BY ANNE PYBURN CRAIG
Given that New York is the most densely populated city in the U.S., it’s hardly a surprise that providing housing is a struggle—especially for moderate income residents. According to a July 2009 report by John Petro of the Drum Major Institute for Public Policy, a nonpartisan, nonprofit progressive think tank founded during the Civil Rights movement, New York City’s overall housing vacancy rate is 2.8 percent, and anything under five percent is considered a crisis situation. In the past quarter-century, 315,000 new housing units have been added, but it’s estimated that 265,000 more will be needed by 2030. And most of the units already added were not especially affordable—half a million New York City households spend over half their income on rent, while experts consider 30 percent the appropriate ratio.
The need isn’t going away, and attempts to improve the situation have spawned an alphabet soup of agencies and a maze of regulations, not to mention legions of committed activists. Housing First!, a coalition hard at work on these issues, has no less than 300 member agencies—and some days, it may seem that any one project has around that many issues needing resolution, given the complexities of permitting, funding streams, and regulations involved.
Mayor Bloomberg’s ambitious New Housing Market Initiative is a 10-year, $7.5 billion plan to create or preserve 165,000 units of affordable housing; as of 2008, about 68,000 more new units—at least 41,000 for low- and moderate-income households and 26,000 for middle-income households—were still needed in order to meet that commitment by 2013. The Department of Housing Preservation and Development’s ability to finance those new units “remains uncertain at this date, potentially affecting new construction of both low- and middle-income units,” according to New York’s Independent Budget Office.
“People often don’t think about affordable housing until it hits home for them somehow, or it’s being taken away,” says John L. Kelly, a man who’s devoted his entire professional life to its creation. The head of the affordable housing division at the law firm Nixon Peabody LLP, Kelly plainly enjoys the challenge of working on affordable housing in a city where a parking space can sell for six figures.
Nixon Peabody, one of the largest multi-practice firms in the United States, has been involved for three decades—and so has Kelly, who began working for the federal Department of Housing and Urban Development shortly after graduating with honors from the University of Connecticut law school.
Even in tough times, there are victories to be celebrated—like the July 29 signing by Gov. Paterson of legislation that preserves the largest publicly assisted housing development in the U.S., the 5,881-unit Starrett City housing complex in Brooklyn. The legislation provides for refinancing, and will mean at least $40 million for capital improvements to existing structures, facilities, and apartment interiors—and Starrett City, a mixed-use complex that includes parking garages, handball and basketball courts, grassy fields, playgrounds, and a shopping center—will be affordable for at least the next 30 years. The deal took over two years to put together, and involved a large cast of characters—tenants and their advocates, a half-dozen public agencies, and a veritable who’s who of political figures from the neighborhood to the state house.
“That’s exciting,” says Kelly of the Starrett City resolution. “And it’s a very strong example of what happens when federal state and city governments work together and come up with a plan that will allow the property to stay affordable and the owner to get some return on the property.”
Other good news, in Kelly’s world of incremental victories: early last spring, affordable housing folks were as concerned as anyone about how the economic “reset” would play out. Nixon Peabody hosted a panel discussion of affordable housing presented by Women in Housing and Finance-NY last March, at which Topic A was coping with the implosion. The combined bursting of the appraisal bubble and implosion of the tax credit market seemed likely to have a chilling effect on the creation and preservation of affordable units.
New York’s affordable housing believers rolled up their sleeves and got to work, and on July 28 Paterson announced $30 million in grant funding awarded for new construction and rehab of affordable housing units, jump-starting eight projects as part of a larger program intended to fill the financing gap left when the tax credits that represent the industry’s largest funding stream lurched 20 percent downward in value.
Kelly is pleased about any progress, but 30-some years in the field have taught him not to count any chickens until they’re happily roosting under affordable roofs. “This addresses that concern for those projects who’ve been fortunate enough to get it—it’s a stopgap measure for this year’s allocations,” he says. “But the real question is, going forward, the state may not have the money to do that. The federal government has appropriated some money to do that this year—are they going to do that next year? It’s an ongoing question—how do you solve the problem in the long run? People are looking at the tax credit program to see if it needs a fix to lure new investors in and raise the amount they’re willing to invest—will that be a fix, or is it going to be a situation with ongoing gaps here and there—which of course raises budgetary concerns.”
And there’s no quick and easy fix. “It’s so complicated,” Kelly continues, with “the tax credits, the financing, the secondary subsidy sources, that to do anything involves a lot of matching up of various types of programs, and that adds to the transaction costs and the time, so any and all steps to minimize and streamline some of that are helpful.”
Into the complex maze of red tape, add more than just a dash of green awareness. “The funding agencies are beginning to require that the developers look at sustainability and that they meet certain criteria for that, in qualifying to be allocated tax credits,” Kelly says. “And the state got a lot of weatherization funding from the Department of Energy in the stimulus plan, aimed at making existing affordable housing more sustainable. There’s quite a lot of money there, and I think there’s going to be continued interest in that. They’re talking about greener materials, greening in terms of energy efficiency, and there’s beginning to be more awareness of smart growth—building around transit centers and so on.”
Massive though the bureaucracies involved may be, Kelly says, they’re not unresponsive to the need to streamline things where possible. “In all fairness, I think all the agencies involved are looking in that direction and making progress,” he says. “Over time, the state has become more efficient at allocating funds, so that you make one application for a lot of different pots of money and they work it together, and the city is doing the same thing. But it’s still very cumbersome. The other thing, of course, is that there’s just never enough money to meet the need.”
At press time, the latest news was good—a joint announcement from Paterson and Bloomberg that $60 million in federal stimulus dollars will provide 739 new, permanently affordable homes in Harlem, East New York, and Brooklyn, generating 2,800 jobs. Advocates are rallying behind a proposal to add $500 million in 2010/2011 capital funding for affordable housing programs and create an Empire State Housing Investment Fund with a dedicated revenue stream.
The problem may be complex, and the fine print may be enough to bring on migraines. But the ultimate bottom line was stated by a Habitat for Humanity representative: “Affordable housing creates jobs, revitalizes neighborhoods, generates tax revenues and creates decent, safe and permanent homes.” And Petro of the Drum Major Institute recommends inclusionary zoning, a measure that has helped in other places.
“It’s an exciting job, and I’m working for a good firm that takes this type of thing seriously,” says Kelly. “I don’t think anyone has a group comparable to ours. The work is detail rich and time consuming and heavily regulated.”
And ultimately he loves it. “I’m a transaction lawyer, not a litigator—a facilitator,” he says, “and I find it very rewarding and challenging. Like any job, it’s got its ups and downs, but the overall field is one I find very satisfying—I get to work with some very interesting properties and sometimes I play a role in helping some good things to happen.”
