Brick By Brick

New York City’s affordable-housing system works—but it’s complicated

At a City Council hearing last week, two union leaders with concerns about New York City’s affordable-housing programs wanted to make a point. So they drew up enormous charts showing just how complicated the system is.

Nicole Vecchione from the Laborers Eastern Region points to a chart illustrating the funding streams behind a New York City affordable-housing project at a City Council hearing last week. William Alatriste/New York City Council

The first one alone had 29 arrows linking seven public agencies, six housing developers and two private companies— all to build one project.

“What you’re seeing here is sort of inherent to the affordable-housing world,” city Housing Commissioner Mathew Wambua said later as he perused a copy of the charts. “There’s a certain coun- terintuitiveness to affordable-housing finance. It has to be highly structured, but while highly structured, it’s pretty template-oriented.”

New York City has one of the most ambitious affordable-housing programs ever attempted. Mayor Michael Bloom- berg says he will have poured $8.5 billion into building or rehabbing 165,000 homes by the time he leaves office. Yet it relies on a crazy quilt of tax credits, tax abate- ments, rent regulations, private devel- opers, nonprofit agencies and government funding to make the most complicated deals spring to life.

It is hardly the most efficient way to find an affordable place to live in a crowded city. But it is the system New York has to live with.

“You have to fit all these pieces together to build and preserve affordable housing,” said Nixon Peabody partner John Kelly. “You’re building housing that costs less to rent, you have to get your costs down and you have to get it built.”

An entire industry of investors, lawyers, nonprofit executives and govern- ment officials wrestles with the tools to make it work, from discounted land to tax credits. One key factor links them all: They are leveraged against the private housing market, so developers construct homes that make room for below-market pricing.

“There’s a huge amount of private investment going into these things, and that’s a good thing,” said Deputy Housing Commissioner Molly Park. “This is afford- able housing that’s being built without the taxpayers having to foot the bill.”

New York State rearranged its housing finance programs last year. State Housing Commissioner Darryl Towns told City & State he was happy to discuss his priorities, but his Deputy Commissioner, Christopher Browne, refused to schedule an interview or discuss any of the agency’s plans.

“The problem is not the alphabet soup of programs,” said Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Develop- ment. “The alphabet soup of programs is what makes the affordable housing possible.”

Even though the system works, Dulchin said, his organization is focused on finding ways to lock in permanent affordability for housing developments that put a time limit on their subsidies— and on ways to stretch subsidy dollars further.

“You live in a city where private industry would never build a single unit of affordable housing without subsidies,” he said. “Maybe we’re not leveraging the competitiveness of the development community enough.”

In a recent report, the Citizens Housing & Planning Council counted 757,000 housing units that claim one of four popular tax abatements for devel- oping affordable housing.

They comprise almost one-quarter of the entire residential housing stock in New York City, the report said—and they cost the city almost $1.3 billion a year in property tax abatements.

Last year, renewing the tax break for new residential construction known as 421-a became entangled with renewing New York City’s rent regulations. This year, renewing the J-51 tax break for renovating apartments may become entangled with a complicated court case involving how the tax break was applied in thousands of apartments. Neither is a case study in how to achieve the best policy goals.

The impact of those accumulated tax breaks is poorly understood, said Harold Shultz, senior fellow at the Citi- zens Housing & Planning Council. Yet while lawmakers regularly tinker with program terms when laws come up for renewal, he said, there is little practical prospect of ever redrafting the entire system to ensure that it is as effective as possible.

“It would be hard to rewrite the thing from the top,” Shultz said. “Here’s the thing to remember: People are still coming to New York City. They need a place to live. We have a very tight private housing market. We need for the private housing market to build housing.”

alisberg@cityandstateny.com