Monday, June 11, 2007

The income mix for AY affordable units already changed; could it change again?

The inaugural issue of City Limits Investigates, which focuses on affordable housing, points out that, with some construction costs rising 1% a month, a lack of cheap land, and limits on governmental contributions, Mayor Mike Bloomberg's New Housing Marketplace Plan may "never get to 165,000 units--or if it does, that the housing produced will not meet the most pressing needs."

Indeed, to get there, city housing officials acknowledge, the cost pressure "could change the complexion of the affordable housing they are delivering." (Or, perhaps, more funds must be sought from other sources, including borough presidents.)

Does that mean that the complexion of Atlantic Yards--the profile of the affordable units--might change? Maybe, but the important thing to realize is that it has changed already.

Original promise

The projected income mix in the Atlantic Yards affordable housing changed considerably in little more than a year.

The Housing Memorandum of Understanding, signed by ACORN and developer Forest City Ratner in May 2005, contemplated three scenarios. In each of the three, 20% of the rentals (and thus 40% of the affordable units, or 900) would be assigned to low-income households, defined as earning up to 50% of Area Median Income, or AMI.

However, there was much wiggle room for the other 1350 units, for moderate- and middle-income households. In the first scenario (above), 450 units would go to households with 60%-80% of AMI, 450 to 81%-100% of AMI, and 450 to 101%-140% of AMI.

(Note that in the chart above, the household size goes up to six, while the one below, from the Atlantic Yards Information Session last July, only contemplates a four-person household.)

Changing gears

From April through June of last year, Forest City Ratner on its web site promoted the first, most inclusive scenario, as I wrote last July. By the time of the information session, however, the first two scenarios were jettisoned, and the affordable units at Atlantic Yards--at least the ones not low-income--would be geared to higher-earning households.

The current chart, as noted below, contemplates 450 units going to households with 60%-100% of AMI, 450 to 101%-140% of AMI, and 450 to 140%-160% of AMI.

To put it more plainly, there were once 900 units aimed at moderate-income families earning 50%-100% of the AMI; now there would be only 450. Beyond that, the top tier under the first scenario, 101%-140% of AMI, would now be the second-to-top tier, given that 450 units would go to households earning 101%-140% of AMI.A time-old tactic

CLI observes:
When rising costs begin to squeeze an affordable housing project during its planning stage, that income mix is a key component with which developers can tinker. Subsidy programs have income guidelines but there is usually room to manuever. The malleability is a handy tool when it salvages projects that otherwise might be priced out of existence. But it also means that the final affordable housing product could serve a different set of New Yorkers than originally intended--in other words, that there will be winners and losers.

It's not clear how much that might affect Atlantic Yards at this point, because there appears to be little wiggle room with the rentals. The wiggle room that remains concerns the 600 to 1000 for-sale subsidized units, onsite or offsite, which are in the MOU but not part of the General Project Plan issued by the Empire State Development Corporation. (Upon approval by the Public Authorities Control Board last December, Forest City Ratner announced that 200 such units would be onsite, but no further details emerged.)

The MOU states:
It is currently contemplated that a majority of the affordable for-sale units will be sold to families in the upper affordable income tiers.

The percentage in that majority, and the tiers associated with it, might increase. (100% of AMI or 160% of AMI? More?)

Potential change?

Even with the rentals, there may be wiggle room, if it's crucial to get the project done. CLI reports:
The RFPs to which housing developers respond often require units for certain income levels. But if it's a matter of life or death for a project, requirements can budget, developer's say. "Nobody wants to see a project fail," says [the Housing Partnership Development Corporation's Daniel] Martin. If costs become a major issue, all the players get together to crunch the numbers, sometimes upward. "For example, let's say the target was 80 percent AMI. Can we support moving up to 110% AMI? For the developer, that's a 20 percent increase in sales price on certain units, and it's enough to put him over the top."


One example in which a change helped affordability concerns the Fifth Avenue Committee's planned Atlantic Terrace development just north of Atlantic Avenue and east of the Atlantic Center Mall, across from the Atlantic Yards footprint. Sales prices on some moderate-income units went down because the market-rate units in a hot market can bring in more revenue. (In this case, the market-rate units explicitly subsidize the affordable units; the Atlantic Yards deal is more murky.)

Still, ultimately, there's a tradeoff, as CLI reports:
"The city must choose between building the most units and getting the deepest affordability," [Lucille] McEwen of [Harlem Congregations for community Improvement] says. "That's a tough call."

The most stringent requirement is that 20% of the rentals go to low-income households earning under 50% of the AMI. Perhaps the upper income bound will be adjusted to 175% of AMI, which is permitted under city subsidy programs. Even though that would seem to violate the Housing MOU, it's hard to imagine that ACORN, which hasn't criticized delays in the project and other impediments to affordable housing, would raise a stink.

Still, if we don't have an inkling for Forest City Ratner's development fees, costs, and profits, it's hard to tell whether a tweaking of the income mix is needed to get the project built or just to drive the return FCR's parent company wants for its shareholders.

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