Tuesday, November 27, 2007

Priced Out: policies and pressures on affordable housing

“The housing situation is bleak,” declared City Council Member Letitia James, opening the “Priced Out” conference on “addressing the pressures of living in NYC,” sponsored by by the New York City Council Black, Latino and Asian Caucus over the first weekend in November at Pace University.

(Here´s more on the Atlantic Yards angle that surfaced occasionally.)

Elected officials speak

Some top elected officials offered some general recommendations, while activists, from the dais or on panels, were often more forceful about fighting some new pressures on affordability and achieving some sought-after reforms regarding rent regulation. (Not on the table, of course, were the conservative arguments about repealing rent regulation--here´s a Gotham Gazette article on the debate--or even the argument, by Nicole Gelinas of the Manhattan Institute, that mass-transit investments would achieve more housing than direct subsidies.)

Scott Stringer, Manhattan Borough President, offered the community-friendly observation that “the people who are most in jeopardy [of displacement]… the people who stayed and fought.”

He offered an unsurprising solution for affordable housing: planning and zoning, even though rezonings have yet to deliver the enormous number of apartments needed. “I think development is good,” Stringer said, “but we should be able to have it both ways,” also supporting affordability.

He cited New York’s role as a beacon for immigrants and also for artists: “Those dreams will be deferred if the entrance fee is a million-dollar apartment.”

Bronx Borough President Adolfo Carrion was more pessimistic. “As New York changes, does New York give opportunity to the new faces?” he asked. “I think the painful answer is that we are not.”

He enumerated some lessons: “Warehousing the poor doesn’t work. Concentrating the need doesn’t work. Mixed-income housing works. Subsidizing development to make it affordable works.” (Well, that depends on the numbers.) “Mitchell-Lama [subsidized housing] worked, and it needs a new breath of life.”

“We have learned that planning and zoning work,” he said. “We have learned that Community Benefits Agreements [CBA] work.” There were a few scowls from the audience, given Carrion’s purge of Community Board 4 members who opposed the new New York Yankees stadium and its attendant CBA. “They’re tricky, they’re like making sausage,” he allowed.

“We need to embrace leaders who understand and embrace and invest in the emerging New York,” he concluded.

Council Speaker Christine Quinn, a luncheon speaker, noted that “there is no issue I hear raised more frequently” as affordable housing. “There isn’t one easy answer,” she added. “It’s like a puzzle, putting new pieces in. Although there is much more we need to do, I am very very proud of what we have accomplished.”

Beyond rezonings, she cited improvements in the Section 8 program, new capital funds to improve distressed properties owned by the federal department of Housing and Urban Development, and the need to make sure the New York City Housing Authority gets the money it needs.

Repealing Urstadt

One significant change sought by affordable housing advocates is a repeal of the Urstadt law, passed in 1971, which “took control of rent regulation out of the hands of the city government and gave it to the state legislature,” as Gotham Gazette explains. And that means that a Republican-controlled body in a dysfunctional, gerrymandered legislature has undue power over a Democratic city.

Each year, said Assembly Housing Chairman Vito Lopez of Brooklyn, the Assembly repeals Urstadt, only to see it the bill die in the Senate. And that’s why Michael McKee, treasurer of Tenants Political Action Committee, states in a Strategic Plan to Win Stronger Rent Laws that “To have any chance of winning our legislative goals, tenants must help the Democrats take control of the New York State Senate next year.” (The Democrats need only two more seats for a tie, and Lieutenant Governor David Paterson, a Democrat, would cast a tie-breaker.)

Vacancy decontrol? The state explains: If an apartment is vacated with a legal regulated rent (Rent Stabilization) or maximum rent (Rent Control) of $2,000 or more per month, such apartment qualifies for permanent decontrol, and therefore for removal from all rent regulation.

The problem is that it was never indexed to rental inflation when established in 1994—had it been, points out Brad Lander of the Pratt Center for Community Development, it would be over $3300 today.

Lopez defended his attempts to increase affordability in the reform of the 421-a tax break—he left out the Atlantic Yards “carve-out”—and said, as he has in the past, that “the state does nothing compared to the city” regarding support for affordable housing.

