Steve Croman Released From Jail; Lawmakers Push Legislation to Combat Predatory Equity

Steve Croman after his surrender May 9, 2016.

Steve Croman after his surrender May 9, 2016.

Property owner Steve Croman was sprung from jail on Friday, after serving eight months of a one-year sentence for mortgage and tax fraud. Croman owns a large portfolio of buildings throughout New York City, including many properties on the Lower East Side.

While his official release date was Sunday, Croman actually walked out of the Manhattan Correctional Facility in Lower Manhattan a couple of days early.

Croman pleaded guilty last summer, as part of a deal with the state attorney general’s office.  In a separate civil case, he agreed to pay tenants $8 million and accept a court-ordered monitor for his real estate empire.

In an email, Croman’s high-powered attorney, Ben Brafman, told The Real Deal, “Anyone who gets a one-year sentence gets released after 2/3 of the sentence is served… It’s the law for city jail sentences.” Brafman said his client plans to, “relax and spend time with family.” Page Six reported that Croman’s wife is planning big “welcome home” party for him in Greece.

While news broke over the weekend regarding Croman’s release, two local elected officials were holding a news conference outside the headquarters of another controversial landlord, first son-in-law Jared Kushner. State Sen. Brad Hoylman and State Assembly member Harvey Epstein announced legislation to crack down on “predatory equity.” According to a press release:

The legislation directs the New York State Department of Finanical Services (DFS) to collect data on financial institutions that lend to property owners with the intent to displace current tenants. Specifically, the bill requires DFS to investigate the role financial institutions play in encouraging anti-tenant practices by notorious landlords like Jared Kushner, Steven Croman and Raphael Toledano.  Similar to the subprime mortgage crisis of 2008, lax underwriting standards and a general lack of transparency have allowed speculators and real estate agents to secure outsized mortgages with very little discretion and oversight. Owners use these loans to make purchases based on unrealistic projections of rising rents, and in turn have difficulty paying the mortgages. Building owners — anxious to recoup on their hefty investments — often resort to abusive and exploitative tactics to drive rent-regulated tenants out. These abusive practices, known as predatory equity, are best-exemplified by figures like Steven Croman and Jared Kushner.

 

On Friday, the Stabilizing NYC coalition released its annual list of 10 predatory landlords. Steve Cromaan was among those property owners singled out. Local advocates and tenant leaders gathered at City Hall to draw attention to the updated list. One of the founders of the “Stop Croman Coalition,” Cynthia Chaffee, said, “Even though Croman is (was) in jail, the harassment of tenants continues, including the deprivation services, poor maintenance and the lack of repairs… We will not stop until Croman is permanently eliminated as a landlord. Period.”

On May 17, tenants living in Croman building on the Lower East Side staged rallies to drive home the point that they fully intend to keep up the pressure on the notorious landlord for as long as it takes.

Council member Carlina Rivera at Stabilizing NYC event. Photo: John McCarten/New York City Council.

Council member Carlina Rivera at Stabilizing NYC event. Photo: John McCarten/New York City Council.

 

Stabilizing NYC Coalition Releases Report, “Banking on Gentrification”

Croman resident and LES organizer Cynthia Chaffee speaks at Stabilizing NYC's press conference at City Hall. Photo: Alex Gerald

Croman resident and LES organizer Cynthia Chaffee speaks at Stabilizing NYC’s press conference at City Hall. Photo: Alex Gerald

Tenants, elected officials and community organizers released a report yesterday intended to highlight the banking industry’s role in New York City’s housing crisis.

Stabilizing NYC, a coalition primarily made up of grassroots neighborhood-based organizations including local groups such as CAAAV: Organizing Asian Communities, Cooper Square Committee and Good Old Lower East Side (GOLES) released the report, “Banking on Gentrification.” It asserts that some private equity companies and landlords are using a wide range of tactics, many of them illegal, to remove rent-stabilized tenants. The groups argue that banks may be complicit in the process.

“The Predatory Equity ownership practice uses investment money in the form of private equity to purchase large swaths of affordable housing, with the goal of pushing out existing rent stabilized tenants and to bring in new tenants with higher incomes and higher rents,” says the report, which also poses the question: “What responsibility should financial institutions have for playing a role in the harassment of tenants and the loss of affordable housing?”

The report highlights landlord Steve Croman, who owns many Lower East Side buildings and was recently charged with 20 felony counts related to his alleged predatory business practices and tenant harassment activities.

According to Department of Finance data used in the report, one of Croman’s properties – 529 E. 6th St. – has a gross annual income of $249,928 and costs $182,027 per year to operate, leaving $67,901 available for debt service. A feasibility analyses featured in the report puts the maximum feasible loan amount (assuming a 30 year term and 4.5% rate) at $1,116,756. The current debt on the building is $3,325,000, nearly triple what the building can realistically support. This is the type of predatory financing that drives tenant harassment, according to the report.

Cynthia Chaffee, a Croman resident and Lower East Side community organizer, spoke at the press conference. “To end the scourge of predatory landlords, the banks have to be held accountable to whom they lend to,” she said. “The banks have to reform their lending criteria and investigate all facts on landlord applications to verify all statements and stop predatory over-leveraged financing.”

In conjunction with the report, City Councilmembers Ritchie Torres, Jumaane Williams and Dan Garodnick are introducing a legislative package that would create and maintain a watch list of multiple dwelling owners who have engaged in practices associated with predatory equity, as well as a watch list of lenders who enable predatory equity – and expand the definition of harassment.

You can read the full report below.