City’s Preliminary Budget Offers More Housing Funds, But Maintains Cuts to Some Programs

HPD would see its capital funding restored with a slight increase in the mayor’s preliminary budget for fiscal year 2022. However, a few initiatives — such as a pilot program to legalize basement apartments, and funding for new supportive housing — continue to face pandemic-related cuts.

The city’s leading housing agency would see its capital funding restored with a slight increase compared to last year in the mayor’s preliminary budget for the fiscal year 2022. However, a few initiatives — such as a pilot program to legalize basement apartments, and funding for new supportive housing — would continue to face pandemic-related cuts.

The Department of Housing, Preservation and Development’s total Fiscal Year 2022 capital budget is proposed at $1.45 billion in the mayor’s preliminary plan, a slight increase from Fiscal Year 2021, where the budget now stands at $1.43 billion for the agency after a series of pandemic-related cuts, shifts and restorations last year. Prior to the pandemic, the Mayor’s Office of Management and Budget had set a capital commitment of $1.2 billion for HPD in 2021. After the pandemic started in April, the city’s shifted allocated capital budget monies – $583 million from 2020 and $457 million from 2021 – into later fiscal years through 2024. In October, the de Blasio administration announced it would restore some of that funding – an estimated $466 million. 

The city’s total preliminary budget for Fiscal Year 2022, which starts in July, is an estimated  $92.3 billion. The city’s finances face a $5.25 billion gap and a $1.5 billion revenue decline, largely driven by a drop in property tax revenue. The biggest risks the city budget faces are any shifts or cuts in state and federal funding. Last week, the U.S. Senate passed a $1.9 trillion stimulus plan, which would include $1.5 billion in rent relief for New York State. Last December, the federal government allocated $1.3 billion in rent relief through the Heroes Act. Those funds will be included in the upcoming state budget.

Under the preliminary capital budget for HPD in Fiscal Year 2022, the city has pumped more funding into the Extremely Low & Low Income Affordability (ELLA) program, which funds new construction where 80 percent of units are set aside for the lowest income levels (up to 80 percent of the Area Median Income, or AMI, estimated at $81,920 for a household of three). The other 20 percent of units can be set aside for formerly homeless households, or moderate-income households earning above 80 percent AMI.

The de Blasio administration has been criticized over the years for failing to create enough affordable housing for the city’s lowest income households. Although the ELLA program did not see major cuts last year during the onset of the pandemic, it did have its funding re-allocated to later budgetary years. Under the mayor’s preliminary budget, the program would see its cumulative funding for 2020-2024 increased by 55 percent or $428 million dollars compared to January of last year, according to an analysis from the Independent Budget Office (IBO).

But other critical housing initiatives, such as the city’s supportive housing construction program, do not fare as well. Pandemic-spurred budget cuts will remain in place for the NYC 15/15 initiative, a commitment made by the de Blasio administration in 2015 to develop 15,000 units of supportive housing – permanent affordable housing for vulnerable New Yorkers with on-site services ranging from social to mental health – over the next 15-year period, or by 2030. Funding for supportive housing construction has been cut by a total of $246 million from 2020 through 2024 in the preliminary budget, according to the IBO’s report.

“There’s a new economic reality in New York City and we’re responding accordingly. HPD has identified mandatory savings targets that will help make the agency more efficient without affecting our core priorities that make this city fairer and safer for all New Yorkers,” HPD Commissioner Louise Carroll said in her testimony Friday, during a capital budget hearing by the City Council’s committees on housing and building.

Councilmember Inez Barron asked if HPD would be restoring the budget for the pilot basement apartment program, a major policy promise associated with the 2016 East New York rezoning. A $1.09 million budget cut last year left the program with only $91,580 for operations.

Initially the program, which launched last year, was slated to receive $12 million dollars for operational costs during a three-year period. The initiative was paused in the last budget cycle and remains on hold, but the City Council allowed for HPD to move forward on conversion projects for about nine homeowners who were already approved for the program. Currently, the preliminary capital commitment plan includes $863,000 for the basement pilot.

