"Affordable Housing" in NYC - For Whom?

There are rich doors and poor doors - Are moderate and middle income New Yorkers being left out?

When mayor Bloomberg first introduced the New Housing Marketplace plan in 2002, more than 40 percent of New Yorkers spent more than 35 percent of their incomes on housing, a position that the U.S. Department of Housing and Urban Development considers cost-burdened.

The original goal was to create or preserve 65,000 units of affordable housing by subsidizing or incentivizing new construction and rehabilitating existing affordable housing. In 2005, Bloomberg optimistically reset the goal, stating the city would create or preserve 165,000 affordable units by the end of 2014 with a $7.5 billion investment from the city.

One notable aspect of mayor Bloomberg's plan was its focus on creating more housing for moderate and middle income families, something few past programs have addressed. This category includes, but is not limited to, people living on $58,000 a year as individuals, or up to $145,000 a year for a family of four.

During the Bloomberg administration: "We want to retain a large and varied workforce in the city,” said Ruth Anne Visnauskas, a deputy commissioner for the Department of Housing Preservation and Development (HPD). “Having affordable housing for the firefighters, the teachers, the nurses — people who might not be at the lowest income levels but are still priced out of the market — is important."

A 2009 study by the Center for an Urban Future looked at the strain that housing costs were putting on middle class New Yorkers and argued that it was imperative for New York City to maintain a strong middle class.

432 units of middle-income housing on West 45th Street in Hell's Kitchen

"Middle class people are the ones who start small businesses, which employ many New Yorkers". 

The Bloomberg administration originally projected that 32 percent of the 165,000 units would be set aside for middle class New Yorkers. According to the IBO’s report, of the 124,400 that have been started so far, only 15 percent have been set aside for these groups. That amounts to about 18,600 units of affordable housing to date.

Mayor De Blasio’s Housing Plan—Housing New York: A Five Borough, Ten Year Plan

Mayor Bill De Blasio's plan: Housing New York:  A Five Borough, Ten Year Plan, is an ambitious plan to build and preserve 200,000 housing units, including 50,000 new affordable housing units.

For Whom? 

De Blasio's plan reduces the percent of units set aside for middle class New Yorkers by 10%

The plan is guided by eight principles, such as revamping the city’s planning and land use policies, establishing economic diversity as the cornerstone of housing development and strategically protect past investments in housing affordability.

These guiding principles will redefine many of the city’s housing programs and policies and can be seen in the more than the fifty initiatives in the plan

Here are a few highlights from the plan:

• Propose the creation of a Task Force to explore legislative and administrative changes to simplify and rationalize the city’s tax programs while increasing their effectiveness in creating affordable housing.

• Change zoning and land use regulations to promote housing creation through conversion of obsolete non-residential buildings and identification of opportunities for using Transferable Development Rights.

• Create new incentives for properties that are not served by existing programs but are in danger of converting to condos or exiting rent regulations.

• Define affordable housing as follows: Extremely Low Income (0-30% of AMI); Very Low Income (31-50% of AMI); Low Income (51-80% of AMI); Moderate Income (81-120% of AMI); Middle Income (121-165% of AMI).

• Overall production goals of the plan: 60 percent preservation; 40 percent new construction.

• Share of housing units preserved or created by income group:  Extremely Low income (8 percent); Very Low Income (12 percent); Low Income (58 percent); Moderate Income (11 percent); Middle Income (11 percent). 

A 2009 study by the Center for an Urban Future looked at the strain that housing costs were putting on middle class New Yorkers and argued that it was imperative for New York City to maintain a strong middle class

Mitchell-Lama buildings that were originally created for Middle Class New Yorkers are at the end of their regulatory agreements. They have been a big source of affordable housing in many neighborhoods.

While preserving the Mitchell -Lama stock helps with overall affordability goals, it doesn't create new options for moderate or middle class families and many Mitchell-Lama buildings have chosen to go market rate at the end of their term. 

The HPD has since revised its goals and plans to devote 22 percent of the housing to moderate and middle income New Yorkers. The IBO predicts that there will need to be a serious shift for the HPD to meet even these numbers.

Even meeting this reduced target will require a fairly significant change in the income mix of units started and in the next few years with a large uptick in the number of moderate units according to the report.

One programs that currently offers home ownership for middle and moderate income New Yorkers are HDFC coops  primarily re-sales that will allow maximum incomes of 120%- 165% of (AMI) Area Median Income.

