Homeless shelters prove profitable

Homeless shelters prove profitable

Hundreds of people protested the Pan American hotel’s transformation into a homeless shelter last month, something that may prove quite lucrative for the building owner. Photo: Christopher Barca

By Christopher Barca
Originally published in the Queens Chronicle.

City pays an average of $2,000 per unit, per month to landlords

A new, lucrative way of making money in the housing market has swept over the city in recent years.

Move over, luxury Long Island City high-rise condos and Brooklyn brownstones, homeless shelters have become hot commodities among some landlords.

As the Department of Homeless Services struggles to house the increasing number of families seeking shelter, landlords across the city have opened their apartment buildings or hotels, such as the Pan American in Elmhurst, to the less fortunate.

In return, they reap eye-popping financial benefits.

According to The Wall Street Journal and The Real Deal, a real estate publication, the average monthly rent in Queens in the fourth quarter of 2013 was $1,662.

But according to Department of Homeless Services Assistant Commissioner of Government and Human Relations Lisa Black, the city pays, through service providers, hundreds of dollars more per unit, per month.

Not including social services provided to the homeless residents, the city shells out an average of $2,078 to the building’s landlord, which includes rent, utilities, around-the-clock security and furniture, Black said.

The inclusion of social services pushes that amount to an average of $3,027 per month, per unit.

According to a 2013 New York Times report, a handful of landlords, mostly in Manhattan and the Bronx, own numerous poorly run apartment complexes-turned-shelters. The report also details cases of landlords offering tenants up to $25,000 to move in order to house homeless people in their dwellings.

Councilman Donovan Richards (D-Laurelton), a member of the City Council’s Committee on General Welfare, which deals with issues regarding homelessness, said his own rent isn’t nearly as high as what the city pays.

“Of course it’s profitable for people. I pay $1,200 for my rent,” Richards said. “Some of these shelter owners are more concerned about padding their pockets than their residents’ well-being.”

In Queens, the Pan American Hotel was purchased by 7900 Development Corp., headed by Steven Berger, in January and transformed into a homeless shelter last month.

Berger is also the listed owner of the LaGuardia Family Shelter in East Elmhurst, and a phone number for Berger on Department of Buildings documents is the same number for the East River Family Center in Manhattan, which houses upwards of 40 families.

Berger could not be reached for comment by press time.

Councilman Stephen Levin (D-Brooklyn), the chairman of the Committee on General Welfare, said that, while homeless shelters have been profitable in the past, the city is actively trying to cut the amount paid to landlords for their available space.

“Under Mayor Bloomberg, DHS was paying a ton of money and landlords had a lot of leverage,” Levin said. “Now, a rent subsidy program is being developed, which would be paid for through an offset by putting a cap on how much the DHS can pay landlords at $1,500. There may be some flexibility with that number, but that’s the approach.”

Richards agreed with the proposed changes to the system, with the aim of eliminating the profitable aspect of leasing space to house homeless families.

“When residents are living in sometimes decrepit facilities while they’re taking a large amount of tax dollars,” he said, “there’s something wrong with that.”

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