INCENTIVES FOR DEVELOPERS IN NEW YORK CITY TO PROVIDE
AFFORDABLE HOMEOWNERSHIP OPPORTUNITIES
by
DRINA A.
HOLDEN
Bachelor of Arts, Economics
Wellesley College
(1980)
Submitted to the School of Architecture
in Partial Fulfillment of
the Requirements for the Degree of
Master of Science in Real Estate Development
at the
Massachusetts Institute of Technology
September 1987
Copyright
(
Drina A. Holden
1987
The author hereby grants to MIT permission to reproduce and
to distribute copies of this thesis document in whole or in
part.
K.1
Signature of Author_
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Drina A. Holden
Department of Architecture
July 31,1987
Certified by
Denise DPasquale
Visiting Assistant Professor
Department of Urban Studies and Planning
Thesis Advisor
Accepted by
Michael Wheeler
Chairman
Interdepartmental Degree Program in Real Estate Development
Rotch
INST TECH,
AU6 3 1 191
s,
INCENTIVES FOR DEVELOPERS IN NEW YORK CITY TO PROVIDE
AFFORDABLE HOMEOWNERSHIP OPPORTUNITIES
by
DRINA ARCHER HOLDEN
Submitted to the Center for Real Estate Development
on July 31,1987 in partial fulfillment of the
requirements for The Degree of Master of Science in
Real Estate Development
ABSTRACT
This thesis
examines the
incentives which
exist for
developers
in New
York
City
to provide
affordable
homeownership opportunities.
Due to the housing crisis
occurring in the New York City market, there is a scarcity of
affordable units. Moreover, homeownership
is declining on a
national level and in the City. The implications of the lack
of affordable housing and declining homeownership have far
reaching effects, from neighborhood stability to the labor
force.
Federal, State and municipal programs have attempted to
address these issues through the development of programs to
encourage participation on the part of the private sector.
To some extent, the programs have been successful, however,
production is not nearly meeting the demand.
Through the examination of three actual development projects
in New York City, the incentives provided for developers
through these programs will be discussed.
Although the use
of development subsidies have mitigated some of the risks to
developers, the overall process and the prospect of limited
profits are impediments to increased production.
Thesis Supervisor: Denise DiPasquale
Title: Visiting Assistant Professor
-2-
TABLE OF CONTENTS
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CHAPTER
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IV.
V.
Federal, State and Municipal Programs
Developer Incentives -
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Case Studies: Flatbush Condominiums
CONCLUSIONS
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Columbia Terrace
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FLATBUSH CONDOMINIUMS
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WOODHAVEN ESTATES
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INTRODUCTION
Historically,
families
homeownership as a result of
recent
years,
however,
earning power.
were
to
achieve
normal increases in income.
housing
prices
The ensuing result
must wait longer
able
have
In
outstripped
is the young family which
to purchase their first home
or by default
have their choice of tenure as rental.
In many cities across
the
York
nation,
specifically
development is expensive
in
New
due to the rising cost
increased construction costs, which
to
the
Hence,
there
affordable housing
stock.
In economic terms,
This
the highest
and best
appears to
use as
exclude
is
an acute
of land and
affordable
scarcity
of
land is going
determined by
housing.
crisis is especially acute in New York City.
crisis has the capacity
housing
are ultimately passed on
consumer.
to
City,
the market.
The
housing
This particular
to jeopardize the long-term economic
health of the entire city.
Both the
to address
private and the public
the problem
developers are
sector have attempted
of affordable housing.
in business to produce
Real estate
a profitable product,
in this case housing.
Affordable housing by definition would
require the developer
to sell his product at
-5-
a below market
rate.
Without
government intervention
profitable venture for the
developer.
this would not
be a
Hence, the production
incentive would be removed.
The purpose of
existing
this thesis is to examine
incentives
for
developers
in New
the issue of
York
provide affordable homeownership opportunities.
the
thesis
market,
gives an
explores
overview
the
the
New York
homeownership.
In Chapter
Federal, State
and municipal
the
housing
need
II,
there
are descriptions
programs created
affordable homes.
the mechanics
of the
These
descriptions outline
programs, and identify
of
the risks
of
to encourage
the incentives
for developers that are provided under each program.
discusses some
for
as well as the importance of
production of
III
to
Chapter I of
City
arguments surrounding
affordable housing in the City,
City
inherent
in real
Chapter
estate
development and the incentives for a developer to assume that
risk.
Chapter
IV analyzes
the
described programs through actual
homeownership development,
impact
of the
previously
case studies of affordable
including project
specific data.
In the conclusion, there is a summary of the effectiveness of
these incentives and recommendations for improvements.
-6-
CHAPTER I
AFFORDABLE HOUSING: AN OVERVIEW
To be
meet the
able to afford
expense without serious
affordable housing
acquired
for a
this
is clean and
thesis
is either in
will
a buyer's
decent housing that
decision
focus
which
of a
is
on
the
can be
buyer's income.
the form owning
homeownership, the topic must be
"is to
consequences."1 Generally,
reasonable percentage
Housing occupancy
While
something by definition,
or renting.
affordability
of
evaluated in the context of
the
cost
of
homeownership
relative to the cost of renting.
There are two general statistical trends which describe
the problem
the
level
income.
of affordable housing.
of
homeownership
Second, is
First, is the
costs
relative
the trend in the
to
trend in
household
level of homeownership
costs relative to the costs of renting.
