Why Building Affordable Housing in NYC Has Rarely Been More Difficult
Douglaston Development CEO Jed Resnick on the changes, challenges and development opportunities arising across the five boroughs.
New York City’s affordable housing crisis continues to be as present as ever. According to a 2021 New York City Housing and Vacancy Survey, nearly a third of the renters in the metro are spending more than 50 percent of their income on rent each month.
For more than four decades, Douglaston Development has been on a mission to ease the city’s affordable housing crisis. Active within the market-rate, affordable housing and senior affordable housing sectors across the five boroughs, the developer has been extremely busy. Douglaston has several projects underway, including 3ELEVEN at 601 W. 29th St., a development that encompasses 703 market-rate and 235 affordable housing residences in Manhattan’s West Chelsea’s submarket.
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In an interview with Multi-Housing News, CEO Jed Resnick admits that developing affordable housing projects in the metro has never been such an uphill battle. But although the city’s affordable housing sector has undergone many changes since the start of the pandemic, there still are development opportunities arising in the industry on a local level.
How would you describe the multifamily climate in New York City today?
Resnick: Currently, demand across the multifamily industry has never been stronger, with both rental prices and occupancy rates continuing to soar as the city continues its post-pandemic resurgence and more people migrate to the area.
This increased demand for housing has also proven the need for new supply to continue meeting market demands. In turn, this has proven challenging for developers and prospective residents. With the expiration of the 421-a tax abatement, ongoing COVID-19-related supply chain issues, and rising construction costs, creating new rental housing has seldom been more difficult.
What are the major changes NYC’s affordable housing sector went through in the past couple of years?
Resnick: Over the course of the last two years, we saw major changes and challenges present themselves across the affordable housing sector, primarily on the construction side of our operations as well as in the lifestyles of our residents. Significant supply chain issues and the prolonged timeline on acquiring materials certainly elongated the development and construction processes.
What is hindering affordable housing development in NYC today?
Resnick: For developers working to create affordable housing offerings in New York City myriad challenges presents themselves throughout the development and construction process. The city has limited capital and staff capacity to close proposed projects within the development pipeline. Due to this, many proposed projects remain backlogged in the city’s systems, slowing the development of affordable housing.
For many of our residents, employment posed a large issue. Although many residents are back to work today, New York City is still down more than 200,000 jobs when compared to February of 2020. This continues to directly impact those residing across our affordable housing portfolio.
In which way can public-private partnerships support the creation and preservation of affordable housing on a local level?
Resnick: The impact that public-private partnerships have on both the creation and preservation of affordable housing is tremendous. As just one example that we know well, New York City Housing Authority’s Permanent Affordability Commitment Together initiative is an incredible demonstration of public-private partnerships’ power to change communities.
READ ALSO: New York Commits $1.4B to Affordable Housing
By entering a joint venture with private real estate firms, NYCHA can access a variety of federal funding programs that wouldn’t be available without participation from the private sector. This allows the joint ventures to raise billions of dollars of private debt and equity capital to fund long-overdue property improvements.
The private market expertise we bring to the table allows for the completion of improvements to be done at a higher quality for a lower cost, and ensures NYCHA delivers to their residents the healthy, safe and dignified communities they deserve.
Elaborate on the development opportunities arising in the industry on a local level.
Resnick: The demand for affordable housing remains as strong—if not stronger—than ever. It is crucial to the vitality of New York City that quality and affordable living options are available to the entirety of our city’s workforce across all industries.
On the market-rate side of the industry, we see opportunity in developing for-sale projects that are not reliant on tax abatements to be financeable. Mortgage rates are certainly higher for buyers than they have been recently, but they remain low by historic standards. With rents as high as they are, homeownership still compares favorably in many cases.
Douglaston Development’s pipeline includes several affordable housing projects across multiple boroughs. What are the most representative projects you are currently working on?
Resnick: Most recently, we announced the topping out of the first phase of a two-phase, mixed-use project located adjacent to New York Botanical Garden’s 250-acre grounds in the Bronx.
The project includes 188 units of affordable senior housing, on-site social services for residents in partnership with Fordham Bedford Community Services, and a full-service supermarket for the whole community on the ground floor. The supermarket is particularly important because the neighborhood was identified as offering inadequate access to fresh produce and groceries under the City’s FRESH program.
To what extent have you felt the impact of rising inflation and high interest rates?
Resnick: The impact of rising inflation and high interest rates has affected us primarily as it impacts our projects’ construction costs. The cost of building materials has risen substantially, and the timeframes for delivery of materials has significantly increased.
In addition to inflation, we are keeping a close eye on employment statistics in the New York City region, since ultimately, we need continued employment growth to help our residents keep pace with rising costs in their own lives.
How do you see NYC’s affordable housing sector going forward?
Resnick: As New York City continues growing coming out of the pandemic, we as a city and a region need to be increasingly aggressive in developing housing options for households at all income levels. That means we need more affordable housing and more market-rate housing, too.
Otherwise, we are in danger of pricing ourselves out of competition with other cities in the other parts of the country. If helpful government policies and resources continue to be available for developers, we will keep moving forward in creating affordable and market-rate housing to keep pace with population growth.
Any trends we should keep an eye on?
Resnick: The expiration of the 421-A program and what the impact of losing that incentive could have on the market, as well as the alternatives to 421-A that could be enacted.