Partnerships for Affordable Rental Housing in New York City

Sasha Tsenkova

Professor, Planning Program, Faculty of Environmental Design, University of Calgary, 2500 University

Drive NW, Calgary, AB T2N 1N4

e-mail: tsenkova@ucalgary.ca

Alex Schwartz

Professor, Milano School of Policy, Management, and Environment. Graduate Program in Public

and Urban Policy, The New School. 72 Fifth Avenue, New York, NY 10011

e-mail: schwart@newschool.edu

Abstract In the context of growing shortages of affordable rental housing in Canadian cities, the policy discourse in the last

decade has centered on ways to get the private sector involved through a variety of public-private partnerships,

policy incentives and regulatory measures. This research explores the provision of affordable rental housing in New

York City (NYC) focusing on major fiscal, financial and planning instruments used to implement local housing

policy. Such interventions build upon a strong political commitment to affordable rental housing since the 1980s,

supportive policy environment and robust institutional partnerships with non-profits and private sector providers.

The city offers important lessons for Canadian municipalities on ways to address affordability problems as well as

improve quality of life in inner city neighbourhoods through mixed income housing programs.

Key words: affordable rental housing, investment programs, New York

Introduction Cities, states, and different levels of government in the United States have designed a number of programs

to create and maintain place-based affordable rental housing. This article explores the affordable housing

strategies of NYC focusing on the planning and implementation of mixed income programs to create

socially inclusive neighbourhoods. Such planning interventions build upon a strong legacy of

comprehensive housing policy, institutional partnerships with non-profits and private sector providers and

sustained political commitment to affordable rental housing since the 1980s. While NYC is famous for its

landmark real estate deals, often triggered by disproportionately high earnings of the global financial elite,

it is also a city of renters, where public and subsidized housing is 12 percent of the rental stock (see Table

1). The city has a rent stabilization law, which imposes restrictions on rent increases in nearly one million

units that represent 45 percent of the rental housing stock. The city government continues to support new

types of subsidized housing and is considered a leader in this regard (FCREUP, 2011). Its Housing New

York Plan aims to create and preserve 200,000 affordable homes for city residents from 2014 to 2024.

NYC offers important lessons for Canadian municipalities dealing with affordability problems and

alternatives to improve quality of life in inner city neighbourhoods through mixed income housing

programs.

Partnerships for Affordable Rental Housing in New York City

Conference Proceedings: Partnerships for Affordable Rental Housing, University of Calgary, November 15-17, 2018

Table 1: Housing Stock Indicators

Affordable Rental Housing in New York

NYC has retained its public housing created through federal support in 1935 (180,000 units), where

tenants pay 30 percent of income on rent. Despite its concentration in several neighbourhoods with some

of the highest poverty rates, public housing is in considerable demand as evidenced by its low vacancy

rate and long waiting lists. Another federal program, Project-based Section 8, initiated in 1974 provides a

direct rental subsidy to private owners who house low-income tenants in newly built or rehabilitated

units, reducing rents to 30 percent of income. NYC has the largest share of units under the program

(64,531). In addition, 143,943 households received federal Housing Choice Vouchers that enable them to

rent housing in the private market. This demand-based subsidy avoids the concentration of low-income

households and has become an essential housing policy instrument. The low-income housing tax credit

program, which began in 1987, has become the primary vehicle for financing new affordable housing. It

provides a dollar-for-dollar reduction in federal income tax liability for investors in rental housing that

serve low-income households. This program has helped finance the construction and rehabilitation of

more than 125,000 housing units in New York City (Schwartz, 1999). New York has been particularly

active in using local funds to support subsidized housing. Designated under the New York State Senate

Limited-Profit Housing Companies Act of 1955, Mitchell-Lama developments account for 105,000

apartments. Co-ops and private developers receive tax abatements as long as they remain in the program,

and low-interest mortgages, subsidized by the federal, state, or New York City government.