On a
national level, the cost
has increased
from approximately 10.64% of
in 1979 to approximately 30.22%
the
most
recent
year
data
expected, homeownership rates
younger
age
burden of homeownership
groups.
Since
-7-
household income
of household income in 1985,
is
available.2
As
might
be
are declining, particularly in
1980,
homeownership
as
a
percentage of the total population has fallen every year, for
a total drop from
65.6 to 64.1 percent.3
While this overall
decline appears minor (a 1.5 percent decline over a five year
period),
a more
significant
statistic, is
homeownership for younger households.
25-29 age segment
the decline
of
For households in the
there was a 4 percent
decline, from 41.7%
in 1981 to 37.7% in 1985.4
The
cost
of homeownership
renting bears
examination.
median
burden
rent
relative
Over
(rent
in
the
cost
plus
heating
during the
index
same period (from 10%
households
overall growth
which
payments
as
a
(basically
financing
over three times
in 1979 to 34%
in 1983).6
influenced the overall growth in
rent.
in households
households that rent
period, the
from 27% in 1980 versus
home related expenditures) of
This disparity in costs has
total
of
increase.5 This compares to an increase
of homeownership
charges plus
the cost
the 1980-1983
percentage of household income) rose
29% in 1983, a 7.4 %
to
Between 1980
was 6
percent.
has increased from 34.4%
to
The
1983
the
share of
to 35.3% over
the same time period. 7
"The current cost of owning a home is largely determined
by the purchase
rate, which
price of the home and
together determine monthly
-8-
the mortgage interest
mortgage payments." 8
As
a result,
purchase
a
the proportionate
home
and
service
Housing prices on average are
in part,
prices
payments
turn
but
Moreover,
in
recent
vulnerable
to
mortgages.
Because
have
risen
mortgage
has
to
not
only
downpayments
on
years buyers
interest
rate
than
increased.
Higher house
higher
have
been
volatility
household
mortgage
houses
as
well.
particularly
in
home prices and mortgage
faster
to
higher across the country, due
contribute
higher
a
income needed
construction costs .
to increases in
in
share of
residential
interest rates
income,
they
have
exacerbated the affordability issue.9
Income eligibility
is a measurement used
whether or not a household
ratio
represents
household
will qualify for a mortgage.
monthly
income.
Income
housing
representing
total
gross
taxes,
and
costs
reflecting
mortgage
mortgage
principal, mortgage
insurance.
institutions have
mortgages.
household
by
percent of
combined,
have a
their income
higher
Savings
-9-
& Loan
income
before
payment
and
on
of
and
Loan
of residential
institutions
devoting more than 30
to debt,
risk of
are based
Savings
been the primary providers
The
monthly
property taxes
Historically,
Data gathered
to
monthly
interest,
suggest that statistically, households
to 35
expenses
eligibility ratios
income
housing
to determine
all types
mortgage default.
of debt
These
findings
have
become an
industry
quasi-public agencies, such as
Association (FANNIE MAE),
conservative
standards.
repackages and
most
to
standard,
adopted even more stringent and
Fannie
that
led
the Federal National Mortgage
Mae,
sells mortgages for the
cases requires
and have
which
purchases,
secondary market, in
monthly housing
expenses do
not
exceed 28 percent of income. 1 1
With a
people, the
population of slightly more
New York
City housing market
housing affordability trends.
Times
article, the
Northeast
region
family devotes 28%
conventional
percent,
$50,000
average
is
reflects national
According to a recent New York
price
of a
slightly above
new
house in
30 year
mortgage, at
purchase
into
a
an interest
rate of
income of
In
New
the
a
and obtains a
a family
house.
the
$120,000. 12Assuming
of their income to housing
this translates
to
than seven million
10
roughly
York
City
metropolitan area, the average price of a previously occupied
house is
$140,000 13,
approximately 17 %
higher than average
prices for new homes in the Northeast region.
Only 8 percent
of the families in the
metropolitan region have incomes over
$50,000,
with incomes
statistics
leaving
92%
coupled with
an
residents of New York City,
below
average income
$50,000.
These
of $26,000
for
suggests that a large portion of
the population is excluded from owner occupied housing. 1 4
-10-
A
general
contributing
homeownership costs
Rising
tend to
usually signal
hence, higher
incomes or put
lead to
the
housing prices.
inflation and
Households must
onerous for
in
larger downpayments
forth larger downpayments to
homeownership are
rise
mortgage credit.
higher levels of
eligibility requirements of lenders.
of
to
is the availability of
interest rates
because they
factor
have higher
meet the income
Consequently, the costs
many households
and they
decide not to purchase. 1 5
The increase
was in
in the
response to
which was
use of adjustable
the affordability problem
caused by higher
mortgages
in the
These mortgages, by providing
interest rates help homebuyers
due lower
of homebuyers
levels of interest rates
early 1970's and early 1980's.
lower initial
rate mortgages
monthly payments
to qualify for
resulting from
lower
interest rates. 1 6
Because of high construction
costs, developers tend to
build luxury rental units where there is potential to command
the highest
York
market rents.
City according
utilities).
wide range of
This
to
The
median contract rent
a 1984
relatively low
survey
median rent
rents in the city and is
-11-
is $330
in New
(including
reflects the
indicative of a very
fragmented market.
The
highest rents in the
in Manhattan, south of 96th
$476, and
asking rents
in
public
housing
Street, where the median rent is
are estimated
well, the median rent
city are found
at above
projects.