Area Median Incomes:

According to the NY Times USA Map June 26, 2014 

The median income in Manhattan (New York, NY) is $68,370. 
In Brooklyn (Kings County) the median income is $45,215. 
In Queens the median income is  $56,789. 
In Staten Island (Richmond County) the median income is $73,496. 
In the Bronx the median income is $34,300. 
In Westchester County the median income is $81,093.
In Nassau County the median income is $97,049.
In  Suffolk County the median income is $87,778.

Mayor De Blasio's Housing Plan

Mayor De Blasio’s Housing Plan—Housing New York: A Five Borough, Ten Year Plan

Mayor Bill De Blasio released today Housing New York:  A Five Borough, Ten Year Plan, his eagerly anticipated plan to build and preserve 200,000 housing units, including 50,000 new affordable housing units.

The plan is guided by eight principles, such as revamping the city’s planning and land use policies, establishing economic diversity as the cornerstone of housing development and strategically protect past investments in housing affordability.

These guiding principles will redefine many of the city’s housing programs and policies and can be seen in the more than the fifty initiatives in the plan

Here are a few highlights from the plan:

• Propose the creation of a Task Force to explore legislative and administrative changes to simplify and rationalize the city’s tax programs while increasing their effectiveness in creating affordable housing.

• Change zoning and land use regulations to promote housing creation through conversion of obsolete non-residential buildings and identification of opportunities for using Transferable Development Rights.

• Create new incentives for properties that are not served by existing programs but are in danger of converting to condos or exiting rent regulations.

• Define affordable housing as follows: Extremely Low Income (0-30% of AMI); Very Low Income (31-50% of AMI); Low Income (51-80% of AMI); Moderate Income (81-120% of AMI); Middle Income (121-165% of AMI).

• Overall production goals of the plan: 60 percent preservation; 40 percent new construction.

• Share of housing units preserved or created by income group:  Extremely Low income (8 percent); Very Low Income (12 percent); Low Income (58 percent); Moderate Income (11 percent); Middle Income (11 percent). 

source: REBNY

HDFC Coops | Facts vs Myths

45 Central Park North

There are about 1500 HDFC coops in NYC about half are in Manhattan. Most have come through various programs run by HPD (Housing Preservation Department) in order to privatize the City's in REM (foreclosed) stock.

Buildings in the Tenants Interim Lease Program  have been gut rehabilitated by HPD then they will be converted to HDFC Cooperatives and sold to the tenants for $250 per apartment. The "buy in" price for all current residents is now $2,500.

HDFC cooperatives originating from HPD Division of Alternative Management Programs (DAMP) have certain restrictions and depending of when the conversion took place they are slightly different.

The most common restriction is income: Conversions prior to 1995 require income of new shareholders not to exceed 6 or 7 times the annual maintenance plus utilities. If the incoming household has less than 3 dependents you multiply the annual maintenance plus utilities times 6. If the family has 3 or more dependents then by 7.

There are a number of HDFC cooperatives converted from 1986 to 1995 that have a further restriction requiring the payment to the City of 40% of any profit on the resale of the shares. These are called 60/40 buildings.

HDFC co-ops are intended to be the primary, permanent homes for the self-supporting working low- to moderate-income households. They are not intended to be investment property, for market speculation or for non occupant parents purchasing them for their adult children although some HDFC coops will allow gifting.

In most subsidized housing low income is considered below 100% of the NY area median income and moderate income is above the median. Moderate incomes range from 120 percent to 165 percent of the area’s median income.

A project in the South Bronx, for example, might be restricted to people with incomes up to 80 percent of the median, which means $68,000 for a family of four. But in Harlem, Morningside Heights, Clinton/Hell's Kitchen or the East Village the limit might be as high as 165 percent of the NY median, or $141,735 because incomes are higher in those neighborhoods.

Generally all HDFCs usually require a "Transfer Fee" commonly called a "Flip Tax" often up to 30% of seller's profit but can vary. It is necessary to review the Proprietary Leases and Offering Plans to ascertain exactly what the restrictions for any one particular HDFC cooperative as there are many variations.

HDFC coop boards are not that different from any other coop board. All coops including HDFC are set up as private housing corporations. The coop board is entitled to approve or deny any purchase for any reason other than discrimination. The only difference is HDFC coops have maximum income restrictions. The must remain "affordable" based on New York metropolitan area statistical median income standards released annually through HUD and HPD as determined by each HDFC.

Cash is not always King: Cash only required may be a red flag. There are many reasons why a lender will not lend in an HDFC coop but there are lenders (citibank, Chase, Bank of America) that will loan in HDFC coops that have good financials and are managed well. Many established HDFC coops are on the lender's approved list.

