By REBNY President John Banks New York City received some good news this past week. Mayor
By REBNY President John Banks
New York City received some good news this past week. Mayor de Blasio announced that during Fiscal Year 2016, 23,284 affordable apartments and homes have been secured, placing his Housing New York plan of creating and preserving 200,000 units of affordable housing over ten years ahead of schedule.
Since the beginning of Housing New York, 52,936 affordable homes have been financed so far – enough for 130,000 New Yorkers. This includes 17,341 new affordable units and nearly 3,500 homes financed in the past year for households earning under $24,000, with over 4,000 affordable homes for low-income seniors also on the way.
This rapid production of affordable housing represents an investment of $780 million by New York City in neighborhood affordability. This investment, in conjunction with over $1.29 billion in bonds issued by the Housing Development Corporation (HDC) in FY16 and a doubling in capital funding for the Department of Housing Preservation and Development, is good news.
The de Blasio Administration is to be commended for the focus it has put on housing New York’s growing population – particularly those with low-income families to support.
What was lost in the coverage last week was the critical role the tax incentive program 421-a played in the creation of so many new affordable housing units. At this point, it is unclear how many of the 17,341 new units announced last week resulted from the 421-a program. However, as of March of this year, 5,006 – or slightly more than one-third – of the 13,929 new affordable units that had been financed through the end of 2015 had received 421-a benefits.
It is equally important to point out that many of the new affordable housing units created by 421-a are in areas of the City where it is otherwise very difficult to create new below-market rental units.
The City of New York should expect even better news over the next year with respect to the creation of new affordable housing units.
In 2015, in response to deadlines that were imposed with respect to the expiration of the old 421-a program, there was an extraordinary activity in permitting new residential development projects. For example, in the second quarter of 2015, the City authorized 33,910 housing units for new construction – over five times the number of units authorized the previous quarter. It is likely that many of the projects that were permitted in 2015 will be completed in 2017 and result in many new market and below market rental units being put in the market.
Once these projects are completed, however, the future is bleak for the production of new affordable rental units in New York City.
One major hindrance to restarting the program is determining what the cost of construction labor should be on sites that use 421-a. Given the failure to put a new 421-a program in place, and the current cost of land, construction and property taxes, the production of new affordable rental units in many areas of the City will grind to a halt.
With a near cessation of the production of new affordable housing units in many areas of New York City, one should expect even more market pressure on the escalation of rents. There will also be a greater economic segregation of the City given, that without 421-a, it will be difficult to produce new affordable rental units in many areas of the City.
As followers of this issue well know, the stumbling block to restarting the 421-a program is determining what the cost of construction labor should be on sites that use 421-a. Numerous studies have shown that imposing a union construction requirement on the 421-a program will either dramatically increase the cost of the program or result in the production of much less affordable housing.
This past June, the State Senate Republican conference sought to break the logjam by proposing an average construction wage standard of roughly $114,000 per year on projects south of 96th Street in Manhattan containing more than 300 apartments, of which 50 percent of the units would be affordable. The Senate Republicans’ efforts were commendable, but this proposal failed to gain traction and the logjam continues.
In other REBNY News:
REBNY’s 8th Annual Summer Donation Drive is officially underway! This year, we’re working with The Bowery Mission to serve homeless and hungry New Yorkers. From June 10th through September 9th, REBNY’s members are encouraged to donate soap, shampoo, conditioner, toothpaste, shaving cream and more items to help restore dignity and respect to our city’s homeless community.
It’s that time again! REBNY’s residential agents are looking at their deals to see what could be a contender for the 28 th Annual Residential Deal of the Year Awards and Charity Gala to be held at Pier 60 at Chelsea Piers on Wednesday, October 26 th , 2016! The deadline for all submissions is Friday, September 16, 2016 at 5:00 p.m. The application forms for the Deal of the Year, Henry Forster Award, Most Promising Salesperson of the Year, and the ticket reservation form can be found at www.rebny.com, and for sponsorship opportunities, please contact Jeanne Oliver-Taylor at JTaylor@rebny.com or at 212-616- 5261.
Future of NYC affordable housing bleak without 421a : Real Estate Weekly