The
median
rent
perception of New York City as
city.
the
of apartments
vacancy rate.
rent
as
does
measured
The net vacancy
City apartments was
1981.
median
not
in the city was 29.3 percent
these
a high rent
indicate
by the
the
prevailing
rate, in 1984, for
2.04 percent, down from
Despite the low median
in
account, in part, for the
disparity in the
availability
As
figure includes the 177,282 apartments
dwellings is $160.18 These figures
However,
$1,000.
New York
2.13 percent in
rent, the rent to income ratio
as of 1984, an increase from 28
percent in 1981.19
In addition,
primarily
rent control and rent
responsible for
the relatively
because they keep rents below
stabilization are
low median
the market rate.
rent,
Rent control
applies to residential
buildings constructed before February
1947 in municipalities
that have not declared an
post-war rental
under rent
continuously
control
housing emergency.
control, the tenant
since
apartment
stabilized
or
is
before
is
vacated
completely
-12-
For an apartment
must have been
July
end to the
to be
living there
1st, 1971.
When
a
rent
it
becomes
rent
either
removed
from
regulation.
Buildings
between
are under
rent stabilization
February 1947
apartments
economy.
have
and
January
increases
tied
1974.
to
Rent Control limits the
if they
Rent
were built
stabilized
fluctuations
in
the
rent a landlord may charge
for apartments and restricts the right of a landlord to evict
tenants.
A
developer must either
wait for tenants
of rent
controlled buildings to move or buy them out.
By contrast, a
developer
to wait
of
commercial property
only
has
until
existing leases expire. 2 0
High
housing
construction
and
contribute to the
developer
prices, increases
depressed
The
low
the high
production
contrast,
cost of
to
rent
cost of
land, provide
of
substantial production
control
factors
in
incentives for
end of the market.
truly
new
of housing a
previously mentioned
developers to supply the high
is
due
the
decision regarding what type
provides.
addition to
rents
in
The result
affordable
housing
in the
luxury end
and
by
of the
market.
Homeownership is
stability
and
community.
is
a determining factor
evidence
Moreover,
of
homeownership
transformation of deteriorating
the purchase
economic
is
investment
a
key
neighborhoods.
of solidly constructed, but
-13-
in neighborhood
in
factor
a
in
For example,
deteriorated homes
in
neglected
areas,
and
considered gentrification.
the transformation of a
subsequent
rehabilitation,
By definition
economic development
has
ceased.
The
opportunities
in
and investment
provision
these
impact, to spur economic
gentrification is
deteriorated neighborhood.
contains many distressed neighborhoods.
of
is
New York
For various reasons,
in some of
affordable
neighborhoods
would
these areas
homeownership
have
a
dual
investment and promote neighborhood
stability.
The
need
goes beyond
for affordable
homeownership
the issue of neighborhood
in urban areas
such as New York City.
arguments for
affordable homeownership
homebuyers.
A more critical
affordable housing
for
stability, especially
On
a national level,
focus on
first time
issue to the economic viability
of urban areas, particularly, New
of
opportunities
York City, is the question
middle/moderate income
Families in the $25,000-$48,000
workers.
income range, whether or not
they are first time homebuyers, are the backbone of the labor
force, because
they supply
support services
to businesses.
In a recent New York Times article, a leading accounting firm
announced its
the city.
could no
intentions to
The reason cited
move its operations
was that the
longer find affordable housing
commute.21 Usually
the decision
-14-
outside of
company's workers
within a reasonable
to relocate outside
of the
city is due to rising
commercial rents.
This segment of the
labor force is being disenfranchised from the housing market,
particularly if their choice of tenure is to own.
provision of affordable
Hence, the
homeownership opportunities at lower
costs to middle/moderate income
groups is important in order
to encourage this segment of the labor force to remain in the
City.
Aside
from
the
importance
of
homeownership
to
neighborhood stability and labor force access, there are also
the
social benefits
Homeownership is
such
it
success.
implied by
a central
has become
Americans
a
homeownership to
part of
valued
expect to
the American
symbol of
consider.
dream, as
independence
work hard and
and
through normal
and expected increases in income
be able to achieve the goal
of
"For
owning
their
own
home.
represents financial security,
to adapt a
them,
homeownership
comfort, privacy, the freedom
dwelling to individual and family
needs, and the
intangible sense of belonging to a community." 2 2
-15-
CHAPTER II
FEDERAL, STATE AND MUNICIPAL PROGRAMS
The following is a description
available
on
the
Federal,
of some of the programs
State and
Municipal
level
to
provide affordable homeownership opportunities:
THE NEW HOMES PROGRAM UNDER THE NEW YORK CITY PARTNERSHIP
The New Homes
City Partnership,
New
York
City
Development.
is
a private
Program is administered by
The New York
with municipal assistance provided
Department
of
Housing
by The
Preservation
and
The New York City Partnership (The Partnership)
organization, composed
of business
and civic
leaders concerned with pertinent issues affecting the City as
a whole.
The intent of the
New Homes Program is to "Provide
homeownership opportunities for
moderate- and middle- income
families in the $25,000 - $48,000 income range, who have been
priced out of the New
current
program,
York City housing market." 2 3 Under the
approximately
1200
homes
have
been
completed.24
Basically, the developer enters
The
Partnership
Consequently,
to
act
he agrees
as
to
the
into an agreement with
builder
build, design
-16-
of
the
units.
and finance
the
now
builder agrees
price.
affordable sales
limit
his profit
costs,
less
less
to
any
guaranteed
subsidies represents
public
10 percent
of
public subsidies
the total
development
contingency
and
the
agrees to
the developer
Moreover,
overruns are the sole
Hence, any cost
for a
the project
to build
cost, which
maximum
The developer,
risk this entails.
assume the
project, and
costs.
responsibility of the
developer and can potentially reduce his profit. 2 5
The majority
City-owned
City
to
of the Partnership projects
land.
