Cuomo-de Blasio Feud Threatens New York City’s Plans for Affordable Housing

Cuomo-de Blasio Feud Threatens New York City’s Plans for Affordable Housing

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For most of the last two decades, financing affordable housing in New York City has been a predictable process, instrumental in adding tens of thousands of apartments for lower-income households in a city where rents continue to soar out of reach for more people every year. But a cloud…

For most of the last two decades, financing affordable housing in New York City has been a predictable process, instrumental in adding tens of thousands of apartments for lower-income households in a city where rents continue to soar out of reach for more people every year.

But a cloud of uncertainty now hangs over those efforts, as many developers predict that projects could be choked off by the unremitting tensions between Mayor Bill de Blasio and Gov. Andrew M. Cuomo, who in January outlined a vastly expanded state role in affordable housing, one of the mayor’s signature issues.

In the latest round of city-state jousting, developers, bankers and de Blasio administration officials said they were told in meetings with aides to Mr. Cuomo that the city would lose a sizable share of up to $900 million a year that the state provides in federal tax-exempt bonds for affordable housing projects in the five boroughs.

Developers and bankers, who spoke on the condition of anonymity for fear of repercussions from Albany, said they were told that the Cuomo administration planned to use the bonds for the governor’s own recently announced $10 billion statewide housing plan.

Gov. Andrew M. Cuomo, a Democrat, says he aims to supplement New York City’s housing efforts, not supplant them. Credit Mike Groll/Associated Press

The shift would alter a decades-long arrangement that has provided the city with a critical source of financing for housing and that in just the last two years has played a role in nearly half of the roughly 40,000 affordable housing units built or preserved in the city. Officials and developers say that a major change would create uncertainty for projects underway and for many others on the drawing board.

At a time when one-third of New York City renters spend more than half of their income on housing and when each subsidized apartment coming on the market draws hundreds of applicants, Mr. de Blasio is trying to rezone parts of the city to encourage more residential development and promising thousands of new affordable units a year.

Mr. Cuomo’s office confirmed the meetings, and state officials who were not authorized to speak publicly on the matter confirmed that the state would be using a greater share of the bonds than in the past. But they denied that they planned a wholesale takeover of the bond program.

In an interview last week, Mr. Cuomo, a Democrat, declined to say how much less the city would receive under his housing plan, which his administration expects to describe in detail in April. “There is no state housing plan that has been discussed with either the Assembly or the Senate, so this is pure groundless speculation,” he said.

But how ambitious Mr. Cuomo’s plans will be and how quickly his administration will be able to deliver are urgent questions for the city, where Mr. de Blasio, also a Democrat, has pledged to build 8,000 lower-rent units a year over 10 years and to preserve at least 120,000 affordable units over that decade.

The bond program is only the latest blow the state has dealt, or threatens to deal, to the de Blasio administration’s housing policy.

After the city spent a year negotiating with the Real Estate Board of New York over revisions to a critical tax abatement program, Mr. Cuomo refused to support it, insisting that developers be required to hire union workers. The program expired in January when real estate executives and the unions failed to come to terms.

And there is already concern about a provision in Mr. Cuomo’s proposed budget that would give a state board approval over individual housing projects in the city that use the federal tax-exempt bonds.

“Hopefully, this is a temporary blip,” said Jeffrey E. Levine, chairman of Douglaston Development, which builds affordable and luxury housing; his Seaview project on Staten Island, a 160-unit subsidized building for older residents, has been delayed, in part because the city did not receive all of the bond allocation it had expected from the state last year.

The Seaview project, a 160-unit subsidized building for older residents on Staten Island, has been delayed, in part because the city did not receive all of a bond allocation it expected from the state last year. Credit Nicole Bengiveno/The New York Times

“I’m optimistic,” he said. “It’s too important an issue to get caught up in a world of politicking.”

Last week, lower-level officials from the state and the city began meeting to try to resolve the differences.

But developers and city officials say dozens of shovel-ready projects may not be financed this year if the state ends up withholding the bulk of the tax-exempt bonds the city uses to leverage other federal financing, along with city subsidies, to pay for new housing.

The battle over the bonds had been brewing since November, when the state told city officials that it would provide only $90 million in additional bond financing for remaining 2015 projects, not the $300 million it had expected, putting a dozen projects in jeopardy. That led Alicia Glen, deputy mayor for housing and economic development, to rebuke Bill Mulrow, the secretary to the governor.

A group of developers, hoping to head off the tensions, met on Feb. 3 with Mr. Mulrow and James Rubin, the state’s housing chief. Several participants said they were told that to finance the deals envisioned, the state would need the bulk of the bonds it would have allocated to the city.

Most housing deals include various sources of financing, but the bonds are valuable because they leverage federal tax credits for the same projects. Still, developers often seek tax breaks, zoning changes and grants for projects where all of the apartments have below-market rents.

A few days after the Feb. 3 meeting, a group of bankers met with Mr. Rubin and other officials to express their confusion about whether New York City projects that they were underwriting could count on bond financing and other subsidies that come from the city or the state. “The result is that stuff that should be getting done isn’t getting done,” one participant said.

A banker at that meeting said Mr. Rubin assured participants that the state would be in a position to back projects, with ample bond financing available, along with subsidies. But the group was not reassured, the banker said, and urged state officials to work with the city.

Ms. Glen said the state conveyed a similar message to “very senior level people in the administration.” She said they were told to expect a substantial reduction in the flow of tax-free bonds.

Alicia Glen, a deputy mayor. Credit Hilary Swift for The New York Times

Traditionally, the state has provided tax-free financing for large luxury projects that set aside 20 percent of apartments for poor and moderate-income tenants, while the city has focused its financing efforts on projects where all of the units would be affordable.

The city received $868 million in bond allocations in 2014 and $694 million in 2015. Over the last two years, the city produced about 14,000 new units and kept another 26,000 existing ones affordable for lower-income households, using bond financing in 40 percent of the projects.

But if the state is going to build affordable housing in the city, it needs resources from the city like additional subsidies, zoning changes and property tax breaks.

“For us to be in a situation where there’s going to be uncertainty around what we can produce at a time when we’re at the biggest affordable housing crisis in the history of New York, to me there’s no way to square that,” said Ms. Glen, who also served as a senior housing official for Mayor Rudolph W. Giuliani.

During an interview on Wednesday with reporters and editors of The New York Times, Mr. de Blasio said he opposed the shift the state was planning. “Anything that fundamentally undermines our affordable housing plan will not be met with public approval,” he said. “The number one issue on people’s mind is the city’s affordability.”

But Mr. Cuomo said talk that the state would substantially cut the city’s allocation of bonds was overstated. “The city has done very, very well on the bond cap under my administration and will continue to.”

He said it was important to revive the tax abatement program known as 421a.

For housing advocates, the main question is whether the governor’s plan will bring in new resources and add housing, rather than simply do what the city would otherwise have done.

The governor, in the interview, said his intention was to supplement the city’s efforts, not supplant them.

“Obviously, it doesn’t make sense for the state to do a program that would be duplicative of a city program,” he said.

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