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Affordable Housing Construction Is Slowing As Demand Is Expected To Explode

Many affordable housing projects in New York City are running on delays despite their essential status as the construction labor force decreases and supply chains slow down.

How much coronavirus-related delays could exacerbate the affordable housing crisis the city faces will be determined by how long they last. 

As of April 10, 34 housing projects with a total of 6,900 affordable units were voluntarily paused by developers despite their essential status, a Department of Housing Preservation and Development spokesperson told Bisnow

Affordable Housing Construction Is Slowing As Demand Is Expected To Explode
A rendering of Bronx affordable housing project La Central.

“This pandemic naturally will not help our affordable housing goals, but to what degree is still up in the air,” an HPD spokesperson said in a statement. 

There are additional projects that have not experienced a full-fledged pause but have faced significant delays as a result of the virus. These stoppages will ultimately trickle down and put more pressure on an already-tight affordable housing shortage, affordable housing builders and advocates told Bisnow

“Who’s losing the most from this is the end users of affordable housing, which is the families that need to find a home,” said Hercules Argyriou, vice president at affordable housing general contractor and developer Mega Contracting Group. “There’s a huge need for affordable housing, and with this happening, that need will probably increase.” 

At the start of his term in 2014, Mayor Bill de Blasio promised to add 200,000 units of affordable housing into the city’s market, penning a $41B plan to hit that number by 2024. De Blasio’s plan estimated that 40% of this new affordable housing would be new development while 60% would be existing spaces refurbished into permanent affordable units, according to the Rent Guidelines Board’s 2019 Housing Supply Report

The administration marked 58% of these units for households making between $42K and $66K a year. Twenty percent of the new units would go to those making less than that, and 22% of these units would go to those making more, the report said.  

In 2017, de Blasio added to the administration’s initial goal, pledging 300,000 new affordable units to the city by 2026, with his Housing New York 2.0 plan. In this new plan, 55.5% of the overall units would be reserved for those low-income families. 

As of September, the city claimed it had reached almost half of this goal with 136,912 units built since the start of the initiative in 2014. With dozens of projects delayed, the city doesn't know how it will affect its production pace.

The mayor's plans were in response to the affordable housing shortage in New York City that has reached a fever pitch over the last decade as need has far outpaced available units.

Between 2007 and 2017, the ratio of affordable units to need dipped 12.1% for low-income households, according to a report from New York State Comptroller Thomas P. DiNapoli. The number of households spending 50% or more of their income on housing has risen from 43.9% in 2006 to 45.6% in 2017, according to the Furman Center at New York University

As the city's cost of living has increased, the amount of money people are making on average has remained relatively stagnant, according to New York City Comptroller Scott Stringer's Affordability Index report.  

The crisis in the city is only likely to increase over the next few years, DiNapoli wrote in the report. 

“In some areas, such as New York City, population growth can be expected to exacerbate the problem of affordability and availability if housing supply doesn’t keep pace,” he said. 

Affordable Housing Construction Is Slowing As Demand Is Expected To Explode

Affordable housing developer Scott Short said he is looking at a two- to three-month slowdown on each of his affordable housing projects. Short, the CEO of RiseBoro Community Partnership,  said that's hugely significant for public health. 

Outbreak prevention measures require social distancing, something that is not easily done in places such as homeless shelters, Short said. The longer the units take to build, the longer that portions of the New York City population cannot socially distance in their temporary housing. 

“With every unit that has delays, more people are stuck in congregate settings for longer,” Short said. 

The reason for the delays, Argyriou said, are threefold: labor shortages, supply shortages and utility restrictions, all due to the virus. If just one of these things goes wrong, it can set the whole project back. 

“In order for a building to become a building, there are a lot of links in a chain, and if you break any link, you have a project that is stalled,” Argyriou said.

Subcontractors have had to pull out of projects because swaths of their workers have chosen to stay home as a precautionary measure, Short said. 

Pennrose, an affordable housing developer who is working on 50 Penn, a 218-unit building in East New York, and another 1,300-unit renovation project in Bushwick, has seen a 15% to 25% decline in its overall workforce each day, Regional Vice President for New York Dylan Salmons said.  

50 Penn is operating at 50% capacity, Salmons said, putting Pennrose two weeks behind schedule since the state began its shutdown. 

“We have a [variable] amount of people showing up each day from each trade,” he said. “Between people who are [suspected] of being ill to people that are concerned about the illness or have expressed that they have family members that could be susceptible if they were to bring the virus home.” 

 Supply chains have also been disrupted. 

“A lot of materials are held up,” Argyriou said. “We were waiting for cabinets ... but the factory has closed down … They’re not coming.” 

Similarly, projects are being stalled at the very end because utility companies are only working on an emergency basis. 

“If we don’t get our gas in time, we cannot do a fire alarm inspection, we cannot start up the boilers, we cannot start up the building,” he said. 

Everyone on the sites is dealing with the same constraints as the rest of the world, and that delays things even further, Argyriou said. 

Mega Contracting Group implemented strict social distancing guidelines, including limiting the number of people in elevators and limiting the number of workers on each floor. This makes the process a lot longer as well, he said. 

Contractors and developers said health comes first, but they do worry about the overall societal and market impacts of the delays. 

“It’s a crisis, we all have to work together to figure it out and do the best we can to get through it,” Argyriou said. 

Affordable housing builders and advocates worry that the delays could lead to larger, more long-term issues in the city's housing market. 

One of the biggest fears throughout the industry is that the buildings will lose their funding as a result of the delays, said Emily Goldstein, director of organizing and advocacy at the Association of Neighborhood and Housing Development. 

If that happens, not only would there be a delay in occupying some units, but many units may not be put into the market at all, Goldstein said. This would place even more pressure on the housing market. 

“We are already in dire need of affordable housing and we can expect that need to go up,” Goldstein said. “Because people who were in a stable situation and lost their income are no longer in a stable situation.” 

Similar to other markets impacted by the coronavirus, affordable housing advocacy groups are looking to get help from the federal government to help kick-start recovery. Lobbyists have been in talks with lawmakers about how to alleviate the impact that delays and increased need will have on the market, Goldstein said. 

"The only real solution is going to be large-scale rent relief," she said. "Anything short of that is going to result in an even worse economic and displacement crisis." 

Another affordable housing advocacy group, the New York State Association For Affordable Housing, has also been looking to relief on the federal level. 

“Once the public health crisis has passed, our state’s housing crisis will still affect millions of New Yorkers," NYSAFAH President and CEO Jolie Milstein said. "And one crucial next step will include advocating for additional federal resources to keep addressing that urgent need."