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Affordable Housing Re: NYSAFAH Policy Recommendations Date: April 24, 2014 With Mayor de Blasio expected to unveil his plan for 200,000 units of affordable housing over the next decade, this memo lays out a series of recommendations for achieving this goal. Our organization has created these recommendations based on five key elements, which include a focus on new construction, preservation, land use policy, funding mechanisms, and maximizing existing resources. Through new construction, the city can catalyze development in economically distressed neighborhoods by targeting and prioritizing resources to underserved areas. Focusing on preservation will enable us to facilitate long term affordability and sustainability by allowing buildings financed under affordable housing programs to become mixed-income over time. By addressing the land use process, we will be able to streamline administrative steps, which will encourage developers to build new units through the inclusionary zoning program. Placing an emphasis on funding mechanisms could lead to the establishment of a new publicly financed Housing Trust Fund, which would leverage private investment. Finally, maximizing existing resources is equally critical, so that we can better support MWBEs, promote industry cost containment standards, and improve interdepartmental coordination to allow for the efficient production and preservation of affordable housing for the future. 1) NEW CONSTRUCTION PRIORITY: Catalyze development in economically distressed neighborhoods by targeting and prioritizing housing resources to underserved areas: Recommendations: Amend the City’s Qualified Allocation Plan (QAP), which is required for making allocations of Low Income Housing Tax Credits to eligible projects, to award competitive points for projects in economically distressed neighborhoods. Prioritize noncompetitive HPD Capital subsidy for projects in economically distressed areas that help achieve neighborhood development goals. Work with the State to prioritize use of Tax Exempt Bond Volume Cap to economically distressed neighborhoods. Upzone economically distressed areas to make affordable and mixed-income development more feasible, provide jobs, and increase density to support local retail. PRIORITY: Encourage and support mixed-income developments to serve a broader income range of New York City residents. Recommendations:
In primarily low income new construction tax exempt bond deals, provide additional subsidy for a portion of the units to serve households between 60% and 100% Area Median Income, or AMI (For example, HDC used to provide $30,000 additional per unit in Low-Income Affordable Marketplace Program, or LAMP, deals for each unit serving households at 80% AMI). And in neighborhoods that can support 100% to 130% AMI rents, incorporate units at these levels without the need for additional subsidy or use additional subsidy to also include units at lower AMI levels – i.e. 50%, 40%, or 30%. For 9% Low Income Housing Tax Credit (LIHTC) projects, use excess eligible basis to develop units above 60% AMI without losing tax credit equity and use the higher rents from the moderate and middle income units to help cross-subsidize the inclusion of units below 30%, 40% and/or 50% AMI within the project. Add points to the City’s QAP for mixed-income development. Offer incentives in competitive Requests for Proposals (RFPs) to promote mixed-income development. Develop a new mixed income homeownership program. Develop a long-term as-of-right real estate tax exemption for 100% affordable projects that serve a wider range of income levels than currently allowed by 420-c. 420-c currently limits the percentage of units above 60% AMI to 30% of the total units which limits the ability to do broader income mixing.
PRIORITY: Encourage and support mixed-use affordable housing development with ground floor retail and community facility components Recommendations: Allocate $10 million in new annual City Capital funding through HPD to subsidize the development of the non-residential components of mixed-use affordable housing in New York City where the local retail market or desired community facility uses cannot support the cost of developing such space. Offer incentives through points in the QAP, through points in competitive RFPs and/or by prioritizing projects within the as-of-right subsidy programs to promote mixed-use development in appropriate locations that will address neighborhood needs. Adopt a policy of underwriting master leases at construction financing closing to eliminate uncertainty and delays currently caused by waiting until permanent loan conversion. Work to develop through REMIC or SONYMA mortgage insurance products better designed for affordable housing projects with larger commercial components. Develop more zoning incentives for including ground floor commercial and community facility uses. While most non-contextual, mid-density zoning districts currently include such incentives by allowing higher total floor area ratio when mixing uses, most of the contextual mid-density zoning districts, which have been widely mapped in recent years, discourage the inclusion of commercial or community facility uses. Connect new construction affordable housing development projects with other City priority initiatives – i.e. new Pre-K classrooms, new community health care facilities, etc. – in a manner that creates certainty for the development projects. Develop more flexible policies on eligibility for community service facility spaces within the 420-c exemption; current HPD policies and processing requirements make it extremely difficult to use the incentive, discouraging the inclusion of the types of
facilities (senior centers, day care/pre-K programs, community health centers) that the City wants developed within neighborhoods. PRIORITY: Develop a new senior housing initiative Recommendations: Develop a capital financing program for senior housing. Target Section 8 project based vouchers (PBVs) for new senior housing to enable the projects to serve extremely low income seniors and other vulnerable seniors while also leveraging additional debt. Senior housing is an ideal use of PBVs as senior housing is not subject to the 25% limit of PBV units in a new project (triggering Davis-Bacon wage rates for a low % of PBV units is not practical) and seniors living in housing specifically designed for them are less likely to move to other housing taking a mobile Section 8 voucher with them. Connect the development of new affordable senior housing with efforts to address the current over-housing of many seniors in existing NYCHA units. Explore ways to address the difficulties of developing senior housing through the inclusionary housing program. Make minor changes to the zoning resolution to facilitate the development of senior housing – see the land use policy recommendations below.