"Predatory equity” and pension funds

Amy Chan, an organizer at Tenants and Neighbors, described a trend, dubbed “predatory equity,” in which Mitchell-Lama buildings are purchased by investment groups looking for a quick fix rather than long-term revenue from rent. In March 2005, a portfolio of five former Mitchell-Lama buildings was sold by Jerome Belson Associates to Cammeby’s International for $295 million, or $74,000 per unit. In May 2007, they were sold to Putnam Holding Company for $918 million, or $232,000 per unit.

Such projects may wind up unaffordable, as developers make improvements that generate significantly increased rents, or, she said, may wind up in foreclosure.

Even more disturbing to tenant advocates is that the owners of Putnam are the City Investment Fund and Urban American Management, both of which include significant contributions from the retirement systems for city and state public employees

“We have tried to talk to the city and state comptrollers,” said ACORN’s Bertha Lewis, noting that they control $154 billion in investments in the above funds. “They’ve invested in these same companies and banks that are ripping people off.”

Surprisingly, this issue has not made the mainstream press. The only coverage I could find was a 9/24/07 article in City Limits, headlined PUBLIC MONEY HELPS FUND EXPENSIVE HOUSING FLIP. A spokeswoman for City Comptroller William Thompson told City Limits he is “sensitive to investments in real estate deals that have a negative impact on affordable housing,” but didn’t consider this an unwise investment—a statement that drew criticism from housing advocates.

“City Council needs to demand that the city and state comptroller use the power of their offices,” said ACORN's Lewis. James told me a meeting was scheduled with Thompson.

Raising rents to what the law allows

City Limits cited Urban American’s strategy as “built upon the direct relationship between capital expenditures and permissible rental increases in rent regulated apartments, where increases in rents can be achieved through investment in unit and common area upgrades." A spokesman for the two companies said they were improving buildings and not evicting tenants.

(Last Wednesday, the Daily News reported that Cammeby's, which had bought a former Mitchell-Lama building in Coney Island, was jacking up rent.)

“We’ve got to repeal vacancy decontrol,” said McKee. “We wouldn’t have these predatory private equity companies buying our Mitchell-Lama and rent-regulated buildings at Enron-like prices.”

(The state last week closed a loophole that would allow landlords leaving the Mitchell-Lama program "to immediately bring the rent in their apartments up to market rate¨," the New York Times reported yesterday.)

Numbers matter

The rent-regulated profile of the city's housing stock continues to change. Chloe Tribich, lead organizer for Housing Here and Now, pointed out that, in 1970, 75% of rental units were regulated. In 2005, the percentage had declined to a little over 50%, and there are fewer units.

Landlords, she said, can quickly move an apartment from $1000 to decontrol, with a series of new tenants and capital improvements.

McKee tried to address the inevitable "gotcha" stories about rich people living in rent-regulated apartment, calling it a "red herring." Median household income in rent-regulated apartments is $32,000, he said.


(Unlike with apartments in many current affordable housing programs in which rent is set at 30% of household income, however, there's a disconnect in some cases between rent-regulated apartments and ability to pay.)

“It’s not just about the rent, it’s the right of tenure," he added. “It is not about somebody’s deal. It’s about keeping the supply of affordable housing available for the future.”

Government tweaks

There’s much that the government can do to adjust the balance between landlords and tenants. Dave Hanzel, policy director at the Association for Neighborhood and. Housing Development (ANHD), said that legislation would enable tenants for the first time to sue landlords for harassment.

Louise Seeley of the City-wide Task Force on Housing Court noted that Council Member Rosie Mendez was about to introduce a bill calling for a right-to-counsel in Housing Court for seniors with incomes under $27,000. “If you get more tenant attorneys in Housing Court, the tone is going to change,” she said. “The landlord’s bar is pretty powerful.”

Indeed, as the New York Times reported in an 11/16/07 article headlined Free Legal Aid Sought for Elderly Tenants, the proposed law, the nation’s first, would protect elderly residents at a time when landlords seeking to capitalize on a hot real estate market and rapidly gentrifying neighborhoods have become more aggressive in taking tenants to housing court, council members said.

Nonprofit legal organizations are strapped, representing only a fraction of the tenants that seek help. Seeley told the Times that 90 percent to 95 percent of tenants in housing court have no lawyers, while nearly as many landlords do have such representation. The bill would cost the city up to $12 million a year to represent up to 10,750 seniors—but could save other costs in emergency shelter.

