The False Promise of Ratner's Affordable Housing - Redux
The inclusion of what is know as 50/30/20 affordable housing in Ratner's plan for the Atlantic Yards is lauded by some City lawmakers and interest groups, and has earned their support. But those guarantees are hardly gurantees at all. Notable among Ranter's supporters are Gifford Miller, Virginia Fields, and ACORN. 50/30/20 is supposed to mean that 50% of the new housing will be market rate, 30% will be middle income affordable, and 20% will be low income affordable. In exchange for affordable units, developers receive a variety of tax breaks and preferable financing. Opponents of the Ratner plan have been critical of the proposal for several reasons, most recently because Ranter has added an additional 2,800 units that do not seem to be part of any affordable housing provision. But that is a problem specific to the Ratner development, and is minor compared to the problems inherit in the City's 50/30/20 program, where handouts to developers are secretly institutionalized.
Due to 50/30/20's formulas and connection to Rent Stabilization rules, it really should be call an 80/20 program. The reality of the 50/30/20 plan is that it only guarantees affordability for the lowest 20% of the equation.
The 50/30/20 program is run by NYC's Housing Development Corporation. And while the guarantees it makes for that lowest 20% is a good thing, the guarantees set forth under the program for moderate income affordability (that middle 30%) are just false promises.
What's in the 50/30/20 closet after the click...
There are two major problems with the 50/30/20 program. The first is that the rent rates are based on city wide Average Median Income. Opponents of Ratner plan's for Brooklyn have been getting this message out and getting some coverage in the media. The problem they frequently cite is that Average Median Income (AMI) for NYC is based on city wide statistics, which means it is pushed higher due to high incomes, mostly of Manhattanites. NYC's AMI is thus out of scale with the Average Median Income of residents living in communities like those around the Atlantic Yards. Because the root AMI values are disproportionately high the affordable rents created under the 50/30/20 program are disproportionately high, and thus not so affordable. For the Atlantic Yards development this means that rents that should be affordable in the 30% bracket are really market rate. This is why City Councilor Charles Barron has called the Ratner plan "Instant Gentrification". Only 20% of apartments marked as affordable will actually be affordable to the existing community there.
The second problem with the 50/30/20 program is even more serious. The first problem could easily be addressed if lawmakers would simply change the formula by which rents are calculated. If rents were adjusted in low-income neighborhoods for the lower average incomes there, then the housing under both the 30% and the 20% would be affordable. But doing so would still not be enough to guarantee the affordability of the middle income apartments over time.
The problem is that rent increases on the middle 30% are based on Rent Stabilization rules. And over the past decade Albany and city lawmakers, bankrolled by city landlord interests have systematically been changing the Stabilization rules to run out the program. Among the rules tweaked by lawmakers to accelerate the demise of Stabilization is the one that says how much a landlord can raise the rent when one tenant leaves an apartment and a new one moves in. This is the allowable vacancy rent increase rate. Right now the vacancy increase rate lets landlords raise rents approximately 20% when an apartment changes tenants. What this means then for 50/30/20 units is that even if those 30% of apartments start affordable, they quickly go to market rate. Vacancy increases on the lowest 20% apartments are capped. Those apartments ARE protected as affordable to people earning 60% of the Average Median Income. There is NO such affordability cap for the 30% moderate income units.
This is why the secret of the 50/30/20 program is that it is actually a handout for developers.
Developers receive tax breaks, grants, preferred rate loans, and rights to build even more apartments (known as inclusionary zoning) in exchange for developing these so called affordable units. But while the tax breaks and loans go on for 15 years or more, the affordable housing units in the middle 30% quickly become market rate apartments, and fully profitable for developers. Rents for these middle income apartments start around $1,045 - $2100 a month (this range covers from Studios to 3 bedrooms). At an increase rate of ~20%, it does not take too many vacancies to suddenly rush those rents to market rate. This is the same process by which Stabilized apartments have been disappearing at an ever increasing rate (as covered earlier the month). Add to this that apartments turn over faster in low income neighborhoods, landlords get an even better deal.
All of this adds up to a big handout for landlords while creating a crisis for low income residents. The 50/30/20 plan starts by making the lowest commitment to low income housing, and then allows the majority of so called affordable units to become market rate - quickly pushing people of low income out. Meanwhile, buoyed by new development, rents across the whole area quickly rise as the neighborhood suddenly becomes more desirable to the higher-income classes. The need for affordable housing thus becomes even more desperate as once affordable units become more costly.
The failure of Ranter supporters to pay attention to these details, especially in the case of Mayoral Candidate Virginia Fields and the low income community advocate group ACORN is troubling. What would make more sense for the city, and what advocates like ACORN and city lawmakers like Virginia Fields and Gifford Miller should be pushing for is not just more affordable housing, but for GUARANTEED affordable housing, where the apartments are reserved for low and middle income earners, and where the rents are capped relative to income rates. These adjustments to city plans for affordable housing should be made not just to projects like Ratner's, but to the basic 50/30/20 program. Developers and landlords like Ratner receive lucrative financial subsidies for building affordable units. The city should be able to keep the affordability it is paying for with those subsidies.
