ANHD 2016 Building the Community Development Movement
New Law Will Help City Tackle the Expiring-Use Affordable Housing Crisis
The New York City Council will take an important step towards addressing the crisis of expiring-use affordable housing with a new law poised to pass today. The bill – Intro 722A – will require NYC Department of Housing Preservation and Development (HPD) to implement a first-ever tracking system for expiring affordable housing units in New York City and report that tracking to local decision makers.
With this bill, the community will have the information it needs to understand where City-backed affordable housing in their neighborhoods might be at risk. And it will allow them to work with their elected and appointed officials to actively discourage developers from seeking a windfall profit at the expense of community affordability. ANHD commends the City Council and the de Blasio Administration for this important step forward.
Since the inception of the Low Income Housing Tax Credit (LIHTC) program in 1986, thousands of affordable housing developments were developed with the idea that a 30-year regulatory agreement would be enough time to resolve the housing crisis. Now, fast-forwarded 30 years, and we are facing a new crisis: expiring-use.
Residents, advocates, and decision makers have long been concerned about the “expiring-use crisis” because of the dramatic loss we have already seen of government-backed affordable housing. When market rents rise around an affordable housing development, it is a huge incentive for profit-motivated owners to choose to opt-out of affordability requirements and abandon affordability goals. This problem not only adds to the affordable housing crisis, but it is especially galling to government officials and taxpayers who see the public value of the housing they have financed slip away.
While we have primarily seen this problem in federally-backed Section 8 and Mitchell-Lama housing over the past decade, it is now reaching the important supply of City-backed affordable housing. Housing built under the major plans of every city administration since Mayor Koch is beginning to reach the date where their affordability will expire, unless the owner opts back into an affordability program. We are already seeing cases of lost affordability, and the scale of this potential crisis is disturbing. According to the Association for Neighborhood & Housing Development (ANHD) research, we may soon begin to lose as many existing affordable units each year through expiring affordability as we are able to create new units through costly City-backed financing programs. How did we get to this point?
The basic tool of City-backed affordable housing financing is the LIHTC program. In LIHTC deals, developers are able to create affordable housing without having to put much of their own money into the deal. After the initial terms dictating affordability in the regulatory agreement expire, usually after 15 or 30 years, the developer has the option to extend the affordability on the property or sell the housing portfolio for a multi-million-dollar profit. We have already seen multiple scenarios of profit-oriented developers taking advantage of weak regulatory agreements, which range from decoupling the limited partnership in Year 15 to misinterpreting the loose language of the right-of-first refusal. This loophole creates a windfall profit for developers who do not have the best interests of the community in mind and puts many low-income New Yorker’s at risk of losing their housing.
We’re already in the middle of an affordability crisis, and we know that crisis will worsen as the expiring-use crisis threatens existing affordable units. According to ANHD research, there are a total of 214,751 City-backed affordable units that will reach the expiration of their initial affordability between 2019 and 2037. There is no way to accurately predict which of these units or how many of these units will chose to opt-out of affordability. But, based on recent experience, it is likely that affordable units built and controlled by mission-driven not-for-profit developers will choose to remain affordable, and that units built with City-backing by for-profit developers will chose to opt-out of affordability if the rents in the surrounding neighborhood has risen to the level that can offer them a windfall profit.
The De Blasio administration and HPD are also alarmed about the impact the expiring-use crisis will have on affordable housing. They have already taken some effective steps to ensure that, going forward, the housing it finances remains permanently affordable, including a new city regulatory agreement that would allow HPD to ensure that all affordable housing units developed on city-owned land will remain affordable permanently.
However, the steps the City has taken so far do not address the problems existing affordable housing is facing. Intro 722A will not automatically resolve any of the regulatory agreement issues in existing affordable housing portfolios, and it will not ensure that these units remain permanently affordable. But it will give our communities a clear view of exactly how and where units are threatened so they can take action to apply pressure to preserve their affordability. Once the tracking system is implemented in April 2020, HPD will be required to submit and review start and end dates of expiring regulatory agreements, total expiring affordable units, their Area Median Income (AMI) band and the council district where they are located to the Mayor and City Council every year. HPD will also be required to describe their preservation efforts and the tools available to keep those units affordable in the long term.
The expiring-use bill will help notify community stakeholders about buildings that are up for expiration, so they can proactively fight to keep them permanently affordable. This bill will put pressure on the Mayor, City Council, and HPD to be proactive in resolving the expiring-use crisis and keeping affordable housing permanently affordable for low- and- moderate income New Yorkers across the five boroughs.