NEW YORK STATE ASSOCIATION FOR AFFORDABLE HOUSING

To: Interested Parties

From: New York State Association for 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.