Citizens Budget Commission Breakfast
September 20, 2017
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Good morning. It is a real honor to be here with you today. I want to thank Carol Rosenthal for that very generous introduction, and Carol Kellerman and Edward Skyler for inviting me to speak to the leadership of the Citizens Budget Commission (CBC) about our progress under the Mayor’s Housing New York plan. The CBC plays such an important role in holding all of us in government accountable—watching not just how efficiently and effectively we spend City resources, but making sure that our programs and policies serve both current and future New Yorkers.
Affordable housing is one of the biggest concerns that New Yorkers face, and it is one of the top priorities of this administration. That is why it is such an honor—and a bit humbling—to serve at the helm of the New York City Department of Housing Preservation and Development at this critical juncture in our city’s history. Having served as President of the Economic Development Corporation and Commissioner of Small Business Services, I see this role as a continuation of the work I’ve been doing with the administration to tackle all sides of the affordability crisis that is affecting more and more New Yorkers.
In the last three and a half years, we’ve made great progress towards the Mayor’s housing plan—not just against the objective measures that we set, but in the policies, often less visible, that will pay dividends long into the future.
But Housing New York is just one piece of a larger, complex puzzle. There is no silver bullet to solve the city’s housing crisis. New York City has been in a housing emergency, with an extremely low vacancy rate, since 1974. The housing crisis has changed over the years—we’ve dealt with blight and physical devastation of entire neighborhoods. What we see now is a different type of devastation, a different type of crisis, born in many ways of our city’s hard-fought successes, where housing costs have risen faster than incomes, and New Yorkers fear that they are losing their place in the city they love and helped to build.
A Nationwide Housing Crisis
To be clear, this isn’t just a problem here at home, this is a crisis of national proportions. In no state in America can a person working full-time at the federal minimum wage afford a two-bedroom apartment at the Fair Market Rent.
And yet the federal government has been pulling back from public and affordable housing, even before the current administration made headlines for proposing to slash the budget for federal housing programs. The scale and complexity of the problem is enormous, and requires a comprehensive solution, as well as investment at every level of government.
So today, I’d like to talk about Housing New York in the much larger context of the nationwide housing crisis we face, and as a critical part of the administration’s much larger strategy to ensure NYC's long-term sustainability and competitiveness.
Goals of Housing New York: 200, 000 units over ten years
So what is the housing plan? Much of the public focus is on the numbers: the number of affordable units we seek to create and preserve; the incomes of the New Yorkers we serve; the costs of each unit. To be sure, all of these elements are important drivers of our work. Yet we see our work as much more than just numbers. We view it through the lens of neighborhoods: how we ensure our investments are meeting the needs of communities; at the building level: how we secure the long-term affordability and sustainability of the housing we create and preserve; and ultimately, and most importantly, through the eyes of the people we serve: how do we give as many individuals and families as possible the opportunities they need to thrive in their city.
Part of a Larger Affordability Agenda
And so it is important to think about the housing plan as part of a larger, comprehensive strategy to address the inequities that are so antithetical to our values as New Yorkers. This broader agenda includes:
The list is long, but it is important to reflect on it because we have to understand how the housing plan sits in the larger context of a comprehensive approach to keep the city competitive, to keep the city affordable, and to keep the city sustainable. All of this work is ultimately about providing resources and creating opportunities for New Yorkers struggling to get ahead, to start balancing the equation in their favor, and to work towards longer-term affordability, health, and competitiveness.
Comprehensive Approach to the Crisis
Of course the housing plan is a critical pillar supporting this larger agenda to make New York a more equitable city. The Mayor committed significant City capital to create and preserve affordable housing, but also dedicated a wide array of resources to keep people in their homes and protect their right to safe, quality housing. As a result, our investment in affordable housing development is paired with:
So HNY truly represents a broader set of strategies to confront the housing crisis. We must work on all of these various fronts simultaneously, but it also is about addressing the underlying problem, which is one of basic supply and demand. There just isn’t enough housing for the growing number of people who choose to live and stay in New York City. We also have a mismatch between the changing composition of New York City households and the existing stock of housing.
Ultimately, growth is good for the city, but the market for housing isn’t keeping up, and it specifically isn’t meeting the needs of low, moderate, and middle income New Yorkers. So we need to produce more housing, and we especially need to create and preserve more affordable housing.
