It's been six years since New York City Mayor Michael Bloomberg first announced the New Housing Marketplace Plan (NHMP), an ambitious program to create and preserve 65,000 units of housing that was expanded in 2005 to a total unit count goal of 165,000 with a whopping $7.5 billion committed to the project. At the New York Housing Conference in December, Bloomberg reminded attendees that the program had already passed the 82,500 unit threshold and reaffirmed his administration's commitment to affordable housing despite the foreclosure crisis, price depression in the low-income housing tax credit market, and competition from market-rate developers.
"As I said to you six Decembers ago, New York's commitment to affordable housing is strong. It is unshakeable, and I believe it is essential to our recovery and our future," Bloomberg said, as he outlined a three-pronged program to juice up the NHMP during the current economic downturn, including dispersing more than $2 million in grants to not-for-profit foreclosure and mortgage counseling services; earmarking $24 million to purchase foreclosed properties and convert them to affordable stock; and extending the NHMP by up to year.
Despite the challenges to keep up with the NHMP's brisk pace, affordable housing advocates remain upbeat about meeting the program's objectives. "It is no small accomplishment to hit that halfway point in the number of units," says Ted Houghton, executive director of the Supportive Housing Network of New York. "Housing development always lags behind target dates, and it is extraordinary that the city has been as on time as it has. It is going to be difficult in the next couple of years to keep it at that pace, but so far so good."
Still, some affordable housing developers are forced to contend with issues that the NHMP cannot immediately address. "I don't know how they will fair getting through his other 82,500 units," says Gary Gutterman, director of housing for the Metropolitan Council on Jewish Poverty, which has 2,000 units of Manhattan senior housing under management, in construction, or in the development process. "I have one project where the tax credits are effectively in suspension and another in Staten Island where we are coming to the market when it is almost impossible to get a nonrecourse construction loan. We have not been firmly rejected, but it is a long shot."
Gutterman says a dependable business in inclusionary zoning projects has also dried up. Where the Met Council would typically field a dozen project bids in a 12-month period, the action among market-rate developers has disappeared. Credit that to private equity players who purchased mega deals and are now facing difficulty getting those properties to cash stabilize. Several affordable players point to Tishman Speyer's acquisition of Stuyvesant Town/Peter Cooper Village as an example of large-scale housing that might come back online?a Citigroup analysis in November suggested that funds from operations on the properties were not enough to pay monthly interest payments on the complex's mortgage, although an interest reserve of approximately $400 million could service the remaining debt until 2011. A spokesperson for Tishman Speyer declined to comment on the current financial state of the asset.
"I think there are several high-profile deals that are in trouble, but I don't know if there will be an opportunity for the city to step in and preserve that housing," says Ken Olson, CEO of New York City-based affordable housing developer POKO Partners and a member of the executive committee at the New York State Association for Affordable Housing. "I just don't think that you can buy residential real estate at cap rates in the low single digits. It costs money to run the building. Forget about covering the debt; you can't cover the electric bill. If there is patient money behind it, those deals will work out or else the lenders will foreclose and re-sell them at a price that makes more sense."
While Olson expects that more multifamily CMBS workouts will likely hit the street in 2009, he remains optimistic on the long-term success of New York City multifamily, affordable housing, and the NHMP. POKO, for one, has just completed the Delancy Lofts in Harlem and has several other projects under development, mostly rentals. "For better or for worse, there is an endless demand for affordable housing in New York City. We're huge fans of the mayor's program. 165,000 units? We'd like to build all of them."