With proposed new city financing program for 70% affordable housing, a way forward for Atlantic Yards/Pacific Park? Proposals due in February.

Is this the bailout that Atlantic Yards/Pacific Park was waiting for?

Not necessarily, but it could be part of the way there.

It was heralded yesterday in a scoop fed to the New York Times under the headline New York City Aims to Build Affordable Housing in Wealthier Neighborhoods.

Instead of using city money to subsidize "100% affordable" projects, now the city will provide a rough substitute for the state 421-a tax break, which has lapsed and previously incentivized 25% or 30% below-market units, albeit some at rather high income levels. 

This instead would require 70% affordability, at various income levels, and could get support from advocates arguing for more affordability in the project. The devil, of course, is in the details.

"Limited Affordability Areas"

The city is offering a preference to proposals with the deepest affordability levels and in "Limited Affordability Areas," as shown in the map below. That Park Slope segment highlighted includes the location of Site 5 within Atlantic Yards/Pacific Park, across from the arena block.

That could mean assistance for the giant, two-tower project long contemplated.

While the rest of the project is not in an LAA, that doesnt rule out inclusion. However, unlike with other sites likely eligible for the city's new Mixed Income Market Initiative (MIMI), the six sites over the Vanderbilt Yard--subject to a foreclosure auction next month--are not on terra firma, but also require an expensive platform.

To deliver 876 (or 877) more affordable units--required under state documents, and subject to fines starting in May 2025--the developers would have to build 1,252 total units. That would require two very large towers, or likely three large ones. But that's likely all subject to renegotiation.

Affordability questions

This program would pursue deeper affordability than the 421-a program.

For example, the last four Atlantic Yards/Pacific Park building to rise contain 30% "affordable" units, albeit aimed at middle-income households earning 130% of Area Median Income (AMI), or typically six figures. 

See chart, and maximum rents, below. Note that, at 130% of AMI, the city caps 1-bedroom at $3,443, that's not realistic, so developers of 595 Dean asked $2,690.

The city's new program would require 70% affordable units, with a cap at 120% of AMI, which is $118,680 for a single person and $152,520 for a three-person household. It's unclear whether developers would seek maximum affordable rents.

Chart from HPD

One in four of the rent-restricted units--or 17.5% of the building's total--must be aimed at extremely low-income households maxing at 30% of AMI, which is $29,670 for a single person and $38,130 for a three-person household, or very low-income households maxing at under 50% of AMI, which is $49,450 for a single person and $63,550  for a three-person household.

That includes a 15% set-aside for formerly homeless individuals. Below-market units would be rent-stabilized for at least 30 years.

Chart from HPD, with 2023 maximum rents

Lottery for 595 Dean, 130% of AMI

Could it work?

What remains unclear is how much 30% market-rate units can cross-subsidize the other apartments, and the amount of subsidy the city would provide, including a potential 40-year tax exemption, in part or in whole.

A Request for Expressions of Interest (RFEI) document, at bottom, notes that responses "may inform changes to existing financing term sheets or the creation of new financing programs."

Clearly the real-estate industry, as well as housing providers, support the initiative, as stated in the press release below. Presumably it will face some oversight by City Council, as well as an examination by the Independent Budget Office.

Proposals are due by Feb. 15, which suggests that this likely has been cooking for a while.

Update: How much of an impact?

Prospect Heights advocate Gib Veconi tweeted that the Times article "makes it sound like most of the #affordablehousing created would target 120% AMI. A small improvement over expired 421a, but still not what this part of Brooklyn needs."

Well, 52.5% middle-income and 17.5% low-income is more than a small improvement over 30% middle-income (at 130% of AMI), but it's still not doesn't come close to the original promises.\

Hiring and contracting requirements

From the RFEI document:

The Developer, General Contractor, and certain Subcontractors will be required to participate in HireNYC, a workforce development program which connects the City’s real estate development projects to the City’s workforce development services.

...Minority and Women-Owned Business Enterprise (M/WBE) Build-Up Program The Developer is responsible for complying with the M/WBE Build Up Program, which is a component of HPD’s Building Opportunity Initiative. Currently, the program requires developers/borrowers to spend at least a quarter of HPD-supported costs on certified M/WBEs over the course of design and construction of an HPD-subsidized project.

The press release, in full

New Homes for the New Year: HPD Launches Innovative Initiative to Build Affordable Homes in More Neighborhoods

December 26, 2023

New initiative was created to tackle the decades-long housing and homelessness crisis at a time when State and Federal resources are increasingly scarce

The brand-new program aims to build new affordable and mixed-income homes using innovative funding solutions techniques.