Correction Note: This article was originally published on June 7th with a factual error. That error was an assertion that Low Income Units in the 20% bracket were also subject to Rent Stabilization vacancy increases. The error was brought to light thanks to Deb Howard, President of PICCED. The article was pulled quickly and this is the re-written version to correct that error.
Due to 50/30/20's formulas and connection to Rent Stabilization rules, it really should be call an 80/20 program. The reality of the 50/30/20 plan is that it only guarantees affordability for the lowest 20% of the equation.
The 50/30/20 program is run by NYC's Housing Development Corporation. And while the guarantees it makes for that lowest 20% is a good thing, the guarantees set forth under the program for moderate income affordability (that middle 30%) are just false promises.
What's in the 50/30/20 closet after the click...
There are two major problems with the 50/30/20 program. The first is that the rent rates are based on city wide Average Median Income. Opponents of Ratner plan's for Brooklyn have been getting this message out and getting some coverage in the media. The problem they frequently cite is that Average Median Income (AMI) for NYC is based on city wide statistics, which means it is pushed higher due to high incomes, mostly of Manhattanites. NYC's AMI is thus out of scale with the Average Median Income of residents living in communities like those around the Atlantic Yards. Because the root AMI values are disproportionately high the affordable rents created under the 50/30/20 program are disproportionately high, and thus not so affordable. For the Atlantic Yards development this means that rents that should be affordable in the 30% bracket are really market rate. This is why City Councilor Charles Barron has called the Ratner plan "Instant Gentrification". Only 20% of apartments marked as affordable will actually be affordable to the existing community there.
The second problem with the 50/30/20 program is even more serious. The first problem could easily be addressed if lawmakers would simply change the formula by which rents are calculated. If rents were adjusted in low-income neighborhoods for the lower average incomes there, then the housing under both the 30% and the 20% would be affordable. But doing so would still not be enough to guarantee the affordability of the middle income apartments over time.
The problem is that rent increases on the middle 30% are based on Rent Stabilization rules. And over the past decade Albany and city lawmakers, bankrolled by city landlord interests have systematically been changing the Stabilization rules to run out the program. Among the rules tweaked by lawmakers to accelerate the demise of Stabilization is the one that says how much a landlord can raise the rent when one tenant leaves an apartment and a new one moves in. This is the allowable vacancy rent increase rate. Right now the vacancy increase rate lets landlords raise rents approximately 20% when an apartment changes tenants. What this means then for 50/30/20 units is that even if those 30% of apartments start affordable, they quickly go to market rate. Vacancy increases on the lowest 20% apartments are capped. Those apartments ARE protected as affordable to people earning 60% of the Average Median Income. There is NO such affordability cap for the 30% moderate income units.
This is why the secret of the 50/30/20 program is that it is actually a handout for developers.
Developers receive tax breaks, grants, preferred rate loans, and rights to build even more apartments (known as inclusionary zoning) in exchange for developing these so called affordable units. But while the tax breaks and loans go on for 15 years or more, the affordable housing units in the middle 30% quickly become market rate apartments, and fully profitable for developers. Rents for these middle income apartments start around $1,045 - $2100 a month (this range covers from Studios to 3 bedrooms). At an increase rate of ~20%, it does not take too many vacancies to suddenly rush those rents to market rate. This is the same process by which Stabilized apartments have been disappearing at an ever increasing rate (as covered earlier the month). Add to this that apartments turn over faster in low income neighborhoods, landlords get an even better deal.
All of this adds up to a big handout for landlords while creating a crisis for low income residents. The 50/30/20 plan starts by making the lowest commitment to low income housing, and then allows the majority of so called affordable units to become market rate - quickly pushing people of low income out. Meanwhile, buoyed by new development, rents across the whole area quickly rise as the neighborhood suddenly becomes more desirable to the higher-income classes. The need for affordable housing thus becomes even more desperate as once affordable units become more costly.
The failure of Ranter supporters to pay attention to these details, especially in the case of Mayoral Candidate Virginia Fields and the low income community advocate group ACORN is troubling. What would make more sense for the city, and what advocates like ACORN and city lawmakers like Virginia Fields and Gifford Miller should be pushing for is not just more affordable housing, but for GUARANTEED affordable housing, where the apartments are reserved for low and middle income earners, and where the rents are capped relative to income rates. These adjustments to city plans for affordable housing should be made not just to projects like Ratner's, but to the basic 50/30/20 program. Developers and landlords like Ratner receive lucrative financial subsidies for building affordable units. The city should be able to keep the affordability it is paying for with those subsidies.
Correction Note: This article was originally published on June 7th with a factual error. That error was an assertion that Low Income Units in the 20% bracket were also subject to Rent Stabilization vacancy increases. The error was brought to light thanks to Deb Howard, President of PICCED. The article was pulled quickly and this is the re-written version to correct that error.
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