Overview of NYC Housing Stock in 2017

Total Percent

Total Housing Units 3,469,240 100%

Owner-Units 1,038,200 30%

Occupied 1,006,081 29%

Vacant available for sale 32,119 1%

Rental Units 2,183,064 63%

Occupied 2,103,874 61%

Vacant available for rent 32,119 1%

Vacant, not available for sale or rent 247,977 7%

Source: HVS

Partnerships for Affordable Rental Housing in New York City

Conference Proceedings: Partnerships for Affordable Rental Housing, University of Calgary, November 15-17, 2018

Political Commitment to Affordable Housing

No city in the United States can match New York’s commitment to affordable housing. In 1986,

responding in part to rapid increases in homelessness, Mayor Ed Koch launched what became a $4 billion

Capital Budget plan to build or rehabilitate housing for low-, moderate, and middle-income households.

Every subsequent Mayor, Democrat and Republican, has maintained this commitment, albeit to varying

degrees of magnitude. The current Mayor, Bill de Blasio, set a goal of building or preserving 300,000

housing units from 2014 to 2026. As of August 2018, the city had started work on nearly 110,000 units.

Mayor de Blasio’s initiative builds on his predecessor’s, Mayor Michael Bloomberg’s, 12-year New

Housing Marketplace plan, which produced 165,000 affordable units (see Figure 1). In total, from 1987

through 2017 New York City has invested more than $17.2 billion in constant 2017 dollars for the

construction of 117,586 units and the preservation of 341,521 (see New York City Department of

Housing Preservation and Development, 2010).

Figure 1: New Housing Marketplace Plan (Mayor Bloomberg)

New York’s housing plans are assemblages of various programs that target different income groups and

residents, involve new construction, physical renovations, and the renewal of existing subsidies. The

plans involve a wide range of partners, including for-profit housing developers, large non-profit

organizations, and smaller community-based organizations. The plans support limited-equity

homeownership, rental housing, and supportive housing that combines housing with case management

and other social services.

The plans are funded through the city’s capital budget (in the form of general obligation bonds), and also

from tax-exempt and taxable private activity bonds issued by the city’s Housing Development

Corporation, federal Low Income Housing Tax Credits, and other sources. The plans also make use of

property tax abatements, and inclusionary zoning that provide private developers financial incentives to

Partnerships for Affordable Rental Housing in New York City

Conference Proceedings: Partnerships for Affordable Rental Housing, University of Calgary, November 15-17, 2018

allocate a portion of otherwise market-rate housing developments for lower income occupancy. Under

Mayor de Blasio, the city expanded its previous voluntary inclusionary zoning program with the

establishment of mandatory inclusionary zoning in neighborhoods that complete a rezoning process. As of

October, five neighborhoods had been rezoned, and efforts are under way for several other neighborhood

rezonings.

Figure 2: Investment in Affordable Rental Housing

During the 1980s and 1990s much of the city’s investment centered on tax-foreclosed property under city

ownership. The city rehabilitated vacant city-owned buildings and constructed new housing on vacant

city-owned lots, transforming entire neighborhoods in the process. As the supply of tax-foreclosed

property ran out, the city increasingly focused on privately owned land, as well as underutilized property

controlled by various city agencies and non-profit organizations.

Mixed-Income Housing

With the development of affordable housing often involving the purchase of expensive privately owned

land, New York’s housing programs increasingly involve some form of mixed-income housing (Waters

and Bach, 2013). The inclusion of units for higher income households in the development reduces the

amount of public subsidy necessary to support low-income units. In some cases, mixed-income housing

involves no public subsidy at all, with expensive, market-rate units generating sufficient revenue to make

the inclusion of lower-cost units financially viable. Mixed-income housing in New York takes on many

Partnerships for Affordable Rental Housing in New York City

Conference Proceedings: Partnerships for Affordable Rental Housing, University of Calgary, November 15-17, 2018

forms, with varying combinations of income levels. Some programs support housing that is

predominantly market-rate, with around 20 percent of the units designated for low or moderate income

households. Other programs cap the maximum eligible income, and subsidize housing for low- and

moderate- income households (Tsenkova, 2013).

Mandatory Inclusionary Housing

In 2015 the City Council passed New York’s Mandatory Inclusionary Housing Program, which built on

previous experiences with this planning instrument (see New York City Housing Department, 2013). The

legislation required developers of housing in rezoned neighborhoods—and of residential construction

located elsewhere that received a zoning variance to be built at higher densities than otherwise

permitted—to include housing for lower-income households. Developers have two basic options:

• Designate 25 percent of units (floor area) for households earning an average of 60% of Area

Median Income (AMI)--$47,000 for family of four), including 10% for households earning 40%

of AMI ($31,000). There is no income or rental cap on other units.

