Friday, March 28, 2008

Why Atlantic Yards depends on a Democratic administration in DC

Besides the credit crunch and the lack of a market for office space, both acknowledged by Atlantic Yards developer Forest City Ratner, the project depends crucially on a sufficient supply of tax-exempt bonds, a "crisis"--in the words of city housing head Shaun Donovan--evident well before the downturn in the economy.

And, despite efforts in Washington by top legislators representing New York, the problem likely won't be alleviated until a Democratic administration and a Democratic Congress revamp the rules and allow hard-pressed states like New York additional "volume cap," or the capacity to issue bonds free of federal taxes.

Former city official: demand is 10 times the capacity

That point was reinforced Wednesday at a panel, ,THE LONG VIEW: How Can New York Preserve Housing Affordability?, at the New School's Milano management and urban policy school.

Emily Youssouf, Managing Director and Head, Housing Finance Division, JP Morgan Securities, reflected on her four years heading the New York City Housing Development Corporation (NYC HDC), the nation's leading issuer of bonds for multi-family affordable housing.

The federal government, Youssef, explained, provides $85 per capita in volume cap per state, and every state uses it. "New York State gets about $2 billion" a year, she said. (Actually, closer to $1.6 billion, according to her successor, Marc Jahr.)

That total covers not just bonds issued by NYC HDC for multi-family housing, but bonds issued by the state housing finance agency for single-family housing as well as bonds issued by industrial development authorities. "The demand for these bonds is like ten times that in every given year," Youssef said.

While Sen. Charles Schumer and Rep. Charles Rangel have pushed to increase volume cap, she said, they've met resistance from Republicans in the Senate, whose "pay-as-you-go" philosophy means that the future tax loss must be balanced by future revenue.

Youssef said she hoped the situation will change "with a change in the administration."

The AY need: $1.4B and growing

Surely Forest City Ratner agrees. State documents project a need for $1.4 billion in bonds for the 50/30/20 program of rental housing, though rising construction costs suggest the total would grow.

Over a decade, that's $140 million a year, nearly ten percent of the state's capacity. Would any one project get such a large chunk?

Either Atlantic Yards will take much longer than announced--as all evidence, including flexible state deadlines, suggests--or significant changes in Washington will make it easier for many developers, not just FCR, to build affordable housing in New York City.

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