5 Things To Know About Affordable Housing In NYC For 2019
There are about 500,000 more New Yorkers who need affordable housing than there are affordable units to house them. But state and federal agencies, multifamily developers and community activists are all moving toward new approaches and programs to address that gap.
Bisnow talked with Berdon principal Matthew Doty about five programs that CRE professionals need to know about that are working to transform affordable housing in New York City today.
1. Rental Assistance Demonstration
The New York City Housing Authority needs an estimated $32B for capital improvements to repair roofs, pipes, peeling paint and other infrastructure and finishes in buildings throughout the five boroughs. To satisfy that need, the U.S. Department of Housing and Urban Development unveiled the Rental Assistance Demonstration program, which allows state and local housing authorities to partner with private managers and developers and enter into Section 8 housing contracts.
“Through RAD, NYCHA can take out loans for renovations and rehabilitation and stay out of receivership,” Doty said. “It’s an innovative approach to fixing New York’s struggling public housing, and it has become a signature policy for HUD and the current administration.”
Doty clarified that RAD does not let NYCHA sell public housing to private developers, but rather offers developers long-term leases on properties to oversee their improvements.
2. Opportunity Zones
According to the program’s proponents, one of the greatest strengths of the opportunity zone program is allowing investors to utilize the tax breaks available in order to affordably develop much-needed new housing in underserved areas. But Doty said that in order for developers and affordable housing advocates to take best advantage of existing tax incentives, they must be innovative in how they structure OZ deals.
Some existing tax incentives, like the Low Income Housing Tax Credit, lack an obvious synergy with opportunity zone benefits because the first affects institutional investors, while the latter attracts private capital holders with significant capital gains. However, Doty explained that by carefully structuring an OZ agreement to take capital from both institutional and private investors, affordable housing projects could reap both benefits.
“It’s really an art to bring everyone into alignment, from the developer and general partners to the investment partner and operator and make an affordable housing project work,” Doty said.
3. Gap Financing
The appetite for private investment in affordable housing has gone down, Doty said, since the Tax Cuts and Jobs Act reduced the corporate tax rate, one aspect that used to make LIHTC properties so attractive. Now that the potential pass-through losses are worth less to investors, developers are facing a financing gap between the costs of an affordable housing project and the funding they have received.
Now, New York state is stepping up to provide gap financing through an expansion of the Federal Housing Authority’s mortgage financing program.
“New York state has really done a fabulous job filling in when it comes to providing gap financing,” Doty said. “We’re in a lucky position, actually. New York may not suffer as badly as many states in an affordable housing crisis, thanks to the generous gap financing that the state is fronting.”
4. Housing Lotteries And Housing Connect
New York state gives apartment developers a tax break if they dedicate more than 20% of their units as affordable housing. Accordingly, many new residential developments hold housing lotteries in which they offer units to low-income residents at affordable rates. Now, the city government has made it easier to search and apply for these lotteries with a digital portal called Housing Connect, which allows New Yorkers to search for affordable housing throughout the five boroughs.
“These housing lotteries not only provide thousands of units to New Yorkers in need, but also highlight just how important affordable housing is,” Doty said. “When you have 60,000 people applying for 100 spots, it puts a spotlight on the crisis.”
5. New Plans For NYCHA-Owned Lots
In addition to owning more than 2,600 buildings, NYCHA also owns hundreds of plots of underdeveloped and underused land, in use for parking or just sitting vacant. Doty said the city is now doing more to turn this underused land into affordable housing.
“The process typically involves rezoning the plots as a whole and offering developers different incentives to build affordable housing on top of them,” Doty said.
This feature was produced by Bisnow Branded Content in collaboration with Berdon. Bisnow news staff was not involved in the production of this content.