Want to Create More Affordable Housing in NYC? Help Private Developers.

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Over the last 40 years, a community of skilled, efficient affordable housing developers has emerged in New York City to address what has become the most pressing concern of both public officials and the public itself: the creation of more affordable housing. This community has grown up in no small part because of the city’s robust set of programs that incentivizes and subsidizes affordable housing development. 

With increased resources devoted to those programs and the reform of regulatory structures that make their work slower, more expensive and more difficult, the energy and resourcefulness of these developers could be unleashed to produce tens of thousands more affordable units annually.

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A number of well-meaning recent proposals seeking to increase the pipeline of affordable housing development seems to be based on misunderstandings about the dynamics and economics of how affordable housing gets built in New York. The members of the New York State Association for Affordable Housing are primarily medium-size, family-owned businesses that are in the business of developing and constructing affordable housing. They are good at what they do — and because of their years of experience they do it in a way that produces the highest number of possible affordable units given the amount of public subsidy available. 

Milstein Headshot Want to Create More Affordable Housing in NYC? Help Private Developers.
Jolie Milstein. Photo: NYSAFAH

Yes, most of our members are in business to make a profit (although the per-unit profit is substantially less than many might think), but uniformly they got into the business of building housing because they sought to do well by doing good. They are committed to the creation of more homes that New Yorkers can afford. Any government initiative to increase the production of units needs to harness their experience and expertise to maximize the output of new homes for low-income and working families.

Those recent proposals have appealed superficially to the idea of eliminating the profit motive from affordable housing development. This would include, for example, shifting most resources toward nonprofit housing developers. Many nonprofit organizations, however, lack the ability to take on the necessary debt and financial burden to bring projects of any size to market, and those that do are among our members. Many of us came up working for nonprofits, and moved to the private sector to expand our reach and effectiveness and to serve those in need.

Turning to government to produce affordable housing is a policy that has certainly been tried in New York. And, while the New York City Housing Authority model is essential, it is not a model that achieves high financial efficiency or gets projects built quickly. Because of the many layers regulating government construction, it has become a slower and more expensive process, without exception. It is also widely recognized that private firms do a much better job than the city when it comes to property maintenance and management.

Creating a more supportive environment for private sector housing development is the best way to create more affordable housing. Leveraging the years of experience of private sector developers is without doubt the path to increased production. 

At the center of the creation of affordable housing is subsidy. Part of the reason that housing is expensive for working New Yorkers is that the cost of building a family-size unit, when converted into a monthly rent, is more than low-income and many working New Yorkers can pay. The difference between what it costs to build an apartment and what families can afford is a gap that needs to be made up for by government — in the form of grants, low-interest loans and below-market land. To produce more affordable housing, we need more subsidy. 

There also seems to be a pervasive misunderstanding of where those subsidies go, which is ultimately to the reduction in rent for tenants. There is simply no getting around this fact. And, again, the most cost-effective way to leverage those government resources is to put experienced builders of housing to work.

On the regulatory side, making New York more builder-friendly is also a necessity, and we need to get creative. Vishaan Chakrabarti, an architect and former leading planning official in the Bloomberg administration, recently proposed changes to New York’s land use rules that could potentially generate 500,000 units. Ideas like his need to be fully explored. 

As a result of out-of-date laws governing the liability of owners, our insurance costs have recently gone through the roof. Those laws need updating. 

One of the greatest obstacles to housing production is, unfortunately, neighborhood opposition. If we really want more affordable housing, we are going to need to get serious about supporting its production in neighborhoods across the city. We need to disempower the many checkpoints along the route to construction that enable small groups to veto new projects, and we have to be able to rely on local public officials to support new housing in their neighborhoods.

New York City and state’s affordable housing developers are ready, willing and able to go to work building homes that low-income and working New Yorkers can afford. We are confident that by working together, elected officials, housing agencies, neighborhoods and the development community can make substantial progress in keeping New York communities economically diverse while at the same time building more homes for more low- and moderate-income families.

Jolie Milstein is president and CEO of the New York State Association for Affordable Housing.