HPD released RFEI and will evaluate proposals based on their depth of affordability and their location in the city.

New York – Today, the New York City Department of Housing Preservation and Development (HPD) announced a brand-new program aiming to build affordable and mixed income homes across New York City: The Mixed Income Market Initiative (MIMI). The program was created to tackle the decades long housing and homelessness crisis at a time when State and Federal resources are increasingly scarce. Understanding the urgency of the crisis, the City is pioneering new ways to build new homes for working families, older adults, children, and all New Yorkers who struggle because there are simply too few homes and nearly no affordable apartments available. Using innovative financing solutions and city capital, MIMI aims to support the construction of new homes across the city.

"New York City is in the midst of a housing and affordability crisis, so we must explore every creative idea to deliver the relief New Yorkers need," said New York City Mayor Eric Adams. "As someone who grew up on the edge of homelessness, allowing New Yorkers to feel insecure about their housing situation is simply unacceptable. The Mixed Income Market Initiative is an example of how our administration is refusing to accept the status quo, and, instead, is relentless in our efforts to accelerate housing production, cut red tape, and get New Yorkers into safe, quality, and affordable homes."

"Today, this administration introduces yet another innovative housing finance tool called the Mixed Income Market Initiative (MIMI)," said Deputy Mayor for Housing, Economic Development and Workforce Maria Torres-Springer. "MIMI will surface new models for combining public resources and private financing to produce new homes for working families, seniors, children, and all New Yorkers who are struggling, with a particular focus on neighborhoods with little affordable housing. We look forward to seeing responses to this Request for Expressions of Interest which we hope will maximize affordability and the efficient use of City resources."

"Any New Yorker who has struggled to find a home or thinks certain neighborhoods are out of reach will be excited about the Mixed Income Market Initiative (MIMI). Today is about building new homes, new opportunities, and new choices for New Yorkers — including areas of the city that are typically not affordable for the average New Yorker," said HPD Commissioner Adolfo Carrión Jr. "Solving the housing crisis depends on new solutions and I'm proud of our HPD team who embraced the challenge to think outside the box. This bold new initiative goes beyond our limited resources and then steps outside conventional financing models to create affordable housing. My message to the city's development community: share your most innovative proposals to bring housing that all New Yorkers can afford to every corner of the city and partner with us to take another step toward the City of Yes!"

MIMI facilitates new construction of mixed-income, multi-family rental projects in areas without many low-cost housing options. More specifically, the new initiative provides city subsidies to projects that include homes for a wide range of household incomes – from extremely-low income and homeless set-aside units, to moderate-income and even market rate units. By including market rate units, this new financing model leverages market rate rental units to help finance affordable housing development while increasing housing choice and household mobility in parts of the city where there are fewer low-cost homes available. Additionally, the program aims to more efficiently use cite resources by leveraging higher revenue from market rate units, thus expanding the city's affordable housing tools while preserving Federal Low Income Housing Tax Credits and other scarce resources for use on other affordable housing projects.

Innovative Financing

In addition to boosting production of new affordable housing throughout the city, the MIMI program aims to use public resources more effectively by combining city subsidy and Article XI property tax exemptions with private financing sources and revenue from market rate units. This mix of financing sources does not rely on other sources of public funding, like the city's short supply of Federal Low Income Housing Tax Credits (LIHTC). Using city subsidy alongside private financing in mixed-income projects with market rate units enables the city to build affordable housing faster while using LIHTC more strategically to achieve the city's affordable and fair housing goals.

As part of the city's fair housing plan, Where We Live NYC, HPD is focused on providing more meaningful choice in the city's housing market, including neighborhoods where low-cost units are in low supply. By experimenting with new housing models, like MIMI, that cross subsidize public with private funding, the city can create more affordable housing than it can with current resources, while leveraging market rate housing to support affordable housing development everywhere.

Deep & Broad Affordability: The RFEI Proposals and Criteria

Housing developers may apply to participate in the initiative through a Request for Expression of Interest (RFEI) on the HPD website. Projects selected to move forward must be 70 percent affordable and 30 percent market rate.

Proposals may include a wide range of housing options, including homeless-set aside units, supportive housing units, and a mix of income-restricted units at rents between 0% to 120% of the area median income, in addition to the market rate units. One in four of the rent-restricted units must be for extremely low- or very low-income households, inclusive of a 15% set-aside for formerly homeless New Yorkers, and applicants may propose deeper affordability

Preference will be given to proposals with the deepest affordability levels that also efficiently use public resources. The program assumes funding sources for selected projects including discretionary property tax exemptions approved by the New York City Council in addition to city capital. Using these sources, amongst others, HPD is aiming to maximize affordability and the efficient use of resources, none of which will be used to subsidize the market rate units.

