who live far from the overleveraged properties.

While banks and owners seek to recoup staggering losses from overly optimistic real estate deals in neighborhoods like the South Bronx, Washington Heights and Corona, Queens, tenants have been left with some of the worst of the bust: crumbling buildings, rats and roaches, the threat of foreclosure.

Since the new owners took over at 1520 Sedgwick Avenue in the fall of 2008, the number of violations has jumped to 598 from 82, an increase of more than 600 percent, according to the Department of Housing Preservation and Development.

“Because it was well maintained and families decided to stay there, relationships grew and it ended up leading to one of the most important cultural contributions in decades,” said Dina Levy, director of organizing and policy at the Urban Homesteading Assistance Board, a tenant advocacy group. “If that were to fall apart, it would be an indicator of what’s going to happen to communities that are stable in the outer boroughs.”

For decades 1520 Sedgwick, which has 102 units, was a much-desired, affordable address for working-class families. When Sylvia Jones moved there in 1997, she said, the lobby was so well maintained that “you could see your face in the floor.” She remembers Christmas parties, Halloween trick-or-treating, back-to-school drives. “We were like a family in there,” Ms. Jones said.

When Clive Campbell, otherwise known as D.J. Kool Herc, held the much-celebrated hip-hop parties in the community room in the early 1970s — parties many see as crucial to the early evolution of hip-hop — the whole building was invited.

Today, a ride in the building’s lurching elevator provides a glimpse of current conditions. It is far from the worst of buildings. But the testimony can be powerful.

Mordistine Alexander, on the 15th floor, said that for three months she had to use a screwdriver to enter her apartment because the lock was broken and no one ever showed up to fix it. Mary Fountain, on the sixth floor, complained of a crack in her bedroom wall, saying, “I can look through and see the sunshine.” Barbara Griles, on the 13th floor, said she planned to move out after 17 years because her toilet flooded her living room, the building’s floors were dirty and “when you ask for service, you don’t get it.”

During the height of the boom, real estate investors, many of whom were backed by private equity funds, paid top dollar for as many as 120,000 apartments across the city, most of which were either rent-regulated or were in buildings that had recently been removed from the state’s Mitchell-Lama housing program, which had kept rents relatively low, according to the Department of Housing Preservation and Development. But the market collapsed, and the new residents willing to pay higher rents never came, leaving the buildings overleveraged and vulnerable.

About 300 of those buildings were in the Bronx, and at least 40 are in foreclosure, according to the University Neighborhood Housing Program. About 100 more buildings in the borough are at risk, the Urban Homesteading Assistance Board says.

Neglect has spurred some tenants to stage protests outside the banks that hold the mortgages.

Others became so fed up with the unresponsive management and the deteriorating conditions that they left the building, or even the borough. About a dozen tenants have moved from 1520 Sedgwick or are planning to, according to the tenants’ association.

The decision to leave carries a special resonance in the Bronx. The fires of the 1970s that turned neighborhoods to rubble began as landlords neglected their properties and middle-class families fled.

“We in New York have definitely seen this movie before,” said Rafael E. Cestero, the commissioner of the Department of Housing Preservation and Development. “The combination of financial distress leading to severe physical distress in these buildings impacts the neighborhoods, and it has a ripple effect that risks destabilizing neighborhoods that we have all spent so much time rebuilding.”

Mr. Cestero divides the city’s overleveraged buildings into three categories. There are about 4,000 apartments, mostly in the Bronx and Washington Heights, with terrible physical and financial problems that have left tenants in housing nightmares. There are at least 90,000 apartments burdened with debt but not in immediate danger of collapse. In between sit some 16,000 apartments at risk, teetering between stability and disrepair. The Sedgwick Avenue building is in this category: Advocates say it can still be saved, but tenants see signs of trouble.

More than 20 residents have filed a lawsuit against the owners of the building, 1520 Sedgwick NY LLC, and the company that manages it, citing the deteriorating conditions.

Azi Mandel, director of Treetop Development, which controls the management firm, called the tenants’ complaints overblown and said the violations had been addressed. “The building is immaculate at all times,” he said.

Mark Karasick, a prominent real estate investor who was part of the group that bought the building, did not return several phone messages. His lawyer, Steven I. Holm, declined to comment because of the pending litigation.

When Mr. Karasick began negotiating to buy 1520 Sedgwick Avenue, housing advocates were puzzled as to why he would be interested in working-class housing stock in the Bronx. Years earlier, Mr. Karasick’s investment group sold the iconic Bank of America Center in San Francisco for more than $1 billion to a group that included Donald Trump.

Mr. Karasick was part of a flood of investors who turned from familiar areas like Midtown Manhattan to gritty neighborhoods uptown, betting big that the wave of gentrification washing across the city would reach the Bronx.

In 2007, Mr. Karasick and a group of investors bought two other Bronx buildings, Robert Fulton Terrace and Fordham Towers, after the previous owners removed the buildings from the Mitchell-Lama program, which allows landlords to receive tax breaks and subsidized mortgages in exchange for limiting their return on equity and keeping rents low. Both buildings are now in foreclosure.

The purchase of the Sedgwick building was so controversial that city officials initially tried to stop the sale, saying that the financing was not viable. Senator Charles E. Schumer and Representative José E. Serrano, among others, rallied behind the tenants’ unsuccessful bid to buy the building, and tried to keep the building in the Mitchell-Lama program.

Tenant advocates and many city officials watched the flurry of sales in some parts of the Bronx and other poor areas with alarm. The rent rolls would not support the high sale prices, they argued, which meant the owners would either force out low-income tenants or slash the buildings’ services.

“Everything has panned out exactly as our worst fears, and that’s pretty scary,” said Ms. Levy of the Urban Homesteading Assistance Board.

Geraldine Davis, a resident of 1520 Sedgwick Avenue for more than 30 years, said that drug dealers had flowed into the building because the locks on the lobby doors were often broken. She pointed to a wide crack in her 13th-floor terrace and uncollected garbage in the trash chute.

“I’m mad up to here,” said Ms. Davis, 70, who raised her two children in the building. “Everything has gone downhill. And everything is getting worse.”

“Miss Gerry,” as she is known to all, prowls the lobby and the laundry room, checking in on everyone’s grievances about the building.

She is determined to preserve the life and community she nurtured for decades. Last month, she decorated the hallway outside her door with Christmas streamers, as she does every year. In her apartment, her teddy bears sit alert on her bed. Ms. Davis has watched several of her friends move to better buildings, but she said she would stay, partly because she has no choice.

“The ones that can afford it are leaving,” she said, traces of a Southern accent from her Florida childhood in her voice. “But not everyone can afford it. I don’t have a place to go. I can’t afford to move.”

Sylvia Jones, who had spent most of her life in the Bronx, had lived at 1520 Sedgwick Avenue for 10 years when the building went up for sale. She said she knew what would follow, and she knew she had to leave.

“The building just starts going down, and the people just stop caring,” she said. “Eventually the only people going to be left in that building are the poor people who have Section 8. They’re not going to go anywhere until the building just collapses.”

Ms. Jones, 60, packed up her things in 2007, before the new management took over, and moved to Monticello, N.Y., a town about 90 miles north of the city. She is adjusting to a new life, even learning to drive. On a recent afternoon, she clutched her car’s steering wheel in a death grip, inching down the empty streets of her adopted town, cringing at the thought of mountain roads at night.

Back on Sedgwick Avenue, Ms. Davis and her neighbors worry about how much worse the building will get. They compare notes and discuss strategies.

Ms. Davis has a message for the landlords. “I was here before you bought this building,” she said, “and I’m going to be here when you lose this building.”