Carroll testified that the program – which aimed to test ways to legalize basement apartments as a pathway for creating new, sanctioned affordable housing units for tenants, and to help moderate-income homeowners – needed to be reexamined. It looks to assist homeowners in legalizing basement apartments by providing them with technical assistance and low-interest financing, helping them select an architect and contractor, and assisting them in temporarily relocating tenants.

But for many homes, Carroll testified, the conversions pose significant challenges. Semi-detached or attached homes, for example, “make it really, really difficult to do the basement work.”

“What we also learned was there’s a height requirement by the fire department,” she said. “In some homes, [they] would need to dig down into the foundation, to dig deeper in order to create that height. And a lot of people dropped out from eligibility for that reason.” She said the city’s requirement that newly legalized dwellings units in the program be accompanied by a certain number of parking spaces also became an obstacle.

According to HPD, the pilot received 8,000 homeowner applications. Out of those, 100 applicants were assessed for eligibility and of those, only nine were considered eligible and have been funded to proceed with the program.

“So we have some work to do, but we really, really love this program and we want it to be solidified,” Carroll told councilmembers.

Carroll says that overall, HPD made progress in 2020 despite the limitations of the pandemic, including a partial shutdown and hiring freeze. This month, the Mayor announced the city would restart $17 billion in major capital projects – including schools, housing and infrastructure construction – which have been on hold since March 2020.

Carroll says the housing agency managed to find a way to close out projects through other financing programs while the city was “paused” so they would be ready to go whenever city agencies resumed their work. She says HPD financed 29,521 affordable homes last year, including more than 1,000 supportive homes, over 1,000 for seniors and more than 2,000 for homeless New Yorkers. 

The the agency also preserved 22,000 housing units in 2020, she added. As of December, HPD says it has financed nearly 177,971 affordable units–57,119 newly constructed and 120,850 preserved– since the 2015 launch of the de Blasio housing plan, 122,000 units shy of the mayor’s goal of creating and preserving 300,000 units by 2025.

She also highlighted the fact that the city placed 1,223 homeless households into housing in 2020, exceeding its goal by 22 percent – an uptick that can be attributed to the city’s response to the pandemic and concerns about overcrowded shelters raised by homelessness advocacy groups.

Councilmembers Helen Rosenthal, Robert Cornegy and Rafael Salamanca raised questions during the hearing about the timeline of HPD projects in their respective districts, saying some have faced delays in the past without a clear explanation for why. Carroll said HPD gives closing deadlines for its development projects up to a year in advance, but that some projects are not able to meet those deadlines for a number of reasons, such as unexpected delays from outside financing sources for a project. Rosenthal and Cornegy both asked HPD to provide the City Council with a list of projects that are currently in the pipeline.

Housing and homeowner advocacy groups also spoke at the hearing to reiterate their concerns for protecting homeowners and tenants who are at risk of foreclosure or eviction due to the pandemic. Advocates also asked for assurances on how the federal funding for rent relief will be distributed throughout the city.

“First we’d like to ask the City Council to work with the state in order to ensure the equitable distribution of the $1.3 billion New York will receive from the December federal relief package. Doing this would in turn support the city’s budget for rent relief,” said Emily Goldstein, Association for Neighborhood and Housing Development’s director of Organizing and Advocacy. 

Other groups, such as Center for NYC Neighborhoods and the New Economy project, emphasized how critical it was to support and fund programs which protect homeowners, especially those in communities of color, and increase funding for community land trusts projects to create more homeownership opportunities across the city.

Typically between March and April, the City Council holds public hearings on the preliminary budget and issues a formal response, proposing recommendations for the Mayor’s Office of Management and Budget (OMB). In April, the city will release an updated Executive Budget, followed by another series of public hearings held by the City Council until the budget is finalized and adopted by a Council vote, which must be before July 1.