Also, as the Times reported in a 10/30/07 article headlined Bias Is Seen as Landlords Bar Vouchers, New York City is behind many other major cities in not prohibiting discrimination against those who hold federal Section 8 vouchers that subsidize apartments they find privately. Council Member Bill de Blasio is sponsoring such a bill.

What about AMI?

Donald Notice of West Harlem Group Assistance said that “where affordable housing was difficult ten or 20 years ago, it seems impossible now.” Community development corporations (CDCs) like his own cannot acquire property on the private market. Needed are deeper subsidies, a greater amount of housing finance, and a change in Area Median Income (AMI), which is based on regional figures and is $70,900 for a four-person household.

In Central and West Harlem, the AMI is $27,000, Notice said. “Who are we applying AMI to when we use $72,000 as a measuring point?”

“I think this AMI stuff is garbage,” said the Assembly´s Lopez. Added Council Member Robert Jackson, “People I represent say, ‘tell me how it’s affordable to us?’”

ACORN’s Lewis said “Stop playing around with this AMI. This is ridiculous.” She said ACORN has pushed for legislation that requires any housing development to be judged by the city’s AMI, which is about $56,000. (That wasn’t the case for Atlantic Yards, which follows the regional AMI of $70,900. Then again, Lewis has defended the deal, asserting it was the best possible: "if I could stop one iota of gentrification, I’ll do it.")

High land costs

Bruce Dale of the Community Preservation Corporation sketched why it’s so difficult to build affordable housing. The cost of land, once low, has skyrocketed. In Harlem, he said, land sells for more than $200 per square foot. It costs another $200 per square foot to build it, plus $50 in soft costs (architecture, legal, etc.). That means that a 1000-square-foot “small two bedroom” would cost $450,000. “It’s no longer affordable, and that’s without profit,” Dale said.

(By the way, in the Atlantic Yards context, 1000 square feet is not a “small two bedroom.” The affordable units would average 775 square feet for two bedrooms.)

“Construction costs have gone up, land has gone up, utilities have gone up. Income has not gone up,” Dale said. “One of the only positive things I see is the change in the government nationally.”
“Developers are in business to make money,” Dale said. “To get them to build affordable housing, there has to be a trade-off.”

Edward Poteat, director of real estate finance at Horsford & Poteat Realty, described how a church group chose not to use tax credits for an affordable housing project, fearing too much red tape, and instead built a market-rate project. “And that’s a church group,” he said. “So there are real challenges.”

Building higher

Poteat said the only solution was increased density. “I tell everyone who’ll listen: if you don’t have land to build horizontal, the only thing you can do is make it vertical.” Sure, he said, public housing has a bad reputation, but “Stuyvesant Town looks like public housing.’’

He suggested zoning changes—as long as the projects included affordable housing—in neighborhoods like Brownsville, East New York, and Bushwick, allowing ten- to 12-story buildings, envisioning a scale not unlike at the Grand Concourse in the Bronx.

General dismay

Hanzel said that advocates should look beyond the 20 or 30 or 40 years of affordability attached to projects. “We want to use permanent affordability as a litmus test for mayoral candidates in 2009,” he said.

ACORN’s Lewis suggested that any development done on city or state land be subject to a land trust, so it would be “affordable forever, not 30 years, not 40 years.”

(When it came to a project partially on state land, Atlantic Yards, ACORN didn’t push for such a deal. The Atlantic Yards Community Benefit Agreement states says affordability will be guaranteed for a “period of thirty years.”)

The argument for permanent affordability, as cited by the Pratt Center for Community Development, is that developers will get benefits like increased density in perpetuity.

City Council Member Leroy Comrie of Queens, responding to a question, declared, “I’ll address the issue of proper urban planning. We don’t have any in the city.” He added, “Long ago we lost the ability to demand that, as a community expands… they have to build parks and schools.”

(Yesterday, the New York Sun reported that the City Council has established a new task force to assess new projects' impacts on city infrastructure, with James as a co-chairperson.)

The housing crisis is “about big business exploiting the poor,” said Lewis, pointing to the role of banks and mortgage companies in the foreclosure crisis.

Despite the progress cited by Quinn, who's a likely candidate to succeed Mayor Mike Bloomberg, much more needs to be done, attendees concluded. Observed Council Member Melissa Mark Viverito: “We have to figure out how we develop a comprehensive housing agenda.”

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