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In tale of Giuliani influence, insight into the flexibility in size of affordable housing units

Yesterday, the New York Times reported on a new blog, Rudy Veritas, by Rudy Giuliani's ex-aide, Russell Harding, who ran the New York City Housing Development Corporation (HDC) and just happens to be a felon (embezzlement, child porn) recently released from prison.

One of the tales, which so far can't be independently verified, regards Harding's role in getting Judith Nathan, the girlfriend and future wife of the still-married Giuliani, an Upper East Side apartment at below-market rent. Harding's post is interesting not merely because of the favor offered, but in the insight into how much flexibility the city allows regarding the size of apartments designated as affordable housing.

Market-rate units are bigger

Harding's tale involves the 80/20 program, involving 80% market-rate units and 20% low-income units, which more closely resembles Forest City Ratner's project at 80 DeKalb Avenue, rather than the Atlantic Yards project, for which the rental towers--though not the ones containing condos--would contain 50% market-rate, 30% middle- or moderate-income units, and 20% low-income units.

As I wrote, though the state Housing Finance Agency requires that 20% of the units be affordable, it requires that only 18% of the floor area be devoted to those units, thus allowing for somewhat smaller units. For 80 DeKalb, FCR plans to devote 18.6% of the floor area to affordable units.

For an earlier incarnation of Atlantic Yards, as I wrote 7/15/06, the affordable units, at an average of 675 square feet, would represent about 33% of the total number of units but only 22% of the housing square footage. Now, the 2250 units would represent 35% of the 6430 total units, and, at 675 sf, they'd represent about 24% of the 6.79 million square feet of housing.

Now that doesn't necessarily mean that the market-rate housing would make up the entirety of the remaining housing square footage--it's not clear to me how common spaces are treated.

Still, it strongly suggests that market-rate housing take up a disproportionate share. And, as Harding's tale shows, government officials may have some impact on the amount of that share. In other words, it's negotiable--an issue worth watching if and when the HDC provides bonds for the first affordable housing tower the developer plans.

Now, the Bloomberg administration appointee running the HDC, Marc Jahr, is a professional in the field, rather than a political appointee like Harding. On the other hand, Jahr, at least in one press report, seemed curiously unconcerned about the potential shortfall in housing bonds for Atlantic Yards. That suggests that AY would be a political priority.

The negotiable size of apartments

Harding writes on his blog:
The person I reached out to was Jeff Blau, President of the Related Companies. HDC and Related had together produced a number of buildings as part of the federal government’s 80/20 housing program.

In exchange for receiving lucrative triple tax-exempt financing, the developer of an 80/20 sets aside 20% of his newly constructed luxury building’s units for low-income tenants. Manhattan is dotted with these buildings and almost no market-rate tenant knows that their neighbor is low-income and is paying a fraction of their market-rate rent.

I placed a call to Jeff and explained what I needed and where the request had come from within the parameters I had promised [Giuliani aide] Tony [Carbonetti]...

The difficulty for me with her living arrangement was that she had probably wound up living in a Related 80/20 building possibly financed with HDC bonds and even likely with a mortgage held by HDC. I never asked the address of where she lived just in case a reporter ever questioned any possible HDC connection. I could honestly say I had no idea where Judith Nathan lived. Having the Mayor’s girlfriend living in a government-sponsored building paid for with triple tax-exempt bonds, at a sub, sub market rate rent, having been negotiated by his appointee, would have been a scandal.

The further difficulty for me was that HDC was constantly involved in negotiating new 80/20 projects with Related. The inherent conflict in any 80/20 relationship is that the developer wants to devote as little of his building to the low-income tenants as possible. While the law states that 20% of the building’s units must be dedicated to low-income tenants, the developer can design the floor plans of the apartments to give the market-rate tenants, say 85% of the square footage, while the low-income tenants receive 15%. That is exactly what Jeff Blau was trying to do. The law is silent on that point. It is perfectly legal as long as 20% of the total units are dedicated low-income even if they are shoeboxes. That is of course if I were stupid enough to sign off on such plans.

Related was the most aggressive developer in trying to minimize square footage for low- income tenants.
It was getting harder and harder to drive bargains with Related while they were playing landlord to the Mayor’s girlfriend. I knew if Blau went to Carbonetti, a friendship I had subsequently brokered, I would lose.

Fortunately, we stuck by our guns on all matters. We never caved on any square footage issues and always made sure that the amenities in Related’s 80/20 properties were up to the same standards as our other developers. Nevertheless, I always knew we could lose the battle should Blau or Related’s Chairman, Steve Ross, decide to pick up the phone. Rudy would never, ever side with us over Judy’s landlord.

(Emphasis added)


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