The Political Economy of NYC “Affordable Housing”


From the NYT:

Living in the Mix


Affordable Housing in New York’s Luxury Buildings


By JULIE SATOW AUG. 29, 2014

Brandon Deese lives just a few blocks from where he grew up, but it might as well be another world.

Mr. Deese, 23, spent his childhood at the Chelsea-Elliott Houses, a public-housing project in the West 20’s. But last year, thanks to a housing lottery, he beat out thousands of others for an affordable apartment at the Chelsea Park, a luxury rental at 260 West 26th Street.

“I used to go downstairs and see crack heads and drug dealers, and now when I go downstairs I see doormen,” said Mr. Deese, who himself works as a night doorman on the Upper West Side.

Presumably, his being a doorman, somebody who understands proper apartment behavior, helped him get this deal. These vast windfalls are supposed to be handed out randomly, but they seem to go to people who will cause the fewest problems.

He pays $540 a month for a studio, a discount of about 83 percent from the market-rate rent, which is around $3,200 a month, according to listings on StreetEasy.

So, he is getting a subsidy of $31,920 per year. Wow.

The article doesn’t say how many years these bennies are good for. I have the vague impression from Chicago of something like 10, 12, or 20 years.

Of course, somebody who is getting such a deal on a studio apartment is probably not going to be starting a family during the life of the deal, although he’ll hopefully have enough saved up when his jackpot is over.

You can see how Mayor De Blasio’s plan is not to make New York City somewhat more affordable for most residents but to make it extremely more affordable for some people who will thus be be loyalists.

Why is there this kind of windfall available to bestow on about 20% of tenants of new luxury buildings? Because getting the political permission to build in NYC is a goldmine because the right to build is so restricted that anybody who does get all the permits approved is guaranteed a big profit, so the city makes the developers kick back some of their profits in terms of these crazy Fairy Godmother deals for some small fraction of all the people in New York. It seems like there ought to be about 10 better ways to do things, but that’s the current system, and the new mayor wants to crank it up.

Private developers have taken advantage of various programs to construct more than 100 mixed-income buildings like the Chelsea Park over the past two decades, mostly in Manhattan and gentrified parts of Brooklyn. In these buildings, the majority of apartments are market rate, with set-asides, typically 20 percent, for low- and moderate-income New Yorkers. In return for including these units, developers can receive lucrative tax abatements, permission to construct larger buildings and bond financing.

The competition for these units in these buildings, often called 80/20s, is fierce. Thousands of New Yorkers apply, but the stipulations are strict. There are income requirements and applicants must provide extensive documentation, such as pay stubs, telephone bills and bank statements. Good credit is also a necessity, typically a score of 650 or more. Making even one mistake, such as mailing an application express rather than by regular mail, can disqualify you from a lottery. Developers are generally required to give preference to those who live in the area.

So a lot of the lucky winners in luxury neighborhoods are probably people from affluent families in the neighborhood who have high prestige low pay jobs in cultural institutions and the like

Under Mayor Bill de Blasio, these mixed-income developments could become even more widespread. The administration has set a goal of financing the construction or preservation of 200,000 affordable units over the next 10 years. One approach is likely to be mandatory inclusionary zoning, whereby developers are required to include a certain number of lower-priced housing units within a market-rate project when building in neighborhoods that have been rezoned to allow for more density. In the past, that program has been voluntary.

“Our goal is really to foster more economically diverse neighborhoods,” said Alicia Glen, the deputy mayor for housing and economic development.

“Our goal is really to foster more voters who owe the De Blasio Administration big time for the luckiest break in their entire lives.

… But the housing lottery is a formidable process. “They tell you to submit the application by regular mail — not express, not registered mail — and you have to follow every direction perfectly or you will be disqualified,” said Natalia Padilla, an agent at Citi Habitats, who has applied to the housing lottery herself and has helped clients with their applications.

… Some are also pushing to soften the strict income cap requirements, which dictate that applicants must earn a certain amount — and not a dollar less or a dollar more —

i.e., you need juice.

while still having strong credit and the ability to cover the rent. Another concern is that many mixed-income developments exclude very low-income New Yorkers in favor of higher earners, and that many of the buildings have studio and one-bedroom apartments, with few larger units for families.

In other words, nobody wants welfare families around.