Dees Stribling, Contributing Editor
New York–The Association for Neighborhood and Housing Development (ANHD), a coalition of 99 neighborhood-based affordable housing groups in New York City, has released a report highly critical of the banking industry’s recent lending practices in the city to support housing in low- and moderate-income neighborhoods.
The report, “The State of Bank Reinvestment in NYC: 2009” asserts that banks have shied away from reinvestment commitments that have been a source of private support for the revitalization of many neighborhoods over the past 20 years, especially in the form of multifamily affordable housing development.
On the whole, ANHD says, New York’s banks are shirking their responsibilities under the Community Reinvestment Act of 1977 (CRA), despite an expanding appetite for CRA-eligible investment, including Low Income Housing Tax Credits. According to report, CRA has been inspired a mix of public subsidy and private funding to develop or renovate about 294,000 low- and moderate-income housing units in New York City since it was passed.
The report details a recent sharp drop in the quantity and quality of reinvestment activities across the industry, including at most of the city’s largest banks. Specifically, the report notes that the deposit base of the biggest banks in New York City grew by over 10 percent between 2007 and 2008, but during the same period these banks reduced their community development lending by $560 million; reduced their multifamily lending by $1.3 billion; and reduced the percentage of branches in low-income neighborhoods from 9.3 percent to 8.8 percent.
One example of the retrenchment cited by the ANHD is Cypress Village in Brooklyn, an affordable housing project that would have included 29 for-sale condo units and nine two- and three-family homes. Various subsidies and grants had been received by the project by the summer of 2008, and market demand for that kind of residential project in that particular part of Brooklyn was judged to be high at the time. Yet no bank was interested in making the necessary loan.
ANHD recommends a number of steps to ameliorate the situation, including strengthening the enforcement of CRA. But the organization also says that banks are missing out on the opportunity to make money from development and redevelopment of low- to moderate-income multifamily housing, something that’s always in high demand in New York.
“Multifamily lending is a core credit need in New York City, as two-thirds of all the city’s residents live in multifamily rental buildings,” Benjamin Dulchin, executive director of ANHD, tells MHN. “Not only is there strong demand for this type of lending, but we have found that multifamily loans that are well-underwritten and based on current cash flow are good risks, will be repaid, and provide a strong return to the bank.”