The Solution to NYC’s Affordable Housing Problem
Speakers at Bisnow’s second NYC Affordable Housing event on Thursday assessed where things stand and where they’re headed. The event came less than two weeks after the de Blasio Administration’s first rezoning, in East New York, Brooklyn, went up for a final public review. NYC Dept of City Planning executive director Purnima Kapur, who keynoted, says there have been some big strides toward meeting the administration’s goal of 200,000 affordable units. Roughly 38,000 were created in fiscal year 2014 and ‘15, she says. And 3,200 of those were done without city subsidies. Purnima says the private sector will need to step up even more for initiatives like City Planning’s Mandatory Inclusionary Zoning program to work. The City Planning Dept’s MIZ program would require every rental and condo development to provide some affordable housing to get tax exemptions. It’s been in the works for about a year and a half, and Purnima says if approved it’ll be incorporated into rezonings throughout the city.
HPD assistant commissioner Louise Carroll (left, with Low Income Investment Fund director Kirsten Shaw) says HPD’s first priority is to avoid stifling development. She says 421-a will remain a key way to encourage rental development while allowing developers to hit the 6% ROI or more they need to make each project worthwhile.
Windels Marx Lane & Mittendorf partner Michele Arbeeny, who moderated, points out that for all-affordable projects, deal structures are getting more and more complicated, and often include cobbling together public grants or financing through GSEs. Common Ground president and CEO Brenda Rosen (snapped) says she recently closed a $9M financing gap for a 248-unit all-affordable project in the Bronx in part by setting aside a portion of the units for formerly homeless families. Brenda says Common Ground’s nonprofit status also makes it eligible for loan terms and financing that for-profit developers typically can’t get.
HDC SVP Anthony Richardson (right) says the inclusion of a condo element is an increasingly common way to make a deal work. Chase Community Banking SVP David Walsh (left) mentions an affordable project where the lender wanted to see a few LOI’s for commercial space before closing on a loan. It’s the kind of thing he says we may see more of as affordable deals get harder to finance and land and construction costs aren’t doing developers any favors.
Asked by CohnReznick partner and moderator Bill Riley whether there will ever be an agreement on a prevailing wage provision for 421-a, Forest City Ratner EVP Susi Yu points out that FCR uses union labor but says if a prevailing wage is mandated, it'll impact how many affordable projects get built in the first place. Hudson Cos principal Aaron Koffman said he doesn’t see the math adding up. The reality, Aaron says, is a prevailing wage can tack as much as 30% onto a project’s cost. SMJ Development/BFC Partners principal Juan Barahona says if you’re tacking on more costs to a project, something’s got to give. Juan says it may not be pretty, but that something will probably have to either come from city or state funds. (Snapped: Bill, Susi, L+M Development Partners development director Spencer Orkus, Aaron, Juan)