Testimony of

Victor Bach, Senior Housing Policy Analyst

Community Service Society of New York (CSS)

Public Hearing on

The Historic Front Street Apartments Project

New York State Housing Finance Agency

March 10, 2003

The Community Service Society (CSS) is a leading nonprofit organization that, for over 150 years, has worked to improve conditions and opportunities for low income New Yorkers.   We are here to voice our opposition to the use of Liberty Bonds to finance the Front Street Apartments as proposed.  Our sole reason is that the project, as it stands, will not provide a single housing unit that can be afforded by low income New Yorkers.

The Front Street project will be the fourth development proposed by the New York State Housing Finance Agency (HFA), in which publicly subsidized Liberty Bonds will be used for high-end rental development without providing any housing for New York’s lower income working families. To date, the Governor will have allocated about $400 million in tax-exempt Liberty Bonds—half of the $800 million of bonding authority in his control—to produce 936 high rent and luxury apartments.  Not a single unit will be available to low-income families under the HUD definition—about $45,000 annually for a family of three.  As in the other HFA-financed developments, the lowest rent in the Front Street apartments is affordable only to families earning at least $71,000 annually. Not a single unit will be available to many of the rescue workers—the firefighters, the police, the EMT workers who risked their lives in the 9-11 rescue efforts—even though HFA has a substantial track record in using tax-exempt financing to develop housing in which at least 20 percent of units are within reach of low-income households.

The question is how can we get the Governor and the HFA interested in using these scarce public resources, known as Liberty Bonds, to help meet the city’s affordable housing crisis as well as rebuild Lower Manhattan.

            New York City’s Affordable Housing Crisis

            The evidence of  New York City’s affordable housing crisis is all around us.  Record numbers of homeless families are in desperate need of shelter.  The crisis is widespread–in the city’s tight, high-cost rental market one out of four households pays more than half of its income in rent alone.  As you might expect, these affordability problems are most strongly felt by lower income households.  A recent CSS survey of low income New Yorkers—The Unheard Third—found that almost 30% – and almost 50% of low income parents had fallen behind in their rent or mortgage payments within the last 12 months. 

Liberty Bonds: An Opportunity for Affordable Housing

            Given the tight fiscal constraints facing the city and state, the federal set-aside of $1.6 billion in Liberty Bonds for housing, is an unusual opportunity to generate a large stream of low-cost capital to address the severe need for affordable housing among a wide income range of New Yorkers and promote the reconstruction of Lower Manhattan.  These “private activity bonds,” which are publicly subsidized by federal, state, and city tax exemptions, make it possible for the private sector to finance housing development at lower costs.  In return for these subsidies, developers are usually required, under federal law, to set aside at least 20 percent of units for low-income families—hence the term 80/20 housing.  These federal requirements were loosened in the Washington reconstruction package that provided Liberty Bonds, but the federal government’s failure to explicitly require that the units be affordable does not mean that the state should ignore the very real needs of low income New Yorkers.  Surely our vision extends beyond doing simply what is required of us by Washington.  NYC Housing Development Corporation and the NY State Housing Finance Agency also have long track records demonstrating the feasibility of developing 80/20 housing in Battery Park City and elsewhere in New York City.  Considering the severity of the city’s housing crisis, we think that – at the very least – the traditional standard of 80/20 should be maintained.

Exclusion of Low Income New Yorkers in the Proposed Development

            The developments already funded by the State, and the current proposal, take us in the wrong direction, by focusing on upper income rental housing and excluding households with moderate and low incomes.  The current proposal follows the State’s poor precedent of designating only 5% of the units as “affordable” with the remaining 95% being luxury developments.  Those so-called “affordable” units are off-limits to the vast majority of New York City residents.  A two-bedroom “affordable” unit in the proposed development requires an annual income of almost $85,000 – almost 3 times the median income of renter households in New York City. 

Recommendations

            There is a great deal at stake in how we decide to use the Liberty Bonds – how we use this rare opportunity to reinvest in, and rebuild, Lower Manhattan will be an important part of the legacy left by current leaders for future generations.  Is our vision of the future of Lower Manhattan really one of a gated community of privilege and exclusion?  CSS therefore puts forward the following recommendations:

(1)   Governor Pataki should put forward a reasoned plan and criteria for allocation of the remaining $450 million in Liberty Bonds to meet affordable housing needs in Lower Manhattan.  We would urge that the plan be coordinated with city initiatives to use the $800 million in Liberty bonding authority allocated to the Mayor. Considering the amount of capital and the extent of public tax subsidies involved, decisions should not be made on an ad hoc basis, development by development, but as part of a well thought-out approach to the need.  The housing finance plan formulated by the Pratt Institute for Community and Environmental Development is a good starting point for such a plan. 

(2)   As a matter of policy, HFA should adopt justifiable income-targeting standards for Liberty Bond financing.  The 80/20 model should be a minimal threshold standard for consideration of any development. 

(3)   If Liberty Bonds are, in themselves, not sufficient subsidies to build 80/20 developments, then we would strongly encourage the Governor to look into more creative ways to deepen the subsidy with other funds like Low Income Housing Tax credits or the some of the remaining Community Development Block Grant moneys that came from Washington as part of the reconstruction funding. 

(4)   Finally, we encourage HFA to reach out to not-for-profit housing developers to induce proposals that would provide housing for a range of incomes.  New York City has a long history of not-for-profit housing development filling in needs unmet by the market.  There is no reason why this important sector in New York’s housing market should not be part of the reconstruction of Lower Manhattan. 

In the coming months, CSS and the other members of the Liberty Bond Housing Coalition will be watching very closely whether the Governor and the NYSHFA decide to use or squander the opportunity provided by Liberty Bonds to address the city’s desperate need for affordable housing.