The New York City Housing Authority is working out a deal with private real estate developers to hand over a 50 percent stake in six of its developments, in an agreement that will see hundreds of millions injected into properties owned by the financially struggling agency.
As a part of the anticipated deal revealed today, private firms L+M Development Partners and BFC Partners would pay the New York City Housing Authority (NYCHA) $150 million for the stake in nearly 900 units in three of the city's boroughs — Manhattan, Brooklyn, and the Bronx.
Under the deal, during the next two years NYCHA will receive an additional $100 million, while the real estate firms would put $100 million towards building renovations. The housing authority said it would gain $100 million in revenue over the span of 15 years. Currently, the agency's operating shortfall sits at more than $60 million.
"We have to think about supporting those units differently," NYCHA spokeswoman Shola Olatoye said about the agreement that has yet to be sealed, according to the Wall Street Journal.
While the deal has been reported as NYCHA "selling" its stake in the properties, deputy press secretary Zodet Negron told VICE News this description was inaccurate. Instead, she described it as "recapitalization" or a partnership, stressing that the housing authority would maintain ownership of the buildings. While the housing authority would keep the power to push out the developers from property management if they wanted, after the 30-year agreement is up, the authority could similarly allow them to bring the units up to market value.
"For private developers, they can have all this access to tax breaks and get funding to rehab these properties," she said, explaining that NYCHA does not have access to these programs. "It is a public private partnership to bring badly needed money to repair these buildings that were outside of our traditional portfolio and in particular disrepair."
Renovation plans would include approximately $80,000 investments in each apartment from the developers, for upgrades like new kitchens and developing playgrounds, according to the Wall Street Journal. This would likely come as a relief for both NYCHA and its tenants, with more than $50 million needed for improvements on the properties involved in the deal over the next five years, and waiting more than a year for building repairs is not an unheard of complaint from residents.
Public housing expert and New York Institute of Technology Professor Nicholas D. Bloom told VICE News that $80,000 per unit was close to the total sum required. According to Bloom, there are more than 180,000 units and $18 billion worth of improvements needed throughout the system.
NYCHA said the six buildings involved in the public private partnership are Section 8 housing, not the traditional public housing in New York City. Section 8 is part of the federally funded Housing Choice Voucher (HCV) program that allows low-income families to receive rental assistance for privately owned properties. The program sets rents for these families at 30 percent of their income, while the voucher makes up the difference for the property owners.
According to NYCHA, its HCV program is the largest nationwide, with 29,000 owners participating. In recent years, however, the city voucher supply has run dry.
The buildings in question will hold onto their Section 8 subsidies — no vouchers are involved — and for each apartment the firms renovate, they would be eligible for federal reimbursement to make up the difference between the rent paid by the residents and the market value.
While he was unfamiliar with the specifics of the deal, Bloom said the plan looks like something tailored more specifically to New York City's unique housing developments. Unlike cities like St. Louis and Chicago, where large housing complexes were torn down in recent decades, this would be challenging to do with NYCHA's properties, because they are still occupied and inhabitable. If the deal goes through, Bloom explained that residents would likely be in favor of this development, something Negron echoed.
While residents may be on board with the improvements, there was a bit of uncertainty echoed in the press today. Rosie Mendez, a city council member in an area in Manhattan where two of the properties are located, told the Wall Street Journal that the deal would mean a large infusion of money into the buildings. She expressed concern, however, that the units would eventually be brought up to market value, saying she viewed the move "as a road to privatization."
Bloom noted that the proposal "definitely reflects the tremendous value in NYCHA housing stock and the complexity of generating income from that value."
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