Despite New York City’s efforts to solve affordability issues, the city’s deep housing crisis continues to persist. The coronavirus outbreak has put even greater pressure on New York City’s vulnerable citizens and brought the affordable housing crisis even more to the forefront. Since the pandemic began, the city has focused on advancing affordable housing projects and has recently announced the acceleration of capital funding within the city’s affordable housing plan.
In the interview below, Habitat for Humanity New York City’s CEO Karen Haycox and The Arker Cos. Principal Daniel Moritz talk about the current state of New York City’s affordable housing segment and provide insights on strategies that developers can adapt to help in battling the city’s housing crisis.
What can you tell us about the current dynamics of New York City’s multifamily market?
Moritz: The multifamily sector is clearly struggling. There is a great need in NYC and throughout the country for federal rental subsidy relief in any upcoming stimulus plan to help alleviate the rental crisis.
Haycox: With the passage of New York State rent regulatory reforms and changes to the economic landscape of the city brought on by the pandemic, there is renewed interest in tenant opportunity to purchase legislation. When paired with appropriately sized capital investments, this could lead to a renaissance in the affordable homeownership space that Habitat NYC is well poised to help lead.
Community and political interests are on the rise in strategies to reinvest in affordable homeownership as a matter of fair housing, and equity is becoming a higher priority in the sector.
What does the acceleration of capital funding mean for the metro’s affordable housing market?
Moritz: This is critical, and we are greatly appreciative of the restoration of significant affordable housing capital dollars. We can’t build affordable housing fast enough and as the economy begins to recover in 2021, the city should be doubling down on its investment in affordable housing to help spur job creation.
Haycox: We are thrilled that the calls from the affordable housing community were heeded and the mayor took measures to partially restore the capital funding previously cut. This means that thousands of previously delayed affordable homes may get funded in the months to come. While this funding will be accessible later in the fiscal year, challenges remain in how funds are used, and which projects are prioritized.
What is your approach to building affordable housing in NYC? How has the current crisis impacted your business strategies?
Moritz: Over the past few years, we have focused on large multiphased developments that can help shape new neighborhoods, where there is a dearth of affordable housing and economic activity. We are in the process of completing a large development in East New York and are turning our focus to the Edgemere section of the Rockaways, where we have a large project in predevelopment called Edgemere Commons. The crisis has been difficult in that it delayed our ability to break ground on Edgemere Commons. However, we are patient and waiting for the right opportunity to kick off this important project.
Haycox: We’re focused on affordable homeownership. In recent years we have expanded our focus to preservation, working with occupied low-to-moderate income cooperatives to provide technical assistance, general contracting, and lending products to stabilize aging buildings, preventing their loss to market forces and the displacement of long-term residents.
The pandemic has encouraged us to look to alternative methodologies to achieve the stability offered by homeownership. We are exploring 15-year preservation-conversion models that would provide a pathway from tenancy to homeownership when a LIHTC building or other expiring project needs intervention to remain affordable. Candidly, we are looking at what our role may be in developing affordable rental housing, especially with a pathway to converting to homeownership in future years.
What are some of the major projects you are currently working on? What is unique about them?
Moritz: As mentioned above, Edgemere Commons is the focus of our attention as it relates to new construction. It’s an 11 building, 2,050-unit mixed-use development in the Rockaways, in an area that has no economic activity and is a food desert. It has the potential to be a real game-changer for the neighborhood. Additionally, we also focus on the preservation of affordable housing, and our biggest project right now is a RAD conversion of 2,625 units in Brooklyn with the New York City Housing Authority. These are life-changing projects for the residents in buildings that have seen disinvestment for decades.
Haycox: Unlike most affordable housing developers in NYC, our current pipeline is predominantly focused on multifamily, long-term affordable, limited-equity cooperatives, although we continue to rehab and rebuild vacant and dilapidated single-family homes in partnership with the New York City Housing Authority.
Some of our projects include the Sydney House, a $29 million, 56-unit HDFC cooperative in the Williamsbridge neighborhood of the Bronx. Sydney House is the largest single-structure Habitat development ever, anywhere in the world. A joint venture with the Almat Group, this project will provide 56 hard-working New York City families the chance to become first-time homeowners.
Habitat for Humanity New York City’s $26 million Mosaic project is a scattered-site project, consisting of 47 affordable housing cooperative units located in central Brooklyn. The project will be called Mosaic after the art form of creating a complete image out of individual parts. We believe that together, these small buildings can create a beautiful whole.
We are also currently working on multiple preservation projects in partnership with occupied HDFC cooperatives and rental buildings seeking to convert to limited-equity cooperatives, but do not generally discuss them until completion. Our most recent preservation success story is 2178 Atlantic Ave.—a 16-unit nonprofit member cooperative recently rescued from foreclosure and bankruptcy.
How has the pandemic impacted your projects and timelines?
Moritz: It has definitely delayed our projects in predevelopment. Additionally, we’ve seen construction delays on all our ongoing projects, due to COVID-19 related restrictions, though we’ve implemented strict safety requirements, and have been able to work as well as possible. In fact, we’ve completed and received TCOs for four new construction buildings during the pandemic and expect three more in the next few months.
Haycox: It can be summarized in one word: delays. Like our for-profit colleagues, we invest significant capital in our projects—readying them for construction—so delays have a significant financial impact on nonprofit developers like Habitat for Humanity.
On the other end of our pipeline, we have 99 units ready to sell to our qualified homebuyers, which we accomplish through an affordable state-backed mortgage product. We have been working closely with those families throughout the pandemic and have moved our homebuyer education classes online and kept the process moving forward.
What are your predictions for NYC’s affordable housing market in 2021 and beyond?
Haycox: We see this as a potentially once-in-a-generation opportunity for New York City and their mission-minded affordable housing development partners to focus on true long-term affordable housing strategies for their vulnerable citizenry. It is more important than ever before to secure existing multifamily housing structures, or other market-rate buildings to be repurposed to house New York City’s workforce, preserving a place at the table for more diverse populations.
Moritz: The demand for affordable housing is unprecedented and will be even more so after the pandemic. New York City needs to continue production into the next mayoral regime with even more urgency. There needs to be a continued and unprecedented investment into the NYCHA portfolio through public-private partnerships. If the political will is there, the private sector will continue to deliver major affordable housing milestones in 2021 and beyond.