Some coops will need to be approved by a lender because they haven't had a recent sale. There is an approval process. If the coop cooperates with the lender and answers the lender's questionnaire and meets lender's and Fannie Mae guidelines they will most likely be approved.

There are a lot of myths about HDFC coops, many are perpetuated by brokers that lack experience and knowledge of HDFC coops. They don't understand the spirit and intent of "affordable housing" despite taking a listing. There are a lot of brokers in Manhattan but few with successful experience selling HDFC coops.

There are many good HDFC coops. For qualified low- moderate income buyers they can offer an opportunity for affordable home ownership but like everything else in NYC there are always some bad apples.

Caveat Emptor. Let the buyer beware. Buyers and or their (HDFC experienced) attorney should do their "due diligence" They should request financial reports as well as copies of the minutes of the Annual Shareholders Meeting, proof of insurance and Fidelity Bond, as well as payments of Property Taxes and Water & Sewer charges.

Related article:
HDFC Coops

Does Landmarking Curtail Affordable Housing Development in Manhattan?

Study Finds No Affordable Units Created in Landmarked Districts Since 2008;

Study Finds Decline in Diversity, Higher Incomes in Historic Districts

A study by REBNY (The Real Estate Board of New York) finds designating large swaths of Manhattan as landmarked districts has stifled the creation of affordable housing in New York City, according to a press release issued by the Real Estate Board of New York. 

Their analysis found that since 2008, zero units of affordable housing have been constructed in landmarked districts in Manhattan, with just five units built since 2003.  There were 8,070 new affordable housing units built borough-wide from 2003-2012. 

In addition, of the 53,220 new residential units built in Manhattan during the 10-year period, a mere 1.9% -- 998 units – were in landmarked districts.

According to the study, census data shows that residents within landmark districts have significantly higher household incomes and are dramatically less diverse than other areas of Manhattan and New York City.

REBNY singled out density restrictions, landmark compliance costs, and a lengthy public review process as main reasons why housing and particularly affordable housing development is extremely unlikely on landmarked sites. 

A July 2013 study by REBNY concluded that landmarking in Manhattan is growing at a rapid rate, with nearly 30 percent of properties protected by landmark regulations.   In some neighborhoods, such as the Upper West Side and SoHo/Greenwich Village, the level of protected properties has reached a staggering 70 percent. Given this and REBNY’s most recent study, it is clear that certain areas of Manhattan are closing off opportunities for affordable housing for future generations. 

In addition to new construction, 114 affordable units were created through renovation – all built before 2008 on City-owned properties, with 85% of these units located within West Harlem’s Hamilton Heights/Sugar Hill Historic Districts and none south of 87^th Street.

As a proud member of the residential brokerage division of REBNY, I appreciate all their analysis and lobbying efforts on behalf of the real estate industry and NYC economy. The study makes sense because landmarking curtails all new construction development. 

The whole idea of landmarking and preservation to preserve the historic and architectural integrity of a neighborhood or building. Unfortunately that includes affordable housing new construction developments. I'm pro development but I'm also pro landmarking. Not every neighborhood and building should be designated a landmark without a valid reason but every 19th century townhouse shouldn't be razed for a new glass sliver building. I beleive in moderation.

 As a broker who specializes in affordable housing the term "affordable" and "low income" in Manhattan is subjective. I have sold many HDFC coops in Manhattan. These "affordable" and "low income" coops are for households with maximum incomes of 120% to 165% of the NY metropolitan area as determined annually by HUD. 

The median income of the NY metro area for 2013 is $85,900 for a household of 4. The maximum income 165% is $141,735 or $99,330 for a 1 person household. Most HDFC coops are in prewar buildings that NYC owned by default and sold them to the existing tenants. it is a successful program that offers affordable housing, home ownership, limited equity and equity. These coops helped gentrify blighted neighborhoods like West Harlem’s Hamilton Heights/Sugar Hill Historic Districts that the study mentions.

Most of the new construction affordable housing in Manhattan is in the 80/20 program. Developers that build luxury developments get tax abatement's if 20% of the project is affordable.

While this is an excellent way of creating affordable housing the 20% is usually rentals and the income requirements are so low $20,00--$32,000 (approx varies building to building) that moderate income New Yorkers such as NYC teachers, policeman, nurses and many other working middle class New Yorkers make too much money for these units. 

A new  luxury condo going up on Riverside Boulevard by Extell Corp under the 80/20 program created a lot of media attention recently. Local politicians, activists and mayoral candidates all pandering with empty rhetoric about the separate entrances for the 80% wealthy condo owners and the 20% low income subsidized renters having separate entrances to the building. Much ado about nothing.