2) PRESERVATION PRIORITY: Facilitate long term affordability and sustainability by allowing buildings financed under affordable housing programs to become mixed-income over time Recommendation: Upon vacancy after the end of an initial compliance period (i.e. 30 years), allow up to 30% of overall units in a building to adjust to moderate or middle income levels that are a target population within the Mayor’s Housing Plans – i.e. between 80% and 165% AMI. PRIORITY: Incentivize good asset management practices and enforce regulatory mechanisms to support high quality long-term affordable preservation efficiently Recommendations: Use the tools provided to the city under existing mortgages and regulatory agreements along with code enforcement mechanisms to address and resolve early signs of physical and/or financial distress. Ensure that any new City housing policies, related to long term affordability or otherwise, provide incentives for high quality asset management to reduce the need for substantial government subsidies to preserve the units in the future. PRIORITY: Ensure that underwriting standards meet the long term operating and maintenance needs of affordable buildings by creating more consistency in underwriting Year 15 and other preservation projects Recommendation: HPD, HDC and private lender underwriting standards in preservation projects should be aligned more closely, ensuring that they accurately reflect realities of each preservation project as well as long term building needs.
3) LAND USE POLICY PRIORITY: Facilitate affordable housing development through the inclusionary zoning program by clarifying that the program is as of right, and streamline the administrative process Recommendations: Clarify that the inclusionary program is as of right and not discretionary. Remove the 10 affordable unit minimum currently required for a project to be eligible for the inclusionary bonus. Establish target processing timelines overall for completing the inclusionary housing program processes within HPD from initial application to executed regulatory agreement. Add statutory timelines for providing objections to initial application similar to what exists for the Attorney General’s office for condominium offering plans. Streamline the disclosure process and limit sponsor disclosure to the administering agent. Allow for the signing of regulatory agreements before construction financing closing to facilitate the use of the program, avoid unnecessary delays and help projects move forward more quickly. Increase staffing levels at HPD to accommodate for increased use and efficiency of the inclusionary program. PRIORITY: Review and revise the Zoning Resolution to provide increased opportunities for affordable housing development, including new senior housing development Recommendations: Create a city-wide floor area ratio (FAR) bonus overlay for affordable housing in R5 districts and above to facilitate increased affordable housing production and help affordable housing developers compete for private land. Similar provisions already exist in mid-density districts for non-profit residences for the elderly. Allow for more flexible building envelops, particularly in contextual districts, to ensure that lots can be developed to their full allowable FAR. Amend height limits in contextual zoning districts to facilitate modular construction; the taller floor to floor heights of modular construction often make modular construction infeasible in contextual zoning. Amend zoning resolutions to facilitate inclusion of rooftop solar panels. Amend Section 23-147 of the Zoning Resolution to expand eligibility for elderly housing benefits beyond “non-profit residences for the elderly” to include “dwelling units for the elderly” to facilitate increased production. Adopt the recommendations of CHPC’s Making Room initiative. PRIORITY: Amend the Zoning Resolution to eliminate parking requirements for affordable housing Recommendation: Amend Sections 25-25 and 36-35 of the Zoning Resolution to exclude all affordable units from parking requirements regardless of whether a project went before the City Planning Commission.
If parking requirements are not eliminated for affordable housing projects, they should be further reduced and should apply equally to all affordable housing projects regardless of whether a project went before the City Planning Commission. If parking requirements are not eliminated, the current restrictions on the waiver for a small number of spaces (Section 25-26) for non-profit residences for the elderly should be removed.
