By Laura Calugar
Bill de Blasio was recently re-elected as New York City mayor. His ambitious Housing New York 2.0 plan commits to creating at least 25,000 affordable homes per year during the next decade. He also announced that the city was nearly halfway to his initial goal of building and preserving 200,000 new affordable units by 2024, so he recently ramped up that goal to 300,000 units by 2026. What do all of these plans mean for real estate developers? Multi-Housing News spoke with Scott Alter and Jeff Jaeger, co-founders of Standard Communities, a national developer specializing in affordable housing, about the prospective impact of de Blasio’s housing policy.
Speaking to supporters at an election night party, de Blasio vowed to make New York the “fairest city in America.” What could that mean for affordable housing in the metro?
Scott Alter: The intent seems to be to enact an agenda that ensures opportunities for success are equally available to all New Yorkers. Specific to affordable housing, the administration is focused on enacting an agenda that not only creates and preserves affordable housing, but also ensures affordable homes exist in safe, high-growth neighborhoods as opposed to just in the less-established areas. Providing lower-income New Yorkers a fair chance to access the established social and community fabrics that support higher achievement will hopefully be a big stride towards narrowing the wealth gap. In areas that are not as established, the administration will continue their progressive programs aimed at creating that fabric, which, in time, will allow for more and more affordable housing to be located in areas that are desirable.
This administration’s focus on affordable housing is as strong as any we have seen nationwide, and the goals that have been publicly set for the creation and preservation of affordable housing units are equally pioneering. This sets the stage for New York City to create a blueprint that can be replicated in other cities, as there is a shortage of affordable housing in metropolitan areas across the country.
In order to achieve the goals stated, New York City will have to embrace many existing workforce housing programs, as well as find new solutions, all while designing these programs to receive financial support from state and federal agencies. We expect the most successful efforts to also include private investors and developers, which opens up a whole new tool chest.
Jeff Jaeger: Private investors and developers can bring a streamlined decision-making process, outside capital and operating expertise that large government agencies can sometimes lack despite their best efforts. We believe that municipalities must increasingly embrace working hand-in-hand with community-focused developers to accomplish shared goals.
Alter: Standard Communities has worked with the City of New York to preserve some of the best-located affordable housing units in New York, such as the Polyclinic Apartments in Midtown Manhattan.
How could potential tax reform and interest rate hikes impact some of the affordable housing proposals put forth by the de Blasio administration, such as the reinstated 421-a property tax exemption and the mandatory inclusionary housing program?
Jaeger: Increased cost of capital and federal policy decisions could both create significant headwinds for the creation, improvement and preservation of affordable housing. Borrowing costs are a cyclical variable that the market knows how to adjust for and that will happen in time. The more pressing concern for the affordable housing space is government policy.
The tax reform proposal that passed in the House recently would eliminate the private activity bonds that allow for the 4 percent LIHTC, which is the federally sponsored program that is used to create, renovate and preserve a substantial amount of the affordable housing stock in the U.S. This is a potentially huge issue. The current proposal that the Senate is considering, at the time of this writing, preserves private activity bonds and the 4 percent LIHTC. Anybody who wants to see working-class families across the country have access to high quality housing at affordable rents should be calling their elected officials to let them know that multifamily private activity bonds, which are required in order to participate in the LIHTC program, must be preserved in any legislation.
The de Blasio administration announced the expansion of its affordable housing program from a target of 200,000 affordable rental units over 10 years to 300,000 over 12. How realistic are these new goals and where could the City find the necessary funds for the program’s increased costs?
Alter: You have to aim high if you want to accomplish anything. Continued success will require a tremendous amount of innovation and coordination across local, state and federal organizations, across partisan lines and between public and private organizations. Whether it is finding funds to allocate, or putting in place a deal structure that is new, flexibility from all parties will be necessary.
Federal budget and policy uncertainty is impacting the willingness of developers to move forward with projects, as committing to long-term capital decisions without a clear understanding of the environment you will be operating in is a difficult pill to swallow. To the extent that these policy decisions settle in a place that makes the administration’s affordable housing goals more difficult to achieve, there needs to be some flexibility on the state and local levels to help get things back on track. Any property tax relief should be reserved for projects that show a real commitment to affordable housing, not necessarily for projects that are predominantly luxury. Borrowing costs for affordable deals in New York City tend to be higher than other major metropolitan areas and making a change there could really help get deals done. There are structures in place in other cities that help to facilitate the preservation of market-rate housing and adopting some of these best practices could help accomplish these goals.
Could this new affordable housing plan cause density issues?
Jaeger: Rezoning and adding density is always something that needs to be carefully considered and looked at with a very long-term view. Growing pains are real, but they can be minimized through a thoughtful capital plan that supports the underlying needs of an area as density increases.
The mayor recently announced “Seniors First,” a slate of new affordable housing programs. Since the number of seniors in New York is projected to grow 40 percent by 2040, how do you think this program will impact affordable senior housing in the future?
Alter: This is another example of an area where New York City has an opportunity to set a blueprint that can be used nationwide. The Baby Boomer generation is going to swell the number of seniors nationwide and this is not something that should sneak up on a municipality.
Jaeger: In the last six months, Standard Communities has created or preserved affordable housing dedicated to seniors at four properties, totaling approximately 600 units.
Housing costs in general are a challenge for seniors, as they often have fixed incomes and any additional needs such as handicap accessibility or access to skilled in-home care can add to costs exponentially. Focusing on these challenges now and allocating existing resources, such as underdeveloped NYCHA sites in an effort to solve them, is a great first step. However, it needs to come hand-in-hand with many of the innovations and collaborative processes that are needed to bolster affordable housing in general in order to be successful. Providing homes for low-income seniors is a good thing, but seniors should have the opportunity to live near their families and in vibrant communities, so the efforts to create and preserve affordable housing for the workforce and for families are equally as important.
Images courtesy of Standard Communities & melissamahon/pixabay.com