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September 3, 2009

State, City Enter Stalled Project Discussion

Momentum has been gathering in the discussion about using stalled or empty luxury condo developments for affordable housing: as we mentioned earlier, at least one building downtown is already in talks with the city about unloading its unsold units as below-market housing, and Assemblyman Hakeem Jeffries is working on others. Now The New York Times reports that the city and state definitely have proposals in development for possible uses of troubled luxury buildings. But there are definite obstacles for these kinds of programs: "With budgets tighter than ever, there are few financial incentives to entice developers and lenders. And there are the practical challenges of selling apartments to buyers for far less than what their neighbors paid, not least among them possible complications for market-rent buyers, whose mortgages often depend on the building’s financial status." The New York State Housing Finance Agency is working on a program that would offer buyers state-financed mortgages for units in buildings partially occupied by market-rate buyers, while developers would simultaneously decrease prices. Another possibility the agency is considering is to allot $5 million for $40,000 grants to 125 homebuyers. Mr. Jeffries also proposed his plan on Tuesday, to "help developers refinance troubled loans worth up to $150 million and make it easier to turn troubled condo and rental projects at all stages of construction into moderate-income rental units."
City Considers Stalled Projects for Moderate-income Housing [NY Times]
Mystery Downtown Development Going Affordable [Brownstoner]
ID'ing Troubled Condos [Brownstoner]
More Plans Surface to Make Luxury Leftovers Affordable [Curbed]

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Comments

This plan embodies everything that is wrong with New York and national politics. The real estate industry and politicians will do anything to keep the real estate bubble (and its corresponding tax receipts) going. There is a very simple solution to this "crisis" set prices to markets rates which will create a viable market equilibrium. Instead we have developers who got in over their heads seeking a government bailout instead of taking the loss that fair pricing would demand. Politicians flush with campaign contributions from said developers are more than happy to channel cash to their developer benefactors and earn for themselves the lucrative political power to dole out below market rate housing to their voting constituents. Other property owners in the area who dare not face the reality of a declining market support this fantasy of price supports so long it allows their egos to cling to their imaginary wealth.

There is a time and place for subsidized housing, but it is not appropriate for newly built luxury condos. If there is any hope for sensible housing prices (which will lead to a more vibrant and efficient local economy) politicians and developers must allow the market to find a new clearing price.

The New York Middle Class (not the rich or those on welfare) can only benefit.

Posted by: Grand Pa at September 3, 2009 10:24 AM

I just read 30 comments on a previous post cheering this as a victory for affordable housing. WAKE UP. this is nothing but a transfer of public money to developers. The developers bought the property and got tax breaks for the promise to deliver affordable housing. The fair solution is to force them to deliver. IF THEY SELL THE UNSOLD UNITS AT THE MARKET CLEARING PRICE, THEY WILL ALL BE AFFORDABLE, at least according to the high (~150K) income caps that have been proposed. WHY DOES THIS INCOME CAP NEED TO BE FUNDED BY THE TAXPAYERS? This heads-i-win crap is killing us.

This program keeps the price level UP. It has the residual effect of propping up the bubble for other condos and co-ops all over the city.

The financial burden needs to fall on the owners of the developments and their equity partners. They enjoy the upside in good times. Let these leeches get forclosed on, and let the banks sell the properties at a deep enough discount so that someone will finish the job and sell the units at their market clearing price, perhaps without pools and granite countertops.

THE CITY DOES NOT NEED TO BE INVOLVED.

Posted by: joe_the_bummer at September 3, 2009 10:41 AM

grand pa -- thank you, I thought I was the only one. is there anyone running for office this september who does not support this plan? all of the city council canditates I've read about are drinking the kool-aid. why not -- you get to count yourself as a middle class warrior while paying off developers, and you don't even have to lie about it.

Posted by: joe_the_bummer at September 3, 2009 10:47 AM

You two make interesting points. I'm curious to see how the other side of this argument will respond to your logic.

Posted by: InsertSnappyNameHere at September 3, 2009 10:52 AM

As much as I am sure I am on an opposite end of the political spectrum from Grandpa, his post is well written and makes a lot of sense.

Posted by: wasder at September 3, 2009 11:04 AM

This is nothing more then a bailout for the dev.

Posted by: bitter_bubble_buyer at September 3, 2009 11:06 AM

correction: "WHY DOES THIS INCOME CAP NEED TO BE SUPPORTED BY THE TAX PAYERS..." should read "WHY DOES THE SELLING PRICE NEED TO BE SUPPORTED BY THE TAX PAYERS"

I am very interested to hear counterargs. one is that the places will sit undeveloped for years. I think this is a bluff -- no leveraged company can sit very long on assets that are not generating a return. they will have to sh!t or get off the pot, meaning build it or sell it or have it seized.

Posted by: joe_the_bummer at September 3, 2009 11:07 AM

I'll agree with that too. Much as I know we need affordable housing, rewarding developers for overbuilding and overpricing is outrageous. Let them wise up and realize lower price sales are better than no sales and s*ck it up.

Posted by: bxgrl at September 3, 2009 11:07 AM

I agree we need more housing. but setting an income cap and holding a lottery for it never made much sense to me as a way to accomplish that. All the city needs to do is simply build housing and sell it. It's justifiable as a public program if the market is failing to supply buildings without pools, cabanas and granite kitchens. selling it to the highest bidder lets them do it more cheaply, and they can build more of it. Supply is supply, and more is still needed if it is to be affordable and fairly distributed at the same time. These "programs" like 421A and this new HARP thing create expensive solutions that are neither fish nor foul, and redistribute wealth in the wrong direction.