4) FUNDING MECHANISMS PRIORITY: Create a dedicated funding source – a new Housing Trust Fund - to support the production and preservation of affordable housing Recommendations: Institute a luxury transfer tax on all residential homes (1-3 family homes, co-ops and condos) selling above a certain threshold – i.e. $5 million. Institute a nominal $75 or $100 title fee on all real estate transactions similar to what was recently proposed in California. Close the loophole on residentially zoned vacant land in the outer boroughs to require that it be taxed at its development potential instead of at the artificially low one-to-three family rate while exploring potential exemptions for small lots or low density zoning districts where 1-3 family buildings are the norm. PRIORITY: Update the 420-c program (in which eligibility requirements currently limit the scope of its effectiveness) to allow for more affordable housing projects to benefit from the exemption Recommendations: Modify the 420-c statute to enable it to support mixed and middle income affordable housing projects. This could be accomplished through increasing the percentage of units allowed to serve household above 60% AMI (currently limited to 30% of units) or could be accomplished through an income averaging approach – i.e. average income restrictions of all units in the project average to 80% AMI or less. Modify the 420-c statute to tie the exemption to affordability levels, not ownership structure. Remove the requirement that a project have federal low income housing tax credit financing for eligibility. PRIORITY: Better integrate Section 8 administration (which is currently split between NYCHA and HPD) with New York City’s overall housing goals Recommendations: Develop a coordinated plan for voucher distribution, including tying Project Based Vouchers to other City financing programs to help leverage new housing resources. Target Project Based Vouchers to senior developments. Explore consolidating the administration of Section 8 to eliminate the current duplicative management of the program and to facilitate its integration into the City’s housing plan.
5) MAXIMIZE EXISTING RESOURCES
PRIORITY: Oppose prevailing wage mandates (which are approximately 20% to 50% above mean market wage rates) for affordable housing to ensure responsible use of public subsidy Recommendation: Oppose any attempt to mandate prevailing wages for affordable housing. PRIORITY: Promote industry cost containment standards to maximize housing production and ensure responsible use of public subsidy while maintaining quality. Recommendations: Amend the City’s Qualified Allocation Plan (QAP), which is required for making allocations of Low Income Housing Tax Credits to eligible projects, to award points for project cost effectiveness and considering incorporating threshold cost containment requirements into the QAP similar to what NYS Homes and Community Renewal has done. Develop a working group of industry professionals to identify and adopt cost containment best practices in a manner that preserves design and construction quality. PRIORITY: Facilitate interdepartmental coordination among city agencies to ensure efficient production and preservation of affordable housing Recommendation: Develop a working group of affordable housing developers and representatives from the Office of Management and Budget, Department of Buildings, Department of Housing Preservation and Development, Department of Environmental Protection, Fire Department, and Department of Parks and Recreation, which will meet on a quarterly basis to facilitate interdepartmental coordination and proactive policies to support affordable housing development. PRIORITY: Support MWBEs in the affordable housing industry Recommendations: Implement a fund to support emerging undercapitalized MWBE development firms by providing credit enhancement and access to predevelopment equity. Support state legislation sponsored by State Senate Housing Chairwoman Catherine Young and State Assembly Housing Chairman Keith Wright enabling HPD to designate a pipeline of development projects to be competitively solicited to a pre-qualified list of MWBEs. Organize active workshops to help MWBEs navigate the certification process and develop business expansion strategies. PRIORITY: Ensure affordable homeownership programs are serving the intended populations. Recommendations: Use existing mechanisms to ensure compliance with affordability restrictions in existing affordable homeownership developments. Review HPD’s current policies on HDFC cooperatives and identify opportunities for broader Article 11 reforms. PRIORITY: Improve the efficiency of the 420-c and 421-a programs to better serve the City’s affordable housing initiatives.
Recommendations: Establish a set timeframe in which the City will complete the processing of 420-c applications; while in the past completed applications would be processed in a matter of months, it can currently take 12-18 months or longer. Develop more flexible policies on eligibility for community service facility spaces within the 420-c exemption; current HPD policies and processing requirements make it extremely difficult to use the incentive, discouraging the inclusion of the types of facilities (senior centers, day care/pre-K programs, community health centers) that the City wants developed within neighborhoods. Allow affordable projects incorporated within larger 421-a projects to utilize the 420-c program for the affordable units. The current prohibition on this results in reduced affordability levels and/or the need for greater government capital subsidies projects. Issue declaratory rulings on 420-c and 421-a eligibility prior to closings, to help alleviate uncertainty for tax credit investors and lenders.
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