• Designate 30 percent of units (floor area) for households earning an average of 80% of AMI

($62,000).

Mixed-Income Mix & Match This program funds construction of rental housing in which 40 to 60 percent of the units are affordable to

households earning up to 60 percent of AMI, and the remaining 40 to 60 percent are affordable to

households earning up to 130 percent of AMI. Projects must have at least four affordability tiers, and at

least 10 percent of the units must be reserved for formerly homeless individuals and at least 10 percent

must be affordable to households earning between 30 and 50 percent of AMI. The amount of city subsidy

provided for Mix & Match projects depends on the representation of different income groups. Units

reserved for formerly homeless households receive $225,000 per unit, units designated for households

earning 70 percent of AMI receive $120,000, and units for the maximum allowable income, 130% of

AMI, receive $10,000.

Extremely Low & Low-Income Affordability (ELLA) ELLA provides funds for all units in mixed-income developments so that cash flow from higher-income

units offsets losses from lowest-income units. There are two options, both of which require that 10

percent of units are reserved for formerly homeless people:

Option1:

10 percent of units reserved for formerly homeless

10 percent of units for households earning up to 30 percent of AMI

10 percent of units for households earning up to 40 percent of AMI

10 percent of units for households earning up to 50 percent of AMI

An option of reserving up to 30 percent of the units for households earning 70 to 100 percent of

AMI

Remaining units serving households earning up to 60 percent of AMI.

Partnerships for Affordable Rental Housing in New York City

Conference Proceedings: Partnerships for Affordable Rental Housing, University of Calgary, November 15-17, 2018

Option 2:

30 percent of units reserved for formerly homeless households

5 percent of units for households earning up to 40 percent of AMI

5 percent of units for households earning up to 50 percent of AMI

An option of reserving up to 30 percent to the unit for households earning 70 to 100 percent

of AMI

Remaining units serving households up to 60 percent of AMI

The subsidy under the two options amounts to about $130,000 per unit under option 1 and $140,000 unit

under option 2. Subsidies are higher when projects include units for households earning more than 70

percent of AMI since this housing is not eligible for federal Low Income Housing Tax Credits.

Sustainability and Design Innovation

Newly built mixed income affordable housing sets an example for sustainability, design innovation and

institutional partnerships. The Hunter’s Point South development on the Queens waterfront is the largest

new affordable housing complex built in New York City since the 1970s. Envisioned as the City’s 2012

Olympic bid, the first phase includes 925 permanently affordable apartments and 17,000 square feet of

new retail space, key infrastructure installations, a new five-acre waterfront park, and a new 1,100-seat

school. The City collaborated with New York State to help finance the residential buildings, allocating

$185 million of tax-exempt bonds for the project. HDC issued $236 million in tax exempt bonds, HPD

provided $68 million in subsidy, the developer contributed over $27 million of equity, and New York

State Energy Research and Development Authority provided $1.2 million in grants for green elements.

The waterfront development incorporates resiliency features to mitigate the impact of severe storms and is

designed to meet Enterprise Green Communities Criteria (national green building criteria).

Figure 3: Hunter Point: the

largest new affordable housing

in New York City.

Photo credit: New York City Housing Development Corporation

Partnerships for Affordable Rental Housing in New York City

Conference Proceedings: Partnerships for Affordable Rental Housing, University of Calgary, November 15-17, 2018

Via Verde is a new affordable, sustainable residential development providing mixed income housing

opportunities in the South Bronx. The project has 222 apartments and received HUD’s Award for

Excellence in Affordable Housing Design in 2013. The ground floor features 11,000 sq feet of retail, a

community health centre, and live-work units. With a 66 kW building-integrated photovoltaic system,

onsite cogeneration, green roof, community vegetable gardens, green interior finishes, rainwater

harvesting and drought tolerant vegetation, the complex is LEED NC Gold certified (see Tsenkova,

2014).

Figure 4:

Via Verde:

sustainable

and

affordable

rental

housing.