The
The
New
Company,Inc.,
(The
potential site
York
City
Fund),
are built on
is conveyed
Housing
from the
Development
a non-profit entity.
Fund
The Fund is
in direct contract with the developer to build and market the
project.
Because of
Article XI
the
The Fund's
corporation),
developer
the
from paying
non-profit status
structure of the
mortgage
(as an
deal exempts
recording
tax on
the
construction loan, sales tax on construction materials, state
property transfer
New York
unit.
the
tax and
capital gains transfer
City transfer tax is
The
State property transfer
sales price
construction
1% of the sales
of the
materials
building materials.
dwelling
is equal
unit.
to
8%
The
as 1 % of the face amount of the mortgage.
The
price of the
tax is equal to
.04% of
sales tax
of the
The mortgage recording tax
-17-
tax.
hard
on
cost
is computed
The capital gains
transfer tax
is usually computed
as 10% of
the developer's
profit on a single family home or condominium unit. 2 6
The developer does
not own or hold title
The Fund, as the actual owner
interest
in
the
site
to
to the site.
of the site, mortgages its fee
the
lender
on
behalf
of
the
developer, so that the developer can obtain financing without
title.
The City
conducts an
site to
determine the value
independent appraisal
of the parcel.
At
of the
this point,
The Partnership assigns a value to the site, of $500 per unit
constructed on the site.
Based
on the number of units built
on the site, this becomes the developers assigned acquisition
costs.
The lowered acquisition cost
favor of the developer.
value
of
the
site
is in fact a subsidy in
The difference between the appraised
and the
developer's
acquisition
becomes a lien on the property assumed by the homebuyer.
lien is over a fifteen
The
year period and diminishes 1/15th for
every year the unit is held.
out of resale
cost
The lien is repaid by the buyer
proceeds at the time the unit
is sold.
These
factors work in conjunction not only to lower the sales price
of
the
homes
to
the
eligible buyers
but
to
lower
the
acquisition cost to the developer. 2 7
Two
sources of
public funds
to provide
Federal monies are available in
subsidies for this program.
the form
are combined
of Urban Development
-18-
Action Grants (UDAG's) up to
also
available from
cannot exceed
These
funds
are
Partnership.
a limit
40
sources for
Subsidy contributions from
$15,000.
percent of
administered
the
and
City Assistance funds
of $10,000
Affordable Housing
York State
the New
Corporation (AHC) up to
AHC
Funds are
private investment capital.
be $3 of
there must
of UDAG funds in the project
For every $1
$15,000 per unit.
per unit.
total project
disbursed
cost.
through
the
are also available up to
Total subsidies
projects participating in the
from public
New Homes Program
cannot exceed $25,000 per unit.28
Lenders familiar with the program, provide construction
financing, typically
developer
for
requiring personal guarantees
construction completion.
lenders will accept the public
participation from
put forth lower
project.
More
importantly,
subsidies as proxy for equity
the developer.
Hence, the
developer can
amounts of equity capital than
However,
from the
the developer
in a regular
continues to be
"at risk"
for the entire amount of the construction loan and subject to
interest rate fluctuations.29
The obligation for the
passed
onto the
property.
bearing.
The
homebuyer
lien
is
If owner occupancy
repayment of these subsidies is
in the
form of
non-amortizing
a
and
lien on
the
non-interest
exceeds fifteen years, the lien
-19-
is removed and the loan
is forgiven.
Otherwise, the loan is
repaid from 50 percent on the gain on the property at resale.
The homeowner is
required to have the unit
as his principal
residence.
If the home is resold within three years the next
buyer must
meet the income eligibility
an
income under
the $48,000
limit.
period, any buyer can purchase
guidelines of having
After
the three
year
the home whether or not their
annual income is below $48,000.
However, liens are repayable
by
meet the
subsequent buyers,
if they
guidelines the lien is assumed by
owner has
an income above
income eligibility
the new owner.
$48,000 the lien is
If the new
repayable at
the time of the resale. 3 0
The
proceeds from
construction
loan
borrowed funds.
monies
owed
for
the
which
sale of
has
the
the
first
The developer and The
non-subsidized
units repay
position
of
the
any
Partnership are paid
development
costs.
The
developer can then deduct the limited profit which may or may
not equal
10 percent
of the
project costs
City Assistance funds, UDAG funds
less subsidies.
and AHC funds are paid, in
that order. 3 1
In
assistance
Program.
addition,
the
to developers
Partnership
who participate
Technical assistance funds
-20-
offers
in the
technical
New Homes
are available through a
cooperative agreement
between the Department of
Urban Development (HUD), and The Partnership.
$25,000
are
available
to developers
surveys and preliminary design
for
schematics.
Housing and
Funds of up to
soils
analysis,
As well, The New
York State Division of Housing and Community Renewal provides
seed loan
for up
money to
developers participating in
the program
such as architectural and
legal fees.
front costs ,
This loan is a zero- interest loan that is given prior to the
construction commitment
construction loan.
, with
All funds
repayment expected
are administered
from the
through The
Partnership. 32
SECTION 235 PROGRAM
Section 235, began in 1980 as the original component of
the City's
in all
of
homeownership program.