Housing production: 77,651 Units Serve Approximately 200,000 New Yorkers
How are we doing? Three and a half years into our work, we are on target with 77,651 affordable units created or preserved. This is enough housing to serve a population the size of Salt Lake City.
We are also meeting our affordability goals. Almost one-third of the housing we’ve created or preserved—about 25,000 units—are for extremely-low and very-low income New Yorkers making less than $43,000 for a family of three, including more than 11,000 units for families making less than $25,770. Almost half of the units we’ve financed are for low-income New Yorkers, and the remaining 20% of the units are for moderate and middle income New Yorkers.
We’ve also really accelerated the pace at which we are creating housing for formerly homeless households as well as seniors.
Based on all these results, the Mayor announced in February that we would produce another 10,000 units for extremely-low and very-low income New Yorkers, bringing our overall target for those households to 50,000 apartments, or 25% of the overall housing plan. To achieve this deeper affordability, the Mayor committed an additional $1.9 billion in capital funds that will be allocated over the remaining years of the Housing New York plan.
Direct City investment
We’ve not only accomplished our goals, we’ve kept the plan on budget. To date, we’ve spent approximately $2.8 billion in City subsidy, which includes both City capital and New York City Housing Development Corporation’s corporate reserves.
City Subsidy to Date
This means that we’ve achieved 40% of our production goals, but have only spent 26% of the City subsidy allocated for the plan.
Much of this is about timing: we’ve seized critical preservation opportunities like Stuy Town, Riverton, Penn South, etc.; while many of our new construction projects on public sites are still moving through the public review process.
At the same time, this reflects our very strong leverage numbers to date. One of the strengths of the affordable housing model is that we are able to use the City’s investment to leverage significant additional resources: For every $1 of City subsidy we spend, we are leveraging $5.35 in State, Federal, and private financing.
To be sure, this number fluctuates, as it hinges on many other variables, such as the pricing for Low Income Housing Tax Credits (LIHTC). Since January, we've seen a modest drop in housing credit pricing, and at the same time we were putting more capital into projects to achieve deeper affordability. Despite these fluctuations, affordable housing production continues to deliver a great bang for the City’s buck; no other agency is able to use their capital funding to leverage private investment in this same way making housing a smart and efficient investment.
So we are very focused both on how we maximize our City capital, but also, on the larger environment that affects our ability to leverage the additional resources we need to create and preserve affordable housing.
Building for the City
To be clear, there is a lot of debate about these targets—the number of units we are creating and preserving; the affordability levels we are reaching; the amount we are spending. Much if not all of this debate is perfectly legitimate, and is necessary to protect the public fisc. We’ve been clear from the outset, however, that the housing plan is not a panacea for all that ails us. We need to pull every available lever to address the broader problems. And while we are very focused on the lowest income households, we also need to serve people along a continuum of need. Which is why Housing New York is building for the city as a whole, and for the kind of city that we want to be in the future.
We aren’t just dropping points on a map—we are working with communities to address the realities of very different neighborhoods, with a wide variation in the type, size, and age of the existing building stock, the availability of land, the zoning issues, the specific needs of communities, and concerns of residents.
Working with Communities
Housing New York has not used—and should not use—a top-down approach. Real community engagement involves a complicated and sometimes messy back-and forth, and so we can’t be and have not been overly proscriptive about our development plans.
Now a lot of ink has been spilled on the pace of rezonings and projects that did not get City Council approval but there is more to what is happening on the ground than what you may read in the headlines.
For instance, more than two-thirds of our projects last year required some form of City Council approval. So despite the emphasis on the very well-covered political opposition to very specific projects, the vast majority of our work is being approved, is moving forward, hence the production numbers we are able to share.
We are currently working on community plans in more than a dozen neighborhoods across the city, not just on rezonings, but in neighborhoods like Edgemere and Brownsville, where there are a lot of opportunities with available City-owned land. The planning process in those neighborhoods, while certainly painstaking, demonstrates the fruits of our labors in terms of community engagement. We now have detailed plans, created in concert with the community, that represent a shared vision and a concrete path for these neighborhoods, which had been overlooked for too long.
