Saturday, February 20, 2010

As affordable housing gets closer to market rate, it's tougher to find takers; experience regarding for-sale units offers some cautions for AY

While it's not exactly on point, a New York Times article yesterday headlined City’s Affordable Housing Program Faces Trouble Finding Buyers suggests some caution regarding the subsidized housing planned for the Atlantic Yards project: the closer the price is to market, the tougher it is to find takers.

That suggests that additional subsidies might be needed to move the units. If the subsidies come from public rather than private sources, that would again add costs to the any effort to calculate a cost-benefit analysis for the project.

There are two important distinctions, however. First, the article mostly concerns middle-income units in relatively poor neighborhoods such as Far Rockaway and Bedford-Stuyvesant, where the demand presumably would be lower than in Prospect Heights. Second, the article concerns for-sale units, for which there are resale restrictions, thus giving the edge to market-rate units.

(Remember, 2250 rentals at the Atlantic Yards project would be subsidized, while there's a more vague plan to build 600 to 1000 affordable for-sale units, with 200 on-site.)

City: "no idea what was going to happen"?

The Times reports:
Developers of higher-priced affordable housing were especially hurt by the housing crash, which caused price differences between their units and market-rate homes to narrow. In addition, market-rate homes do not have the resale restrictions that the affordable homes often have.

Rafael E. Cestero, the city’s housing commissioner, said that during the housing boom, when financing for many projects was lined up, higher-priced units like those at Waters Edge “were deeply affordable” compared with what was then on the market. “We had no idea what was going to happen,” he said.
Maybe, but consider that, even when the market was healthy in July 2006, some rents announced at an AY affordable housing information session--$2658 for a four-person household--were at or above market. And, as I wrote last month, affordable units at 165% of Area Median Income (AMI) could easily track market.

The problem with AMI

The Times touches on an issue that's been raised frequently regarding the mismatch between rents proposed for Atlantic Yards and the capacity of Brooklynites to pay them:
Javier Valdés, deputy director of the community advocacy group Make the Road New York, based in Bushwick, Brooklyn, said the city should change how it calculated affordable income limits. Generally, people eligible for low-income subsidized units can earn up to 80 percent of what is known as the region’s “area median income,” which in 2009 was $76,800. Moderate-income housing is open to people earning from 80 percent to 120 percent, and middle-income housing is open to people earning 120 percent to 175 percent.

But those income figures are based on a broad region that includes Long Island and Putnam, Rockland and Westchester Counties. Mr. Valdés said affordability should be determined by neighborhood. In Bushwick, the median income is $32,328, according to census figures.
Cestero blames only the housing bust.

The Atlantic Terrace example

The Times reports on an effort to lower AMI, right across Atlantic Avenue from the AY site:
Seeing this trend, one development switched midstream. The Atlantic Terrace, an 80-unit building in Fort Greene, Brooklyn, built by the Fifth Avenue Committee, a community development group, was originally going to sell 59 units to families earning up to 165 percent of the area median income.

After the market collapsed, the group lined up an additional $2 million in subsidies to make the homes affordable to people earning far less. The lottery for the units drew 4,881 applicants.

“We read the tea leaves,” said Michelle de la Uz, the group’s executive director.
[Updated] The additional subsidies came from public sources, including city and state funds provided via local legislators. Atlantic Terrace is funded by a variety of sources.

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