Only on Manhattan’s Upper East Side would a one-bedroom apartment for a senior citizen cost $760,000 to build.
That’s what the Related Capital Company, Arker Companies and the Metropolitan Council on Jewish Poverty plan to spend—$9.1 million in all to purchase and demolish a hundred-year-old townhouse at 231 East 77th Street and construct 12 new units for low-income elderly. (The purchase price alone was $3.5 million.) To do it, they’re asking for more than half of that amount in the form of a limited public subsidy: tax-exempt bonds from the state Housing Finance Agency.
That’s not the only help the project is getting. The developers are also bringing in $7.1 million in permanent financing via Manhattan’s longstanding but little-used inclusionary zoning program, in which developers of high-rise apartments are eligible for “density bonuses” allowing them to build an extra four square feet of market-rate space for every one square foot of affordable housing they construct nearby. That program is distinct from the inclusionary zoning recently approved for use on the far West Side of Manhattan and under consideration in Williamsburg and Greenpoint—but the possibility that projects may be gorging on subsidies has important implications for the new plans.
At a recent hearing on the proposed bonds, housing advocates pleaded with HFA not to approve them. “This development far exceeds the usual cost per unit of HFA projects, raising questions about whether these scarce bonds are being made to stretch to benefit as many low and moderate income people as possible,” testified Stephanie Greenwood of Good Jobs New York, a group that watchdogs public subsidies. “Given the limited nature of tax-exempt bonds for housing and the high demand for them elsewhere in the city, [the] price tag seems disturbingly high.”
“The project should be able to be built without the use of bonds,” Martin Dunn of Dunn Development told HFA staff. “The amount of bonds being asked for this project could finance 50 units, or 90 units of rehab.” What’s more, Dunn added, noting that some of his own supportive housing projects had been rejected for HFA financing, “there are never enough tax-exempt bonds for all the public uses that want them.” Last year, HFA issued $896.1 million in bonds.
The financing for 231 East 77th is “still in the customer review process,” said HFA spokesperson Tiffany Bern. She did not provide a timeframe for a decision.
Through a measure meant to conserve precious housing subsidy dollars, the old inclusionary zoning program, launched in 1987, broadly bars participating developers from using funds from other government programs. But the proscription is vague enough that certain kinds of public subsidy have come to be accepted by government agencies. According to Carol Abrams, spokesperson for the Department of Housing Preservation & Development, “HFA tax exempt bond financing…is allowed under the Inclusionary Housing program,” provided the bonds are used for construction only.
In a major shift, the Hudson Yards and proposed Brooklyn zoning plans encourage developers to take full advantage of public subsidies to make it feasible to produce the affordable housing. The move is long overdue, argues Frank Braconi, executive director of the Citizens Planning and Housing Council. “Layering subsidies is the name of the game in affordable housing,” said Braconi. “Nobody does projects with just one subsidy.” That said, he added, HFA could stand to have its financing decisions examined more closely. “It’s a black box. There’s no transparent criteria so a project can be evaluated.”
Brad Lander, executive director of the Pratt Institute Center for Community and Environmental Development, testified that the new inclusionary zoning programs need to be monitored carefully to ensure maximum public benefit. “The city is talking about combining subsidies,” he said. “That’s got to have a lot of careful scrutiny.”
Sol Arker, principal of Arker Companies, declined to disclose which new market-rate high-rise will benefit from the density bonus. It is not a project of the Related Companies, he asserted.
But at the HFA hearing, members of ACORN had the last word. About 20 adults and children, many of them living in overcrowded or unaffordable apartments, came to midtown from upper Manhattan and the Bronx to plead for attention to their own dire housing needs. “We want to know where the money is going,” testified member Linnette Serreiras. “As a person who wants housing for her kids, I want to know.”