Projects have
boroughs except Staten Island.
the
235
Program
is
the
been built
A critical component
Mortgage
Subsidy
Program,
administered through HUD, which enables families with incomes
under
$35,000
purchase
limited
,
homes.
by
the
who
otherwise
Sales
prices
program
would
be
of section
guidelines
to
ineligible,
235
homes
$57,000
for
three-bedroom home and $66,000 for a four- bedroom home.
Section
235 Program
is currently
Federal
cutbacks.
To
date,
-21-
the
being phased
program
out due
has
to
are
a
The
to
produced
approximately 1100 homes. 3 3
Section
235
Developers
parcels.
Proposal(RFP)
complete
are
homes
are
on
which
Request
a developer
is chosen
to
the
acquisition cost was $500 per
unit built on the parcel.
For
projects
the acquisition
the
after
appraised value
program the
projects begun
For
before 1986,
begun
For
owned
City
a
selected through
process, by
a project.
constructed
1986,
of the
parcel.
Similar to
cost
is
the Partnership
difference between the acquisition
cost and the
appraised value is payable by the individual purchaser at the
closing
of his
income
eligible
designs,
builds
home or
assumed as
purchasers.
and
loan from a private
235 homes
are built for a
the sales price caps
from
the City
The
finances
through a
a lien
designated
construction
of
the
fixed sales price, not
up
case of
developer
construction lender.
described above.
providing
in the
homes
Section
to exceed
Subsidies are awarded
to $15,000
per
unit in
City
Assistance, and for homes built after 1986, up to $13,500 per
unit in combined UDAG or AHC
units equal to
lien is the
the
the amount of the
resold.
program are available
a
A lien is placed on the
construction subsidy.
responsibility of the homebuyer to
home is
owning
funds.
home
which
Houses built
under
translates into
-22-
be paid when
the Section
to anyone able to afford
families
The
235
the costs of
which
are
approved for a mortgage by a conventional lender.
The single
requirement is that the units remain owner occupied. 3 4
BRONX NEW HOMES PROGRAM
The Bronx New
Program, aims
to provide
moderate income
produced over
Bronx.
The
homes, in
Homes Program, similar to
homeownership opportunities
target market.
three hundred
project is
At present,
units in
designed for single
units are targeted for sale
for a
the program has
several sites
the $70,000-$80,000 price range.
percent of the
the New Homes
in the
family attached
At least ninety
to families with
incomes below $48,000.35
Developers
Proposal process.
builder,
and is
are
selected
through
responsible
for
allocated in
for
design, construction
The acquisition cost of
$500 per unit built on the parcel.
available,
Request
for
The selected developer acts as the
financing the project.
are
the
$15,000
payments during
per
and
the land is
City Assistance subsidies
unit.
The
the construction
subsidy
phase.
is
Upon
completion and sale of the homes to purchasers, the remainder
of the land price is
Assistance funds
payable.
The subsidy derived from City
convert into liens on
the property similar
to those described under The New Homes Program. 3 6
-23-
Several
mortgages
are
presenthomes
421b tax
State of
New
York
available
built under
abatement.
for
New
the program
The tax abatement
initially pay property taxes on
years, taxes on the house are
homeowner
Mortgage Agency
will pay
Homes
units.
are entitled
At
to the
allows homeowners to
the land alone.
phased in.
approximately
(SONYMA)
half
After three
At five years, the
the fully
assessed
property taxes with the full assessment paid after the eighth
year.37
NEHEMIAH
The Nehemiah Program is
East
Brooklyn
administered by a coalition of
Churches known
as
the
Nehemiah Plan.
The
program was founded in 1982 to build single-family row houses
in the
Brownsville and East
The objective is to provide
the
moderate income
units
various
are sold
phases of
sales prices
of New
for
of Brooklyn.
affordable housing for people in
bracket.
Both two
$43,500.
Roughly
production
and three
2,000
bedroom
homes are
in
under the
program.
The
are attributable to several
factors.
The City
York has made
dwelling unit.
New York sections
large acreage available for
In addition,
low
$1.00 per
City Assistance is available in
the amount of $10,000 per dwelling unit.
-24-
The City has agreed
to complete
street paving
and other infrastructure
work in
the public right of way.38
Nehemiah further
which
is used
by
benefits from
the developer
as
a large
private grant
an interest-free
loan
during the construction phase.
Because these are very large
sites, development costs and in
turn purchase prices, can be
reduced significantly by economies of scale. 3 9
The Nehemiah development process
process
in
the other
Coalition of
for a
programs
in
license to build
on City - owned
in
by
the
the
$43,500.
After
City.
amount
completion, the subsidy
the sale
with the city
land.
Construction
from the coalition members.
Site preparation, including demolition
completed
The
a private interest free revolving
fund obtained from contributions
available
several respects.
East Brooklyn Churches contracts
financing is provided from
is
is different from the
City
of
and removal of rubble
Assistance
$10,000
per
serves to reduce the
of the
units the
funds
unit.
are
Upon
sales price to
City Assistance
subsidy becomes a permanent lien on the property .40
Neither
Nehemiah homes.
