Testimony of

Victor Bach, Senior Housing Policy Analyst

Community Service Society of New York

at Hearings,

New York State Housing Finance Agency (NYSHFA)

Proposed Allocation of Liberty Bonds for Housing

June 25^th, 2002

The Community Service Society (CSS) is a leading nonprofit organization that, for over 150 years, has been working to improve conditions and opportunities for low income New Yorkers. From that perspective, CSS wants to register its strong objections to the allocation of Liberty Bonds to the two proposed housing developments.

Liberty Bonds: An Opportunity for Affordable Housing

The set-aside of $1.6 billion in Liberty Bonds for housing, under state and city initiatives, is an unusual opportunity to generate a large stream of low-cost capital—subsidized by federal, state, and city tax exemptions—to address the severe need for affordable housing among a wide income range of New Yorkers and to promote the reconstruction of Lower Manhattan. The present allocation, proposed by NYSHFA and Governor George Pataki, sets a disastrous precedent by focusing exclusively on upper-income rental housing. We are concerned that this rare opportunity will be squandered and lost.

Exclusion of Lower Income New Yorkers in the Proposed Developments

The two proposed developments at River Terrace and Liberty Street represent a total of 562 apartments, of which 95 percent are to be rented at market levels. The remaining 5 percent (or 30 apartments) are targeted—and I use the word hesitantly—to annual incomes of up to $93,000. Designated by NYSHFA as “affordable”, these few units can be afforded only by households with incomes from the high $60,000s up to the $90,000s. Despite the substantial investment of public tax subsidies in the financing, and future property tax exemptions, most New Yorkers—those at low and moderate income levels with urgent housing needs—are effectively excluded.

The central question that NYSHFA and Governor Pataki must answer is whether public tax-exempt financing is essential to produce this kind of upper-income housing, particularly when private financing may suffice. The use of public tax subsidies should, to the maximum extent, leverage mixed income developments serving a diverse range of incomes. Developers of luxury housing should not be drinking at the public trough.

NYSHFA and Governor Pataki can do much better with Liberty Bonds. Indeed, the proposed allocation is a shocking deviation from NYSHFA’s standing guidelines for tax-exempt financing of multifamily housing. The 80/20 program—as it is called—requires that at least 20 percent of units be targeted to low-income households, a model that NYSHFA and HDC have long pointed to as a success story. We urge that the 80/20 mix be used by NYSHFA as a minimal threshold standard for the allocation of Liberty Bonds, and that the agency attempt to broaden the income mix to include the highest feasible proportion of lower-income households.

Recommendations

There is a great deal at stake in these hearings—not only the developments proposed today for Liberty Bond financing, but the future of the $465 million remaining to be allocated by the state and $800 million by the city. We are concerned that NYSHFA and Governor Pataki are setting a harsh, unjust precedent that inexplicably ignores the housing needs of low-income New Yorkers. CSS puts forward the following recommendations:

(1) We urge that NYSHFA defer any decision until further hearings are held on the proposed allocation. Notice of these hearings has been short and a large number of concerned civic and housing organizations want to be heard, but were unable to appear this evening.

(2) NYSHFA and Governor Pataki must put forward a reasoned plan and criteria for allocation of the remaining $600 million in Liberty Bonds to meet affordable housing needs in Lower Manhattan. Considering the amount of capital and the extent of public tax subsidies involved, NYSHFA proposals should not be seriatum, development by development, but part of a well thought-out approach to the need.

(3) As a matter of policy, NYSHFA should adopt justifiable income-targeting standards for Liberty Bond financing, with the 80/20 model as a minimal threshold standard for consideration of any development. Its standards should come closer to the 25/75 ratio, when possible, a standard that more accurately reflects the distribution of affordable housing needs by income level.

In the coming months, CSS and other concerned New Yorkers 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.