And we are pushing ahead on area-wide rezonings, fully aware that the extensive community engagement we committed to undertake necessitates that we act with both a sense of urgency given the needs on the ground, and patience given the work we need to do with communities. But, we are seeing results, as the recent approval of the Downtown Far Rockaway neighborhood plan will attest. The plan exemplifies the model of neighborhood planning we are seeking to do across the city—one where we’re increasing the capacity for residential growth while making the types of investments in parks, streets, community facilities, workforce training that will strengthen the bones of communities for generations to come.
Deploying a Wide Range of Programs
Within neighborhoods, we are also drilling down to the building and site level, where properties, land availability, and costs vary greatly. HPD deploys a wide range of programs and tools to meet the varied needs of our city’s diverse housing stock and available land.
We are extending affordability and rehabilitating both large Mitchell-Lamas and single family homes; massive complexes like Stuy Town and small 20-unit rent-stabilized buildings. The range of our programs must match the unique conditions and needs—physical and financial—of all these different properties.
At the same time, we are financing new construction projects on large City-owned sites as well as small infill sites, and working with private and non-profit developers as well as faith-based groups and other community organizations who come to us with potential sites to develop as affordable housing.
We are providing down-payment assistance to first-time low-income homeowners from the South Shore of Staten Island to Borough Park, Brooklyn and Flushing Queens. And the administration is very committed to creating more supportive housing—one of the most cost effective, and humane approaches to serving New Yorkers with special needs.
Now this might look like an alphabet soup of different programs and acronyms, but it is necessary because we are a very diverse city, communities have diverse needs, and our building stock is incredibly diverse – there can be no one size fits all approach. One of the things I’m really proud of is the skill with which the teams at HPD and HDC, working with all our partners, are able to use all of these different tools in tandem in order to create and preserve as much affordable housing as possible.
Setting the Terms
For each of our programs, we set and publish the terms to make sure that we are meeting our goals as efficiently and effectively as possible. Our program “term sheets” establish detailed guidelines and parameters for how we deploy City Capital, which is used to subsidize a portion of the total development cost.
At the outset, we revamped all of our programs with an eye to achieving the right mix of affordability and uses, not just for the neighborhood, but for the health and long-term viability of the buildings.
We created programs like ELLA and SARA to achieve our goals for deep affordability, but also revisited our mixed-income programs to make sure they reach both the lowest income New Yorkers and our city’s homeless population.
As you can see here, the subsidy ranges dictated in our term sheets vary widely across program types, but the amount of subsidy we’re typically spending aligns with the subsidy budgeted by program type.
There are of course always outliers: the development that is next to a subway tunnel or has historic preservation concerns; or the project in a "high opportunity" area that has more expensive land costs, but is important for achieving our fair housing goals.
Once we saw that our programs were working at the subsidy levels we set, we were in a better position to increase our targets for deep affordability. We’ve since revised our term sheets again to reflect the additional commitment of $1.9 billion in City capital from the Mayor, and will continue to be vigilant in guarding how we spend our City subsidy, and making sure we are leveraging this investment as strategically and efficiently as possible.
Promoting Affordability Citywide
We are equally committed to finding ways to achieve greater affordability citywide, without City subsidy.
Through our new Mandatory Inclusionary Housing program, the most aggressive in the country, much thanks to my predecessor Vicki Been for all the work to get this off the ground, we now require permanently affordable housing to be created in areas rezoned for growth, securing affordability far into the future.
Although still very new, more than 10,000 new homes have been approved in individual applications by the City Council. Of those units, approximately 2,600 are required to be permanently affordable under MIH, and nearly 5,000 will be affordable through other programs.
This is on top of 6,607 units we’ve financed through our Voluntary Inclusionary Housing program, which helps us achieve permanent affordability in some of the highest opportunity neighborhoods in the city with no additional subsidy.
And we fought hard for reforms to 421-a to achieve affordability requirements citywide and end tax breaks for luxury condos. In high cost neighborhoods where it is difficult for the City to subsidize affordable housing development, 421-a is an important tool to create affordable housing opportunities that would otherwise be out of reach.
Ensuring Long Term Affordability and Public Control
And we are always looking to expand and strengthen the tools available to secure long-term affordability for future generations of New Yorkers.
That is why we now finance virtually all projects using balloon mortgages that result in the owner owing the City a significant amount of money at the end of the loan term, which provides a very strong incentive to an owner to extend affordability.
Recently, we introduced a new policy to ensure future public control of all affordable housing developed on City-owned sites.
