BY BILL STANIFORD CEO Urbint
It’s safe to say that whatever we’ve been doing with affordable housing isn’t working and needs to be rethought. Homelessness is on the rise and predictions of an explosion seem plausible. The Feds, through HUD, are threatening to create more chaos in NYC with new rules on housing subsidies. There has to be a better way and it’s going to require some creative thinking.
First, there are some facts that need to be addressed:
• The city is not the best landlord.
• Renters don’t always have the best interest of the property in mind.
• Residents and community board members want more control over their neighborhoods.
• The law of supply and demand always prevails.
• Projects without an exit plan are rarely successful.
Let’s face it: Government excels at securing resources. It is flawed when deciding where those resources should be deployed and inefficient at administration. In short, government should not be a landlord. However, in reality there are no alternatives, so for every project where government takes on the role of landlord, there must be an exit plan. Anything else would be courting the public housing fiscal disaster that has been well documented.
One of the major problems in public housing is an agency issue. Residents of the NYC Housing Authority (NYCHA) are not shareholders in the sense that they do not have any motivation to maintain, monitor or improve their communities. Any new NYCHA housing developments should consider the possibility of a rent-to-own mechanism that would create incentives for community improvements, from neighborhood watches to beautification projects, general maintenance and school involvement.
Property ownership creates powerful motivations for community involvement over time as equity is built. Eventually, the city will need to turn over the entity to the private sector to unlock the newly created value. This concept could unleash a new era of growth in unused city lands, increase community values, and create opportunities for families to escape poverty.
Why can’t a portion of the state subsidies become an equity position for the tenant? Wouldn’t everyone in the city benefit if NYCHA residents were able to build at least a modest nest egg that they could pass on to their offspring? Financial mechanisms could be put into place where after a period of time, properties could be turned over to the open market. Releasing the city from its responsibilities and creating an opportunity for the city to recoup costs would be a positive.
Of course, turning over NYCHA properties to the open market would decrease affordable housing, right? Not at all. There are many locations and properties that could be developed with this business model, and the city holds the key to unlocking the value: air rights. The air rights are currently tied to the zoning, and the city should be motivated to align the goals of the city with the concerns of the neighborhood. So the question becomes: How do we align the community boards with the need for affordable housing projects that developers would be excited about? The answer may lie in land value capture (LVC).
Wouldn’t it be nice if the city used its air rights generation power to create an opportunity for NYC residents to escape substandard housing, build value in a new community, and be intrinsically motivated to ensure and maintain value creation? Wouldn’t community board members be more interested in bringing these new affordable housing projects to their backyard if they knew the individuals living in the properties had a vested interest in the appreciation of the property?
If City Hall focuses its energies on securing resources by using the zoning laws more effectively, it could return more of the decision-making powers to the community boards themselves. Through LVC the city could direct resources to the MTA, local school districts and community projects. In order to get more projects started and completed, we are going to have to do a better job of aligning the goals of the city, the community boards and developers.
Let’s start with one question: How can this new homeless shelter, halfway house, or affordable housing project increase the value of the property in the long run? The answer may lie in finite building-use agreements, favorable zoning, subsidies with or without 421a, community and transportation improvement projects, and ultimately privatization. One thing is for certain: City Hall is going to need a less contentious relationship with Albany.
In order to create continuous downward pressure on housing and rental prices we must create more supply. Period. The last I checked it hadn’t changed to the ‘theory” of supply and demand; it was still a Law. There are plenty of properties in our beloved city that are capable of being developed for affordable housing, and there is an almost infinite amount of air rights. We have an exceedingly capable MTA ready, willing and able to provide first-class transportation to new development as long as there is sufficient funding through LVC.
The time has come for us to take a long look at the “golden assets” identified by Scott Stringer and start using new digital data platforms like Urbint.com to identify potential target properties ripe for affordable housing development. Working strategically with shared-space companies like WeWork, which house well over 6,000 NYC startups, may also prove fruitful when identifying target locations not just for housing but for community development that doesn’t just continue to funnel workers into Manhattan.
A fresh, new, comprehensive data-driven strategy that brings together community, city and state leadership is necessary. The city needs to develop a program that will stop the fiscal bleeding, motivate community board members to become proponents for development, grant the MTA a permanent seat at the table, and attract top-quality developers for smart, green, and sustainable NYCHA developments.
A rent-to-own program, in partnership with the city, will provide the neighborhoods with supportive community members motivated to protect and grow their assets. Asset development is a clear way for tenants to escape crushing cycles of poverty while creating a vehicle for the city to recoup construction expenses. Both parties would now have intrinsic motivations for maintenance, safety and school performance.
This type of public-private partnership is necessary to permanently solve the issues of affordable housing that have been plaguing our city for generations. The ultimate goal is creating true community development projects that increase value for all stakeholders.
There are roughly 600,000 souls currently living in NYCHA housing. Imagine if these renters began thinking like owners, to help our city move forward into the 21st century so that we can prepare for the 22nd. We all know that the city is not a good landlord.
Just maybe it can become a decent asset builder.