A man wearing a mask walks his dog in Brooklyn Bridge Park. | AP Photo | Mark Lennihan/AP Photo
The fiscal blow the coronavirus has dealt New York City has not spared its affordable housing program, even as half a million New Yorkers could find themselves newly unemployed in one of the priciest cities in the world.
Mayor Bill de Blasio proposed momentous cuts to his signature 10-year plan to build and preserve 300,000 homes at less than market rate by 2026: $583 million from the current fiscal year, which ends June 30, and another $456 million next year, according to figures shared with POLITICO, which is first to report on the housing budget hit.
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“It’s going to be harder to finance affordable housing without a doubt,” said David Schwartz, principal of Slate Property Group, whose company builds income-restricted apartments. “The city’s going to have to be a little more selective on the jobs that they do. But it’s going to be really, really challenging because the need’s going to increase.”
The housing plan, while exceedingly controversial, is also one of de Blasio’s most sweeping accomplishments and one he was building his legacy on before Covid-19 shattered the city's booming economy. Now he plans to delay spending more than $1 billion to rein in costs, meaning longer wait times for people in need of affordable homes.
Affordable housing developers and others in the field say this action will make it difficult to continue producing homes for low- and middle-income New Yorkers at the current pace, and some are already bracing for financing delays on projects in the development pipeline.
The 12-year housing plan, which has benefited from a booming city economy, was going so well de Blasio decided in 2017 to roughly double its capital budget to $16.9 billion and expand the goal from its original 200,000 homes to 300,000. The total price tag of the plan with private investment is $82.6 billion. The city spent about $1.7 billion in 2018 to finance roughly 34,000 apartments. The cuts leave the city with about $870 million and $740 million capital funding in fiscal years 2020 and 2021, respectively.
To make matters worse, record-low interest rates in recent weeks have pushed down the value of federal housing tax credits that contribute to the vast majority of the country’s affordable housing development — threatening to make projects even more reliant on government subsidy in the wake of the pandemic.
And uncertainty abounds over the scale of the economic damage once the immediate crisis passes.
"The agency is taking a hard look at the projects in our pipeline and working creatively with partners to find additional sources of financing to move our projects forward," said Matthew Creegan, a spokesperson for the city's housing department. "We understand that affordable housing will be more important than ever on the other side of this crisis, which is why we are advocating for more federal resources to support our push forward."
The de Blasio administration plans to add a little more than $1 billion to fiscal years 2022 through 2024 to compensate for the upcoming loss. But those projections rely on a swift economic recovery or a federal bailout — both of which are far from guaranteed. The city is currently facing a $7.4 billion drop in projected tax revenue over fiscal years 2020 and 2021, and a $800 million shortfall in state aid.
Some developers said they’ve already been warned that June of this year, a month in which the city traditionally closes on a large share of financing deals involving its tax-exempt bonds, will face a significant hit.
“All of our government partners have certainly been preparing us for a slowdown in the production pipeline just given the massive amount of resources the city and state have had to devote to crisis response,” said Scott Short, CEO of Riseboro Community Partnership. “There’s been a general message out there that this June closing season will not look like Junes of recent years. So I think we’re all kind of preparing ourselves for some fallout.”
Some are skeptical that the budget additions in 2022, 2023 and 2024 will actually pan out.
“I don’t think we can count on that, I just don’t think we have a sense of how the economy is going to rebound, of what the real estate market is going to do,” said Rachel Fee, executive director of the New York Housing Conference. “There’s too much uncertainty for us to rely on those out-year capital budget numbers and feel assured that money is really there.”
Fee and other housing advocates are also voicing worries about broader economic changes that have further pushed down the value of the low-income housing tax credit, lessening the benefits developers can reap from the program.
“The city and state are not going to be in a position to put more capital in to make it up,” Fee said. Between the budgetary issues and the tax credit concerns, “we are going to see an impact in production, we are going to see fewer units being financed and produced.”
The proposed cuts to the city’s budget will face at least some pushback in the City Council, which plans to hold remote budget hearings in the coming weeks.
Council Member Brad Lander warned of “austerity thinking” coming out of the crisis. He said it’s a mistake to cut the capital program for housing, and suggested the city take on more long-term debt to avoid that route.
“One danger in a crisis like this is in the name of budget balancing, which you have to do, you eat your seed corn and you make decisions that sacrifice the city’s long-term future,” Lander said. “I really think leaning into and investing more in affordable housing is part of how we promote the recovery.”
The cuts come as the city has been continually pushed in recent years to make changes to its housing plan that require more city subsidy.
Just earlier this year, in his State of the City address, de Blasio announced the administration would rework the plan to produce more housing for the poorest New Yorkers, which came with a $220 million price tag.
The Independent Budget Office, which analyzes city budget issues, said the construction and rehabilitation of supportive housing and very low-income housing appear to be taking some of the biggest hits in the updated capital plan.
The administration has also poured subsidy into neighborhood-wide rezoning plans, partly to allow for more income-restricted housing for people in lower-income tiers, but several rezonings have still fallen apart in recent months following community opposition that said the so-called affordable housing produced is not affordable enough.
Some are optimistic the outlook for development will change following the crisis.
“To the extent that there’s more limited city subsidy overall, this is an opportunity to think about [mandatory inclusionary housing] projects in neighborhoods where there is a stronger real estate market and where it doesn’t need additional subsidy to make MIH work,” said Michelle de la Uz, executive director of Fifth Avenue Committee. “Perhaps there’d be more openness in those neighborhoods than in prior, different conditions.”
“The rezoning efforts going into this have been really hard. There were a lot of fights,” Schwartz said. “Perhaps there’s more political will to build affordable housing coming out of this.”
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