Public Employee Press

Part 1 in a series:
Vanishing: Affordable housing
in New York City

Exposed!
Liberty Bond housing aid:
Reserved for the Rich

By DIANE S. WILLIAMS

A year after terrorists destroyed the World Trade Center, Congress appropriated $8 billion for Liberty Bonds to rebuild lower Manhattan. As part of the deal, New York City and New York State equally shared $1.6 billion to fund housing development in the area.

Out of the ashes came an opportunity to alleviate the city’s longstanding affordable housing crisis. The finance plan, Mayor Michael R. Bloomberg said, would make downtown a neighborhood with “all sorts of people at all sorts of economic levels living there.”

Yet two years later, two of four housing projects subsidized by Liberty Bonds stand erected at either end of Battery Park City near Ground Zero: 20 River Terrace and 10 Liberty Street. Only 5 percent of their 562 apartments, just 30 apartments, are reserved as affordable housing — a missed opportunity for New York.

In the rush to rally aid for recovery, Congress did not attach any affordable housing requirement to the Liberty Bonds authorization. The lawmakers left that to New York State Housing Finance Agency and the New York City Housing Development Corp. The door was open for the state and city to require that more apartments be set aside for low- to moderate-income families.

Instead that door quickly slammed shut on most New York families. The governor and HFA set what housing experts call a “harsh and unjust precedent” by abandoning the standing 20 percent set-aside rule followed by city and state housing agencies. HFA allowed developers to cut the number of affordable units to just 5 percent, scrapping the long held 80/20 model for a downsized 95/5 model in Liberty Bond projects.

Economic segregation
And the so-called affordable rentals come with a $93,000 income requirement — a figure that is tantamount to a “Keep Out” sign for most working people.

Congress defines affordable as 150 percent of the median income for a four-person family in New York, or around $93,000 annually. That far exceeds the pay of the average DC 37 member, who earns about $29,000, as well as other municipal employees such as Teachers and Sanitation workers. It also excludes other New York City municipal employees such as Teachers and Sanitation workers from the lower Manhattan neighborhood, as well as the Emergency Medical Technicians, Police Officers and Firefighters, who responded first on Sept. 11.

“It sends a message of exclusion,” said Victor Bach, a housing policy analyst for the Community Service Society of New York. “It says: ‘We are rebuilding lower Manhattan, but there ain’t no room for you.’ ”

The central issue is not whether upper-income or even luxury housing should be built. But when government-guaranteed triple-tax-free bonds are used to fund construction projects for the rich while the housing needs of low- to moderate-income earners are ignored, something’s rotten downtown.

The soon-to-be bustling community of lower Manhattan may very well become economically segregated, an exclusive community for the very rich funded by tax dollars collected from very average working stiffs who cannot afford to live there.

In the past, when private developers received public funds to build housing financed by federal tax-free bonds, all New Yorkers stood to benefit.

Record rents
For years the city and state used the 80/20 model, reserving 20 percent of all federally-funded housing units for low- to moderate-income families. Diversity and creativity thrived in those communities and helped New York City keep its unique flavor as a melting pot.

Today the picture is very different. High thresholds of $70,000 to $93,000 minimum annual incomes are setting a policy favoring monolithic, homogeneous gentrification of lower Manhattan.

A majority of the buildings that benefit from Liberty Bond funds were constructed shortly after the 9/11 tragedy. Ninety-five percent of these apartments will rent at the going market price. They range from $2,500 for a 420-square-foot studio to $7,000 for a three-bedroom apartment with a terrace.

Although developers do not receive federal cash, Liberty Bonds are triple tax-exempt, with no federal, state or local taxes and provide access to hundreds of millions in low-cost capital. They pay no real estate taxes on these properties for 20 years.

HFA has approved $353 million in bonds, nearly half of its $800 million Liberty Bond allotment for housing, for the four lower Manhattan high-rise rentals. Build affordable housing State campaign records show that development corporation principals like Stephen Ross and Leonard Litman
contributed a combined total of more than $100,000 to the state’s Republican and Conservative parties, as reported in the New York Times.

While the governor may be satisfied that these projects have created jobs, Mr. Bach said, “Any time you build you’re creating jobs, that’s a given. If you’re interested in housing, build what people can afford.”

While the city’s Housing Development Corp. has set aside the normal 3 percent fee for financing to create affordable housing elsewhere in the city, that figure does not compare with sum given to finance these lower Manhattan projects.

Capital for affordable housing is needed. However, the Battery Park City fund, which began in the 1980s and was projected to generate $3 billion in 30 years, has used only $140 million to date to build affordable housing elsewhere in the city.

“When it comes to open space, no one asks where’s the money going to come from. Building a new transit hub is seen as much needed infrastructure,” Ron Shiffman, director of Pratt Institute Center for Community Development said in an online interview. “However, when it comes to housing, particularly low- and moderate-income housing, we ask where the money will come from and will it compete with other uses. This is a double standard. We worry more if the beneficiary is a low-income person than if it is a wealthy suburbanite.”

The city and state created hundreds of units of new housing with tax bonds in the 1970s. With affordable housing such a desperate need in this city, the 80/20 model should be the minimum, said Mr. Bach.

And some major developers, like Forest City Ratner at its 111 Worth St. building, have successfully stuck with the 80/20 model.

Liberty Bonds can be better used to meet the challenge of preserving diversity and providing much needed affordable housing. As PEP went to press, the deadline to issue Liberty Bonds was
extended to 2009.

Whether Mayor Mike Bloomberg presses Washington for changes in the reconstruction package remains to be seen. If so, the mayor would certainly bring New York City closer to his promised 2002 “Vision for Lower Manhattan” to have a “mixture of housing. To find a place for everybody to live.”