Photo credit: New York City Housing Development Corporation

Lessons for Canadian Cities

The experience of NYC with affordable rental housing provision offers important lessons for Canadian

municipalities. A strong political commitment to affordable rental housing, significant financial and

planning support and robust institutional partnerships with non-profits and private sector providers play

an important role in neighbourhood transformation through sustainable mixed use projects. Its experience

shows that investing municipal resources in the development and preservation of affordable housing is a

long-term strategy, which may be costly and not necessarily popular under different economic and

political conditions. The sustained fiscal and financial support from the federal government, through

direct investment in public housing, HOPE VI mixed income developments, demand-based subsidies

(Section 8 and Section 22) and tax credits for private investors makes a critical difference. The supply

side interventions of NYC might have been very helpful in rescuing the abandoned housing and vacant

land, but tend to be a very costly way of developing affordable housing that generally may have been

provided through the normal filtering process (Tsenkova, 2014).

In Canada, the level of federal support is more limited, although Canada’s Economic Action Plan since

2011 has marked a dramatic change in this regard, providing $850 million over two years for the

renovation and retrofit of existing social housing, plus a further $475 million to build new rental housing

Partnerships for Affordable Rental Housing in New York City

Conference Proceedings: Partnerships for Affordable Rental Housing, University of Calgary, November 15-17, 2018

for low-income seniors. The Economic Action Plan 2013 proposed $1.25 billion to renew the investment

in affordable housing, while the first National Housing Strategy adopted in 2017 commits to $40 billion

over the next ten years. In the context of fiscal support from senior governments and improved access to

long-term finance for affordable rental housing, Canadian municipalities can play a significant role in

facilitating private sector involvement by creating a positive planning and policy environment. Key

recommendations in that regard focus on density bonusing (permitting higher development densities in

return for provision of public amenities), streamlined development approval and acquisition of vacant

land and tax delinquent properties.

Inclusionary zoning could allow for new affordable housing in mixed income developments, although

various factors, including income and tenure mix, design, location, amenities, the strength of the local

housing market are critical to building successful mixed income developments (Schwartz et al., 2012).

Increasing capital funding for a continuum of affordable housing options by senior governments—federal

and provincial—is essential to bridge the gap between the cost of development and potential revenue

generation. The programs need to have transparent and well defined rules, standards and target groups. As

different forms of collaboration between private, public and non-profit institutions continue to evolve, the

fiscal framework, including tax incentives, needs to be adjusted to encourage more private sector

engagement. Specific instruments might be used to target low-income, vulnerable and special needs

households, while others might be appropriate for medium income groups that can be accommodated in

near market rental and affordable homeownership housing (Tsenkova and Witwer, 2011). Capitalizing on

the competitive advantages of the private sector (promote/finance, design/build) to reduce development

costs through innovative construction and/or management efficiencies should be promoted as a viable,

market-based strategy for increasing affordable housing and creating mixed income communities.

References Furman Center for Real Estate and Urban Policy (FCREUP) (2011) State of New York City Housing and

Neighbourhoods. NY: New York University;

New York City Housing Department (2013) Inclusionary Housing Program. Available at:

www.nyc.gov/html/dcp/html/zone/zh_inclu_housing.shtml (Accessed July 2, 2013).

New York City Department of Housing Preservation and Development (2012) New Housing Marketplace Plan,

3 and Monitoring Report.

Schwartz A. (1999) New York City and Subsidized Housing: Impacts and Lessons of the City’s $5 billion Capital

Budget Housing Plan. Housing Policy Debate; 10(4):839-77.

Schwartz H, Ecola L, Leuschner K, Kofner A. (2012) Is Inclusionary Zoning Inclusionary? Santa Monica, CA:

RAND Corporation; pp.13–21.

Tsenkova, S. (2014) Investing in New York’s Future: Affordable Rental Housing in Mixed Income Projects,

Plan Canada, vol.53 (3), pp. 32-40.

Tsenkova S, Witwer M. (2011) Bridging the Gap: Policy Instruments to Encourage Private Sector Provision of

Affordable Rental Housing in Alberta. Canadian Journal of Urban Research;20(1):52-80.

Waters TJ. Bach V. (2013) Good Place to Work Hard Place to Live. NYC: Community Service Society.