City: use our money to simply build housing, wherever you can find cheap land.

Posted by: joe_the_bummer at September 3, 2009 11:19 AM

joe- the city is too busy selling land to developers of luxury apartments, and finding creative ways to make it easy for them. Bloomberg at his "best."

Posted by: bxgrl at September 3, 2009 11:26 AM

Gotta say, I'm with Grandpa and joe here, too.

Posted by: Montrose Morris at September 3, 2009 11:29 AM

Here's my question (and please forgive my ignorance): Are there any politicians out there running for seats who believe in this and would be likely to effectuate such a policy?

Posted by: InsertSnappyNameHere at September 3, 2009 11:31 AM

I agree with you two. Why should the politicians jump now to make housing more affordable? It looks like it is happening already. At this point all subsidies would achieve would be 1- prop up prices artificially and 2- give a handout to failed developers. It reeks of patronage.
For what it's worth, I've heard that Be@schemerhorn would the first building made "affordable" through this scheme.

Posted by: Maly at September 3, 2009 11:37 AM

Someone just posted in the OT that Be@ is now returning deposits. Waiting on a link to that story.

Posted by: InsertSnappyNameHere at September 3, 2009 11:41 AM

bxgirl -- it's true there have been too many fat deals. I don't have any problem with luxury condos going in as long as developers of luxury condos are paying market rate for the land and selling their units at market rate (and respecting architectural context). in fact I have a big issue with jamming low-income housing projects into nice neigborhoods in pursuit of perfect income homogeneity across the city.

and in bloomie's defense, there are other middle income housing developments going in, notably a large one in queens near the river.

but I am disappointed that he hasn't put an end to all of the developer goodies -- since he's already a billionaire and doesn't need the campaign contributions, I thought he'd be harder on developers.

Posted by: joe_the_bummer at September 3, 2009 11:44 AM

joe- a lot of the big developers are friends and acquaintances. Not saying anything shady is going on, but there is a lot of looking the other way. I do agree- what's so wonderful about income homogeneous neighborhoods? I don't care about that -I care if poor and low income neighborhoods get their fair share of services. To my way of thinking, that must seem a cheaper fix" than adding bus lines, fixing streets, improving garbage pick up or planting trees in neighborhoods that have been shorted.

Posted by: bxgrl at September 3, 2009 11:49 AM

I also agree - if the developers and the banks backing them simply scale the rates back to what the market will bear, they'll fill their empty buildings. Why should govt step in to, in effect, ensure these guys make a profit?

joe, I'm sure Bloomberg feels SORRY for those developers because they are millionaires and not BILLIONAIRES, and as such they "don't make much money" from the mayor's point of view.

Posted by: East New York at September 3, 2009 1:01 PM

NO BAILOUTS FOR DEVELOPERS!

NO $50000 DISCOUNTS FOR FRIENDS OF HAKEEM!

VOTE AGAINST EVERY POLITICIAN THAT SUPPORTS THIS!

Why should I pay taxes to subsidize a luxury apartment that I can't buy?

Posted by: thwackamole1 at September 3, 2009 1:51 PM

all subsidized housing is total sh*t. affordable anything just means more money out of my pocket sanctioned by people i didn't vote for to give to people that shouldn't be getting it.

it's socialism, it's gross.

this is obscene.

Posted by: wine lover at September 3, 2009 2:41 PM

Wow. I've been waiting all day for someone to come out on the other side of this and make an argument. Guess that's not going to happen.

Posted by: InsertSnappyNameHere at September 3, 2009 3:08 PM

I would imagine that the city's stance would be that the developers will not sell/rent at market but rather leave these empty and/or in default. So by the city subsidizing the sale/rental, it is preventing the areas in question from being subject to eyesores and quality of life issues.

With the real estate tax abatements they all got the city couldn't even foreclose for that... It's all bad no matter where you look.

Posted by: BH76 at September 3, 2009 3:21 PM

BH76, when the HARP plan was originally proposed, it was indeed billed as blight-prevention in "at-risk" neighborhoods, as well as a way to add to affordable housing. I think this was supposed to conjure up images of boarded-up holes in Crown Heights. That is a totally different scenario than what seems to be on the table now: a subsidy for developers of complete but unsold lux towers like the Forte and Be@schermerhorn.

Posted by: joe_the_bummer at September 3, 2009 3:59 PM

This is an underhanded grab by the politicians to get cheap housing for their friends, 'community activists', and other associated hangers-on.

Total UGLY political payoff -- absolutely corrupt.

Wait until the condos go bankrupt and revoke the tax exemptions. This will encourage the banks to sell the apartments and the market will clear.

NYS needs 20-40000 new apartments per year to keep up with population growth. The only reason that we have boarded up houses are due to government interference, not lack of demand (as in the 70s).

Posted by: thwackamole1 at September 3, 2009 4:05 PM

Here is some information on our district 33 city council candidates:

Jo Anne Simon, Stephen Levin, Evan Thies, Kenneth Diamondstone, Doug Biviano are all FOR the plan

(source: gotham gazette, levin campaign literature)

I havn't found position info for three others: Elizabeth Tretter, Isaac Abraham, Ken Baer. working on it.

Posted by: joe_the_bummer at September 3, 2009 4:25 PM

CALL THE CAMPAIGNS TO PROTEST THIS RIPOFF OF TAXPAYERS!

Posted by: thwackamole1 at September 3, 2009 6:49 PM