Non-Profit Housing Lender Gambled on Luxury Condos, Faltered
Over the past few months, one of the most prominent non-profit housing lenders in the country has "teetered at the brink of collapse," Bagli writes. Community Preservation Corporation, a major player in New York's multifamily housing scene, had traditionally financed rent-regulated housing projects, "reviving downtrodden neighborhoods across New York City."
But at the height of the housing bubble, then-CEO Michael D. Lappin steered the group and its for-profit division into a series of high-risk, luxury condominium investments – "In 2007 and 2008, more than half of the $1.5 billion in loans originated by Community Preservation or its for-profit arm were for condos." And when the market collapsed, Community Preservation was faced with the same crisis that confronted for-profit real estate speculators.
Lappin defended his leadership of the organization, arguing that accommodating the needs of the middle class is equally important to producing stable communities. But when Community Preservation defaulted on over $150 million in loans late last year, it forced Lapping into retirement.
According to Bagli, Lappin "was known as a zealous advocate for affordable housing. He created a one-stop shop, providing loans to landlords and nonprofit housing groups, assisting them in obtaining government grants and tax credits." And his supporters claim that the board, composed of bankers past and present, were equally culpable – and that some of them "had an even worse record of bad loans to private developers."
Earlier this year, the board appointed Rafael E. Cestero its new chief executive, in hopes the change of leadership will realign the group with its original goals.