A coalition of affordable housing advocates—along with union leaders and elected officials—is set to march in Harlem Wednesday afternoon to call for Mayor Bill de Blasio to require new projects in areas rezoned for greater development to set aside half the apartments as affordable.
But the Real Estate Board of New York said the proposal would not be economically feasible.
The city is currently contemplating a series of neighborhood-wide rezonings that would require affordable housing to be built as part of any new construction. The coalition, called Real Affordability for All, will march to urge Mr. de Blasio to require at least 50% of new units in these areas be affordable for a range of income levels. The administration, meanwhile, is currently formulating its plan, and recently reached out to the private sector for help.
The coalition’s idea is that the higher 50% requirement in some areas would hold down land prices, since landowners could only sell their parcels at a price that would give developers enough financial room to meet the higher standards for affordable units. Nonetheless, the development community still reacted to the 50% call with skepticism.
The longtime head of the Real Estate Board of New York stressed that creating more affordable housing is a top priority for the advocacy organization and for the city, but he insisted that the coalition’s financial models were not realistic.
“The success of the new housing development analysis that we have discussed with advocates, relies upon the accuracy of extremely optimistic assumptions,” said REBNY President Steven Spinola. “The economics of a new development program creating 50% market-rate housing and 50% affordable pose serious questions about market rents, interest rates, and labor costs.”
For instance, a financial model provided to Crain’s by the coalition assumes a large upzoning for a manufacturing site in Manhattan projects that rents for market-rate units of $75 per square foot would be sufficient to offset the cost of creating the affordable units. The problem is that figure may well be too high for projects in most parts of the city. In addition, the model factors in deeply discounted costs for union labor, which are still above the current cost of nonunion crews. When asked about that, a member of the coalition suggested that the proposal is only a starting point for negotiations.
“Maybe we’re too optimistic and they are too pessimistic, but let’s get to the middle and go,” said Ismene Speliotis, executive director MHANY Management Inc., who helped draft the financial model.
The model is a flexible one, she said, ranging from projects in lower-income areas like East New York, where a project might end up being 100% affordable, to high-income areas like the Manhattan example, where market-rate apartments could be used to offset the cost of building affordable.