Through the use of a remainder interest, HPD will guarantee future control of its public land to ensure long-term affordability. The agency will apply this new approach in all future Requests for Proposals (RFP) and Requests for Expression of Interest (RFEI) for affordable housing development, starting with the RFP for three HPD-owned sites in Brownsville, Brooklyn; the RFP for the Inwood Public Library; and the RFEI for Greenpoint Hospital—all of which have been released in recent weeks.
Under this new policy, when HPD conveys land for affordable housing development, it is subject to a remainder interest—a legal tool that will give the City ownership of the property at the end of the initial affordability period, with an option to leave the property in private ownership if the owner agrees to extend the affordability period.
This latest approach is just one more strategy that the City is using to ensure that the affordable housing it subsidizes remains a long-term resource for low- and moderate-income New Yorkers.
The work we do is incredibly complex, and at times, may seem impenetrable to the public, community advocacy groups, and others who are understandably going to continue to push for more for the people they represent. We hear all of this feedback, and we spend a lot of time listening to and responding to the many different—and often competing—views of our various stakeholders. But we are solving not just for the problems of residents today – as pressing and real as those problems are—we are laying the foundation for the city we want to be in the future. And we do so in the face of very real threats on the horizon.
Potential policy changes and tax reform could have serious consequences for our affordable housing work.
Tax reform could have implications for the tax credit incentive programs we use to get housing built – both the Low Income Housing Tax Credit and private activity tax-exempt bonds. For example, if the corporate tax rate is lowered, that makes investors less eager to buy Housing Credits, which means less money for affordable housing.
We’re working with groups across the country to fight budget cuts. Eighty six percent of HPD’s expense budget is federally funded through the Department of Housing and Urban Development’s (HUD) housing and community development programs. I’m sure you heard that President Trump proposed eviscerating programs with longstanding bipartisan support, like Community Development Block Grants and the HOME Investment Partnership. His proposed budget would have eliminated thousands of Section 8 vouchers in the city.
But if working in affordable housing has taught us anything, it’s how to fight for every dime and use every resource with incredible efficiency. So now more than ever, we are very much focused on fighting to protect these programs.
Pushing Forward on Housing New York
At the same time, we are pushing forward on the broad goals of Housing New York with renewed energy. The main pillars remain the same but we know we must continually adapt to a changing landscape. Given what’s on the horizon, this means a new type of coalition-building, which we are well-positioned to forge given the history of affordable housing development in New York City has been defined by partnership—across sectors and disciplines.
It means the type of coalition-building where our politics reflect what’s best in us, and not what’s worst. For all the skepticism—and there is much of it—we wouldn’t be making this progress if people weren’t coming together to get the job done.
For example, due in large part to the tremendous work of affordable housing advocates here in New York City and nationwide, we stand on much better terms on the federal budget front.
Both the House and the Senate have proposed funding levels for HUD that are drastic improvements from the draconian cuts put forth by the Trump Administration.
This is the kind of partnership we need if we are to attempt to solve the very real, very complex problems that we face.
It means the type of coalition-building where we connect the dots of our work so that we don’t view affordable housing programs as the one and only answer to the city’s affordability crisis. It will take, more than ever, a truly multi-disciplinary approach to addressing the current crisis to keep New York City a place of opportunity for everyone—housing, jobs, infrastructure, skills building. It is the reason I hope my background outside of affordable housing will prove useful in the work ahead.
It means the type of coalition-building where we find a way to amplify the message and ensure that affordable housing stays top of mind at all levels of government. Despite the clear housing crisis too many Americans find themselves in today, it has struck me that the discussion of “affordable housing”—whether it’s because of the historical stigma associated with affordable housing programs or the industry’s own inscrutable jargon—is often absent on a national scale. But now, more than ever, our ability to pursue bold solutions to this crisis depends on our ability to get the message out and ensure that no level of government walks away from its obligation to ensure that everyone has access to safe, good, affordable homes are within reach for everyone.
So on the road ahead, we will no doubt continue to have healthy debates about the precise details of the work we are doing. That is to be expected. That is healthy. But we can’t let our disagreements undermine our ability to find the common ground we need to get the job done. Too much is at stake: the stability of our neighborhoods; the competitiveness of our economy; the health and well-being of our residents; the opportunities available to their children who will one day take our place and continue to make our city great.