State nor
Federal Subsidies
All units have
Authority (SONYMA) set-aside
are utilized
in
a State of New York Mortgage
which guarantees all purchasers
-25-
mortgages
at SONYMA
Nehemiah units are
"Under this
the
rates,
currently
9.2%.
entitled to a twenty
In
year tax abatement.
abatement, homeowners are obligated
pre-existing
occupancy.
land
tax
After the
for
tenth
gradually until the
exemption
ends
the
first
year, taxes
phased in
and
the
addition,
to pay only
ten
on
years
the home
20th year, at which
property is
taxed
at
of
are
time the
its
fully
assessed value." 41
OTHER SOURCES OF PUBLIC SUBSIDIES
DEPARTMENT OF HOUSING AND URBAN RENEWAL
Federal
cutbacks
have
clearly
affordable housing programs which
been
evident
came under the auspices of
The Department of Housing and Urban Development (HUD).
the advent
have been
Urban
of these
cutbacks, HUD's
curtailed.
Development
subsidies
for
Partnership and
However, HUD
Action
affordable
Grants
Development, HUD grants are
for
technical
.
Since
previous contributions
is still the
(UDAG's)
homeownership.
the Department
in
of Housing
source for
which
Through
provide
the
NYC
Preservation and
available to designated projects
assistance,
42
-26-
such
as
site
feasibility
URBAN DEVELOPMENT ACTION GRANTS
As
previously
mentioned,
Grants are available to
Urban
Development
partially finance development costs.
A maximum of $15,000 per unit is provided by HUD.
be at
least $3 of
funds in
private investment
the project.
The funds are
There must
for every $1
of UDAG
disbursed as
work is
completed, based on a predetermined leverage ratio.
are
derived
from
subordinate
UDAGs
financing,
Action
in
the
which
form
is
of
Benefits
zero-interest
attractive
to
both
the
developer and to the conventional lender in the project.
The
benefit to the end user is in a reduced purchase price due to
the subsidies. 4 3
AFFORDABLE HOMEOWNERSHIP PROGRAM
During
the
established a
1985
session,
the
State
subsidiary corporation of the
Legislature
Housing Finance
Agency (HFA), the Affordable Housing Corporation (AHC).
administers
Program.
Program is
moderate
the
"The
Affordable
purpose
to promote
income.
AHC
Home
of the
Ownership
Affordable
homeownership by
provides
Development
Home
persons of
financial
AHC,
Ownership
low and
assistance,
in
conjunction with other private and public investment, for the
acquisition, construction and
-27-
rehabilitation and improvement
of
owner
occupied
housing.
By
reducing
rehabilitation costs, the assistance
development
and
provided is expected to
make homeownership affordable to families and individuals for
whom
there
are
no
other reasonable
ownership alternatives in
the development
connection
blighted
in
affordable
home
the private market.
Additionally,
and rehabilitation activities
undertaken in
with this
program are
neighborhoods,
blighted.
and
It is
or
expected to
those
in
danger
also expected to create
communities throughout
the
help improve
State.
of
becoming
jobs and stability
Eligible
applicants
under the program are municipalities, housing development
fund
companies
charitable
or
any
organization
not-for-profit
which has
as
corporation
one
of its
or
primary
purposes the improvement of housing." 44
Funds
Affordable
are
available
funds
exist, in
that
there
to partially
State
finance
must
be $3
of
private
Again,
work is completed, based
predetermined leverage ratio.
awards cannot
York
AHC funds in the project.
disbursed again as
funds can be
New
Guidelines similar to those applicable to
investment for every $1 of
funds are
from the
Housing Corporation,(AHC),
development costs.
UDAG
also
No more
than 50% of the grant
used in a single municipality.
exceed $15,000
per unit or
project cost, whichever is less.
-28-
45
on a
As well, grant
40% of
the total
STATE OF NEW YORK MORTGAGE AGENCY
The State
public
of New
benefit
affordable
offers
corporation
housing for
below
York Mortgage
market
tax-exempt revenue
New
bonds.
formed
York
rate
the mission
provide
New
State residents.
SONYMA
mortgages through
opportunities.
Affordable
The
Housing
the
sale
from the sale
of
of these
mortgages originated by a network
of the
Yorkers
1970
is a
provide
of participating lenders statewide.
Cuomo,
in
(SONYMA)
to
Proceeds
bonds are used to purchase
Agency
In 1983, under Governor
agency was
with
better
mortgage
Program,
loan
changed in
order to
affordable
housing
program,
began to
center
renamed
on
the
"forward
commitments" made by the agency to purchase new, below market
rate
mortgages from
purchasing
seasoned
lenders instead
mortgages.
of the
Hence,
old method
creating
a
immediate secondary market for residential mortgages.
mortgages are
available to purchasers of
constructed homes
at a
years with a minimum 5%
program must
fixed rate for
down payment.
be first-time
economically distressed
homeowner requirement is waived). 46
-29-
more
SONYMA
existing and newly
a maximum
of thirty
Beneficiaries of this
homebuyers, except
neighborhoods
of
(where
in targeted,
the first-time
CHAPTER III
DEVELOPER INCENTIVES
The role of the developer in any real estate project is
analogous to that
the
pivot for
of a producer of a motion
all the
absence of the
components of
picture.
the project.
developer or the producer there
He is
In the
is no vision
of what the end product can be, moreover there is no strategy
to realize that vision.
coordination
and
The developer is responsible for the
negotiation
responsibilities include site
of
the
project.
These
identification and feasibility
analysis, acquisition, financing, construction, marketing and
sales.
The
skills
involved
draw from
a
wide
range
of
disciplines, from engineering and architecture to finance and
law.