Making the Moonshot Goal Real

The Mixed Income Market Initiative comes as the Adams administration explores several ways to increase housing development in parts of the city that have not produced as much growth. In September, Mayor Adams unveiled his City of Yes for Housing Opportunity plan that would create an additional 100,000 homes over 15 years by making it easier to build new housing in every neighborhood. Just this month, Mayor Adams announced the Housing-at-Risk Task Force to save projects that are in jeopardy due to the expiration of the "Affordable Housing New York" 421-a tax abatement program; unveiled the "Green Fast Track," a streamlined environmental review process to accelerate the production of small- and medium-sized housing projects; and signed into law Intro 1031, establishing a "Fair Housing Framework" to help ensure that every neighborhood plays an equitable role in addressing the city's housing crisis through community district-level housing production targets and an assessment of unique community housing needs. All of this comes as the Adams administration looks to carry its momentum forward after a record-breaking fiscal year for creating and connecting New Yorkers to affordable housing, including the most ever new supportive homes and homes for formerly homeless New Yorkers.

The administration continues to advocate for state legislation needed to create a new statewide tax incentive, as well as federal legislation such as the Affordable Housing Credit Improvement Act, which would expand the production of affordable housing in New York by increasing the city's ability to leverage private investment, while remaining committed to exploring all opportunities and finding creative ways to build more affordable housing.

"We applaud the Adams Administration for this forward-thinking housing finance program," said Jolie Milstein, President and CEO of the New York State Association for Affordable Housing. "The development of new affordable housing has long been constrained by land cost and the availability of tax-exempt bonds. With this innovative technique, HPD will be able to build more affordable units in high-opportunity neighborhoods. As usual, New York is at the forefront of affordable housing finance."

"This is an amazing advancement in the expansion of the tools available to develop much needed affordable housing," said Craig Livingston, Board Chair of the New York Real Estate Chamber (NYREC). "Utilizing a mixed income approach provides much better outcomes in terms of creating economically diverse communities while at the same time allowing the higher income units to subsidize the building of lower income units. The added benefit is that buildings built with this program can come to market faster because they don't have to wait for tax exempt bond allocation. Kudos to HPD and the Adams administration for the creativity. We should all applaud this."

"The Adams administration should be applauded for its ongoing focus to pursue policies to help address the City's housing supply crisis," said Basha Gerhards, Senior Vice President of Planning for the Real Estate Board of New York. "A variety of tools will be needed to facilitate the production of much more rental housing, particularly below market rate units, that New Yorkers desperately need."

"This program gives us the ability to harness the private market and maximize existing municipal resources to spur the creation of new mixed-income, affordable housing in neighborhoods throughout the city," said Rafael E. Cestero, CEO of The Community Preservation Corporation. "Using these resources more efficiently and effectively enables the city to stretch its limited federal subsidy sources to be used more strategically to boost production and create additional housing opportunities where they are needed most. I thank Commissioner Carrion and his team at HPD for their work in crafting a thoughtful program."

"The Mixed Income Market Initiative is an innovative approach to add another tool to fight our housing crisis," said Brendan Cheney, Director of Policy for the New York Housing Conference. "New York City currently uses all of the federal funding we are eligible for and we still have an extensive pipeline of projects ready and waiting years for subsidy. This could be an excellent tool get more housing supply, especially more affordable housing, without federal funding and we applaud the city's use of city subsidy."

"There is still an intense need in New York City for the addition of more affordable housing to our inventory," said Valerie White, Senior Executive Director of LISC NY. "If we are to ease this housing crisis, close the racial wealth gap, and bring more economic stimulus into our communities, the efficient deployment of public resources to create more housing, including deeply affordable units, is absolutely critical. This is why we must consider and pursue any proposal or policy change that would promote our fair housing goals and provide marginalized populations more accessibility to neighborhoods that are the most challenging to move into."

"The Interfaith Assembly is pleased to support HPD's new request for expression of interest to help stretch city dollars to incentivize the development of affordable housing units as part of mixed income housing projects," said Marc Greenberg, Executive Director of the Interfaith Assembly on Homelessness & Housing. "At times such as these, we applaud HPD's continuing creativity in helping our city to build the housing our people desperately need. Projects with 'internal subsidies' have always been a viable model to create affordable housing by incorporating profits from market rate units as long as the resulting units serve New Yorkers of limited means. We are fully in favor of this strategy and encourage for profit market rate developers to seriously consider this option."

Applications for the MIMI RFEI are currently open and will be accepted through the end of February. The Agency will review applications with the intention of identifying projects that meet the Agency's goals in the coming calendar year.