The Current State of Affordable Housing in New York CityOctober 26, 2021 – Northeast Multifamily & Affordable Housing Business
New York City has long suffered from a dearth of affordable housing units. The Area Median Income (AMI) is $119,300 for a family of four. The Department of Housing Preservation and Development (HPD) utilizes the U.S. Department of Housing and Urban Development (HUD’s) calculations which includes the five boroughs of NYC, Putnam, Rockland and Westchester Counties. HPD considers a rent of $2,592 per month for a two-bedroom apartment affordable for this family. However, the average rent is $3,995. Experts claim that rent expenses should not exceed 30% of a household’s income. Therefore, the average New Yorker cannot afford the average rent. Inherently, there is an affordability problem.
Further adding to the affordability conundrum, there is a tale of two cities within New York’s five boroughs. Areas such as Downtown Manhattan boast one-bedroom rents averaging $5,906 while the Rockaways have the least expensive average rents for the same unit type at $1,647 according to apartmentguide.com. The result is a lack of economic diversity in many of the City’s neighborhoods. The aim of affordable housing programs is to offer additional affordable housing options across all City neighborhoods at various percentages of AMI and allow for lower earners to live in neighborhoods which would traditionally have been unavailable.
Affordable New York and 421-a(16)
The Affordable New York Program (ANY), also known as the 421-a(16) program and enacted in 2017, offers a partial tax exemption to residential real estate developers in exchange for a minimum of 25% affordability. The program has seven different affordable housing options, six for rental projects and one for homeownership.
- Options A, B, and C are intended for all rental projects except those with greater than 300 units and not located within Brooklyn or Queens Community Boards 1 and 2 (mostly).
- Option A offers the lowest number of affordable units but is not available if the owner is receiving substantial government assistance such as grants or loans. Manhattan based projects are eligible for this option.
- Option B permits substantial government assistance and Manhattan based projects.
- Option C also does not permit substantial government assistance or buildings in Manhattan south of 96th Street.
- Options E, F and G are for Brooklyn and Queens waterfront projects where there are 300 or greater units.
- Option D permits affordable homeownership under very limited circumstances.
Affordable rents should not be confused with inexpensive rents. The goal of ANY is to offer housing at a monthly expense commensurate with one’s income.
Another program goal is to seamlessly integrate affordable tenants into the building. The program requires the use of common entrances and amenity accessibly for all tenants. Furthermore, no more than 70% of a floor may contain affordable units. Buildings must provide a proportionate unit mix of affordable units based on bedroom count or at least 50% of the affordable units must be a two bedroom or greater with not less than 25% of the units being studios.
Voluntary Inclusionary Housing & Mandatory Inclusionary Housing
Both the Voluntary Inclusionary Housing (VIH) and Mandatory Inclusionary Housing (MIH) programs allow for Zoning Incentives of increased floor area and building height in exchange for affordable housing. These Zoning Incentives are critical to the profitability and sustainability of new developments, since floor area (i.e. the amount of developable square footage on a property) and height restrictions limit maximum building envelopes. Both programs allow for the required amount of affordable housing to be provided on-site or off-site. In the case of off-site affordable housing, the property receiving the floor area Zoning Incentive must be located in a VIH or MIH area; within the same community district or within an adjacent community district; and be within a half mile from the zoning lot that contains the required affordable units.
The main difference between VIH and MIH are the areas where the programs apply, and the amount of affordable housing required. In addition, as the names suggest, VIH is voluntary while MIH is mandatory.
VIH was enacted in 1987 and applies to properties located: in an R10 or R10 equivalent zoning district (R10 Districts); or in an inclusionary housing designated area (IHDA). All VIH units must be permanently affordable to residents at or below 80% of AMI. In R10 Districts, the amount of floor area Zoning Incentive generated varies by the type of affordable housing provided (e.g. new construction, substantial rehabilitation, and preservation affordable housing), and the funding source (e.g. public vs. private). Unlike R10 Districts, in IHDAs floor area Zoning Incentives are the same regardless of the type of affordable housing provided and the funding source.
MIH was enacted in 2016 and requires portions of properties that are subject to a residential upzoning to provide affordable housing. The floor area bonus allowed for MIH developments is the same as the maximum floor area cap allowed under the IHDA program. MIH requires the provision of permanent affordable housing units in residential developments, enlargements, and conversions from non-residential to residential use, that do not exceed either 10 dwelling units or 12,500 square feet of residential floor area. In MIH areas, developers must use one of four “options” to provide affordable housing, but not all four options will be available in each MIH area. Generally, the options require between 20%-30% of the residential floor area in a building to be set aside for affordable housing units. Depending on the option, the income targets range from an average of 40% of AMI to 115% of AMI.
New York City Department for Housing and Preservation as Administrator
MIH/VIH projects which are financed via a loan from HPD are subject to HPD’s design guidelines for new construction. The guidelines are a design criteria and policy document which are meant to promote projects that: have a strong relationship to the neighborhood; meet the needs of households and individuals; promote greater equitability and healthy outcomes; encourage active design; and utilize sustainable features that can potential reduce operating costs.
ANY Combined with MIH/VIH
Many developers avail themselves of both ANY and MIH/VIH. When combined, developers receive zoning and property tax incentives. Applicants must adhere to the stricter of the two program’s rules which will usually results in lower rents for the affordable units. However, there are clear synergies which incentivize developers to make use of both programs for a particular project. It is important to consult with your real estate tax and zoning counsel to learn more about how these ANY and MIH/VIH may directly benefit your project.
This article originally appeared in the October 26, 2021 publication of the Northeast Multifamily & Affordable Housing Business.
For more information on 421-a or affordable housing matters, please contact:
Brett J. Gottlieb at +1 212 592 1455 or [email protected]