The
organizer.
developer
He has
is
to
the
consummate
rely on
the
tradesmen to complete his project.
desires
the developer
to the
objectively
and
One of
must
team members.
realistically
members, and ensure
project.
capabilities of
and
other
There is a great deal of
For team work to be productive and cost -
teamwork involved.
effective,
negotiator
be able
He
to communicate
must be
able to
the abilities
that they can fulfill his
the keys
to
business is project management.
must be adequately addressed.
-30-
success in
of
the
his
assess
team
vision of the
the real
estate
Every detail of the project
At every point in the development process there is some
element
of risk.
interrelated.
risks,
The risks
There
which all
project.
A
and
Success
control
of
the
magnitudes of
profitability of
decision
is the amount of risk he
the risks
often times
developer's
depends on the ability
construction risk,
inherent
in
the subsidy provided by
to
the
burden
of
some
a
to
is willing to
to identify, assess
a project.
There
financing risk and absorption
result of
shift
types and
the potential
part
undertake a project,
assume.
project are
are different
impact
large
of a
risk.
is
The
homeownership programs is
of
these
risks
from
the
increase
the
developer.
The
intent
production
of
available to
the
use of
mitigate a
of
the
affordable
programs
housing
the target market.
subsidies.
portion of the
The
program.
thus,
When the
to
and
make
the
achieved by
to
the project.
price of the units to the
part
risks in
product
subsidy is
developer's risk in
satisfying
the
The intent is
effect of
Moreover, the subsidies reduce the
homebuyer,
is
of
a project
the
intent
of
are diminished,
the
an
incentive exists for the
developer to consider going forward
with
result,
the
production
project.
of
The
affordable
should
housing,
-31-
then be
meeting
the
increased
original
obj ective.
Subsidies are applied to
of
the development
financing.
similar,
The
available
subsidize
in
the
the
case
and buildable
applications.
usually
process, acquisition,
construction, and
structure and mechanics of
they
demonstrated
the most risk sensitive areas
risks
of
studies,
sites are
the programs are
the
project.
acquisition
As
costs
lowered through
of
subsidy
In unsubsidized development, acquisition costs
equal
the appraised
value
of
the property.
The
subsidy defers a portion of the cost of the land by attaching
a lien on the property which
defers payment of the remainder
of the appraised value until the unit is resold.
Subsidies are also directly applied to costs during the
construction phase.
These subsidies
non-interest bearing
contribution to the
Repayment of
resale
of
this subsidy
the
contribution
to
unit
are in
the form
construction loan.
comes from profits
by
the
these costs,
buyer.
the
of a
realized from
Aside
primary
from
their
benefit of
the
subsidy is that lenders will accept it as proxy for equity in
construction
financing.
As
a result,
in the
case studies
relatively little equity was put forth by the developers.
In
addition, during
the construction
-32-
phase there
is
always
must
the risk
of construction
demonstrate
project, prior
the
cost overuns.
capacity
to designation.
to build
Developers
and
All of the
finance
the
developers have
development experience, however every project must be managed
individually
schedule.
to control
Those
confident
that
who
costs
participate
based on
their
capacity to control costs.
key
to
affordable
and deliver
in
the project
these
experience,
on
programs
are
they have
the
In this instance, cost control is
housing
developer's profit is limited.
construction
because
the
Therefore, cost overuns would
have a negative impact as deductions from their profits.
The structure of the program also allows for the waiver
of certain municipal and state "taxes" because title is never
passed directly
to the builder.
This
structure exempts the
builder from mortgage recording tax on the construction loan,
state
property transfer
tax, tax
on construction
building
materials, and the capital gains transfer tax.
Due
to the
developer
product
has
time factor
the additional
is completed,
the
rates are below his original
to
command the
alleviated
involved in
prices
risk
market is
by the
soft.
If
time
his
absorption
projections, he may not be able
he had
by participation
that
development, the
anticipated.
in affordable
-33-
This risk
is
housing programs
where historically there has been a waiting list of potential
applicants that
example,
a
exceeds the number of
recent project
Partnership has
families.47
The
by
New York
594 apartments and
A captive
market
units available.
City
Housing
a waiting list
exists
For
of 5,000
where demand
exceeds
supply.
Developers also participate in
the program in order to
gain experience and establish credibility.
risks
involved
mitigated as
conventional
an incentive for the
in the program.
to
in
refine and
As discussed, the
development
have
been
developers to participate
Herein lies an opportunity for the developer
practice his
craft in
a somewhat
sheltered
environment.
Participation in the program also allows a developer to
establish
contacts and
City approvals
familiarity in
and permitting
working through
process.
the developer in all likelihood
In
the
future projects
will negotiate with the same
politicians and city bureaucrats.
Knowing how to expedite a
project through this process is a cost savings because of the
construction loan interest the developer is accruing.
As
innovative
construction costs
methods to
rise
reduce
-34-
developers
these
costs.
seek new
Attempting
and
to
lower
costs with
prototypes has
the
prefabricated modules
become an
construction
appropriate
of
backdrop
and simpler
design
builders.
Again,
alternative for
affordable
for
the
housing
builder
provides
to
an
test
design
fraught with risks.
Again,
prototypes, in an effort to control costs.
Real estate development is
the objective
of affordable housing programs
the production of such
Although the
developer,
developer.
lower
accepting
trade-off
For the
risk.
housing by private sector developers.
program endeavors to
the
a
there is
these types
housing project the
is
mitigate the risk
limited
limited profit,
However
is to increase
of
profit
to the
for
the
the developer
obtains
another opportunity
cost to
projects.