Personally I would very very happy to get a $million+ apartment on the Hudson river for $500/month no matter what entrance led to my luxury subsidized apartment. Not one politician or news article suggested the need for "affordable" housing for middle class New Yorkers. 

Manhattan certainly needs affordable housing. It needs affordable housing for the middle class. 80/20 is a great program but in my opinion it would be much better if it included affordable units for moderate incomes and for middle class New Yorkers.

To read the full study released today, please visit: http://www.rebny.com/pdf_files/REBNY-Landmarks-and-Affordable-Housing-Report102413.pdf.

REBNY  

The NYC Landmarks Preservation Commission

West End Preservation Society 

Greenwich Village Society for Historic Preservation

 

 

Hamilton Heights | Harlem Sub-Neighborhood

Hamilton Heights is located between 135th and 155th Street. Hamilton Heights in Upper Manhattan was the home of Alexander Hamilton from 1802 - 1804. 

Today Hamilton Heights is mostly a housing fusion of palatial 19th century brownstones, spacious pre-wars and tenement walk-ups.

The Harlem sub-neighborhood of Hamilton Heights boasts some of the city’s most-desired townhouses, and is best known for Sugar Hill and Strivers’ Row both NYC landmark designated. The Harlem sub-neighborhood of Hamilton Heights has some of the most-desired townhouses in New York City. 

 

Sugar Hill  - Sweet and Expensive," During the Harlem Renisance of the 1920's The Hill attracted those with talent, money, education, and social prominence. Sugar Hill was celebrated for its exclusivity and status. 

Parts of Strivers’ Row were designed by the noted architecture firm of McKim, Mead and White. Strivers Row below Sugar Hill named by Harlemites for it's ambitious residents.

Strivers' Row houses are among the few private homes in Manhattan with space for parking. Many of the townhouses have lovely staircases, fireplaces, pocket doors, and moldings. Even in the surrounding area, the conjunction of great subway access (the train stops at 135th and 145th streets) and beautiful row houses makes Hamilton Heights a lovely place to buy a home.

Zoning does not allow for very large buildings. Many apartments in Hamilton Heights are floor-throughs that come with town house amenities, like terraces, gardens, fireplaces, and uncommonly good light for Manhattan.

A diversified mix of Buyers are coming to Hamilton Heights for the neighborhood’s history, culture, houses, brownstones, new condos and HDFC coops that cost much less than they would a mile to the south.

I have a new exclusive listing at 517 West 144th Street Apt. 8,  A mint renovated 3 bedroom 1 bath HDFC coop for $349,000. First Open House Sunday December 9th from 12 noon to 1:00 PM.

"Hurray take the "A" train or the  1,  B, C, and D trains to go to Hamilton Heights, way up in Harlem" for the history,  culture and affordable housing. Hope to see you up in Harlem.

Reveille with Beverly -- (Movie Clip) Take the A Train

Ann Miller (as "Beverly") spins this performance of "Take the A Train" from Reveille with Beverly, 1943, by the famed Duke Ellington's Orchestra, with Ivie Johnson's vocal.

Largest New Construction Housing Plan in Manhattan

550 West 45th Street Project Will Encompass Nearly an Entire City Block and Provide More Than 1,200 New Apartments with Over 600 Designated As Permanently Affordable, New Retail Space, New School and Open Green Space

550 West 45^th Street is the largest affordable new construction housing development project in Manhattan to be created under the Bloomberg Administration’s New Housing Marketplace Plan. The plan, launched by Mayor Bloomberg in 2003, is a multibillion dollar initiative to finance 165,000 units of affordable housing for half a million New Yorkers by the close of the 2014 fiscal year. To date, the plan has funded the creation or preservation of more than 125,700 units of affordable housing across the five boroughs.

The residential portion of the project will be comprised of three separate buildings. Building A will be a 31-story tower with 698 total units with 141 affordable units (60 units being permanently affordable) and will contain the retail space at the ground floor level. Building B will be a 14-story building with 297 permanently affordable units. Building C will be a 14-story building with north and south segments located over the Amtrak train tracks with a combined 243 permanently affordable units.

Throughout all three buildings there will be 476 studio units, 419 one-bedroom units, 262 two-bedroom units and 81 three-bedroom units. The combined 600 permanently affordable units will be targeted to families with household incomes at ranges between 40 percent and 165 percent of the Area Median Income (AMI) or the equivalent of $32,720 to $134,970 for a family of four. The design by architect Schuman Lichtenstein Claman and Efron (SLCE) respects the scale of Clinton’s streetscapes by organizing the buildings into segments, each with a distinct exterior.

The residential development will be financed with $520 million primarily tax-exempt bonds issued by the New York State Housing Finance Agency , a subsidiary agency of New York State Homes and Community Renewal. These bonds are credit enhanced by a syndicate of lenders led by Wells Fargo Bank. The project also leverages $35.5 million in Low Income Housing Tax Credits.

HDFC Co-op | "Affordable" Home Ownership

HDFC Coops - Affordable Home Ownership in Manhattan

The Monterey | 351 West 114th Street
Morningside Park

Q: What is an HDFC coop?

A: HDFC (Housing Development Fund Corporations)
Since 1979, the Department of Housing Preservation and Development (HPD) has sold formerly City-owned buildings to Housing Development Fund Corporations (HDFC's)

HDFC coops are affordable cooperatives in New York City. They are a relatively unknown market niche that are city subsidized and sell below market (40%-50%) below non HDFC comparable coops and condos.

If you qualify an HDFC coop may be right for you. It may be a great deal.

HDFC coops are a form of limited equity home ownership. HDFC coops offer many of the same benefits as regular coops but they have some eligibility (income) restrictions and many have a "flip tax" paid by the seller.

Since they are sold below market and the maintenance remains low because the city reduces real estate tax on HDFC coops upon selling a portion of the profit is shared with the coop and sometimes the city hence "flip tax".

Back in the late 70' and 1980's many rental buildings were abandoned by landlords and owners that may have owed back taxes or city water charges and the buildings were taken over by the city. NYC HPD (Housing Preservation Department) through an affordable housing program helped to rehabilitate the buildings, trained the tenants on ownership, set the Coop up financially to be self-sustaining, and then sold the apartments to the existing tenants for very low amounts some as low as $250 in exchange the new owners had to maintain the buildings.

Rather than becoming a landlord, the City helped rehab and trained the existing tenants, even some squatters about maintaining their building and becoming a self sufficient housing cooperative. It has been a very successful program. Over the years they rarely sold and remained within families.

During the past several years brokers including myself began listing and marketing HDFC coops and have been able to get much higher prices for the owners. While they still sell below market many sellers are now able to get the highest possible price for their coop and their sweat equity.

I recently represented a seller and a buyer in two different 3 bedroom apartments in the same line in an HDFC coop in Morningside Heights. I sold the seller's beautifully renovated apartment for $660,000 and managed to procure the same apartment on a higher floor, un-renovated for $550,000. The highest prices in the building's history. A non HDFC comparable coop would be $900,000 - $1.1M.

More recently I've represented sellers and buyers in Harlem's most sought after HDFC coop as well as HDFC's in Hamilton Heights, Sugar Hill, Manhattan Valley, Hell's Kitchen and the East Village.
While prices vary building to building and neighborhood to neighborhood it should be noted that under the private Housing Finance Law, all HDFCs must be low income. 

The specific definition of low income for some HDFC cooperatives were time limited and have expired, the cooperation must adopt a new standard. The highest standard that HPD will accept is 165% of the median income for the metropolitan area.

Because HDFC coops were originally set up as low income housing they must remain affordable so a buyer must qualify financially. An HDFC coop must be a primary residence and the income restrictions are based on area income standards. In many cases either less than 120% or 165% area median income. Therefore individual HDFC coops have different income requirements. It also varies depending on the household size. A household of five can have a substantially higher income enabling larger households to afford larger apartments.

The cost of owning and maintaining shares in a cooperative include apartment maintenance, the monthly payments on any loan used to purchase the shares, utilities, and homeowners insurance. Generally buyers should not pay more than 30% of their gross income in housing costs. HDFC boards have the same discretion to approve or reject a buyer like any regular coop. The only difference is there is a maximum income allowed to purchase or lease in HDFC coop apartments.

An HDFC coop represents a great opportunity to own a home  in New York City, for a fraction of the price of other coops and condos but with that comes some restrictions on purchasing and upon selling you often have to give a portion of your profit back to the coop in the "flip-tax" (private transfer fee.)

When buying or selling an HDFC Coop it is important to use a broker that understands the rules, restrictions and nuances of HDFC coops.

More reading:

HDFC Coops | Facts vs Myths
HDFC Coop Income Standards
The Flip Tax
Restrictive Covenants

If you would like more information about buying or selling an HDFC coop please contact me.
 
Disclaimer: I am not a lawyer, this blog and my answers to questions are my opinions for information purposes only based on my experience as a real estate broker and not intended as legal or financial advice and should not be used as a substitute for advice of legal counsel.