For every
developer accepts with the
affordable
promise of a
limited profit he forgoes other projects.
The
build
opportunity cost
and develop
development
is
for a
affordable
inherently
real estate
homes is
a
high risk
developer to
high.
Real
business.
estate
For
a
developer to undertake risk, reward must be the trade-off.
A
balance is struck between the
subsequent
reward
which
undertaking that risk.
subsidy programs
amount of risk assumed and the
compensates
Developers
the
developer
who participate in public
to provide affordable housing
-35-
for
must usually
limit their
profit to some extent.
Homes
program the
total
development costs.
higher than
will
In the case of
developers profit
If
total
is limited
Conversely
developer to deliver
there is
to 10%
development costs
originally projected then the
be less.
the New
of
are
developers profit
no
incentive for
the project below cost
the
since profit is
limited to 10%, he cannot realize any cost savings.
The amount of
risk the developer must
limited profit may be the same
in a project
programs
as the amount of risk assumed
where the profit is not
described
in this
thesis
portion of the developer's risk,
still
responsible
for
undertake for a
limited.
attempt
Although the
to mitigate
a
in essence the developer is
construction loans
and
subject
to
interest rate fluctuations during the time period the loan is
outstanding.
The
developer acts as the
does not hold title to
clever
and complex
the land.
structure of
great deal of risk.
-36-
builder, however he
The developer, despite the
these programs,
assumes a
CHAPTER IV
CASE STUDIES
As has
been suggested,
sector production
in order to
must offer
of affordable housing programs
to the developers.
concrete and quantifiable incentives
programs described
developers
promote private
incentives for
have attempted to provide
through direct
and
The
indirect subsidies.
Direct
subsidies as applied, lower
the acquisition and construction
costs.
are
waiver
Indirect subsidies
of municipal
taxes on
construction materials.
affordable
units by
derived in
form of
costs, specifically
a
land and
The programs promote the building of
attempting
builder is exposed to
the
to mitigate
the risks
the
during the normal development process.
Diminished or controlled risk is the incentive for developers
presented
by
the
realizes a profit,
programs.
In
addition,
limited to 10 percent
the
developer
of the development
costs less any subsidies and contingency costs.
The following section describes how selected programs
in
the
New
York
City market
have
achieved
the
desired
results, stimulating the private sector to provide affordable
housing.
Moreover,
contribution
the analysis
and impact
of
attempts to
the subsidies
programs.
-37-
determine the
provided by
the
Both the
Condominiums
Program,
last phase
between
fall
under
administered
Partnership.
Area.
Woodhaven Project
of housing in
the builder
Assistance
by
Preservation
Funds.
The
New
the
York
The Columbia Street
developed under
The New
and
New
City
Homes
Housing
Columbia Terrace Project is the
is being
and
of
auspices
the
Phase V of the
This project
Housing
the
proposed Flatbush
and the
York
an agreement
City Department
Development,
initial phases
Urban Renewal
utilizing
of the
of
City
project were
completed under the Section 235 Program before its demise.
-38-
FLATBUSH CONDOMINIUMS
The Project
The
located
project
of 72
Brooklyn, consists
form
condominium
of
buildings.
The project
and under
sponsored by The
the
units
Bushwick
developed in
is being
of
in the
three
twenty-four
in
section
new construction
story
conjunction
Catholic Charities of Brooklyn &
auspices of
The
New Homes
New York City Partnership.
Church has contributed
the remaining
the
units of
with The Holy Cross Church,
Queens,
in
90% of the site to
10% coming from
held by the Partnership, the
the City.
Program
The Holy Cross
the project, with
Title to
the land
"right" to build is conveyed to
the developer who then becomes a contract builder. 4 8
Development Objectives
The New Homes
of
distressed
Program specifically targets utilization
sites,
economically feasible.
which
otherwise
would
not
be
To achieve this goal, use of the site
in the program and subsequent development of the site must be
profitable for the developer.
The builder/ developer sought
to realize a reasonable
return,
partnership
developing
which
is
-39-
(10% was satisfactory).
this
site
includes
The
a
builder/contractor.
One of the
objectives of the builder is
to test design prototypes that might prove cost efficient for
the
Because
projects.
future
includes
partnership
an
experienced contractor, as developers they are confident they
can
This
costs.
control
of
profitability
the
project
decision
to
Any cost over runs are
addition,
project
in
this
the
is
the New
Homes
An underlying reason for their participation in the
Program.
program
In
profits.
partnership's first
development
the
the developer/builder and consequently
the responsibility of
potential
to
critical
their
and
participate in the New Homes Program.
erode
is
point
was
working with
to gain
experience
and
develop expertise
city agencies through the
in
development process.
This type of experience is invaluable in terms of familiarity
with
the
city
approval
process and
contacts
within
the
were determined
by the
per
bureaucratic system. 4 9
Project Summary
Prices
for the
72 units
square foot development costs before the subsidy was applied.
This method enabled the
developer to basically determine the
sales price for the units.
two -
The
bedroom apartments and 48
determining
the per
square
projected unit mix is for 24
three-bedroom units.
foot costs
-40-
and
After
the number
of
in each
square feet
price.
base
unit type, the
public subsidy
The
This
price.
amenities, for
base
on
a per
unit basis
was
of each unit for a subsidized
subtracted from the base price
sales
at a
developer arrived
price was
adjusted
example, parking spaces and
for
various
direct access to
the unit. 5 0
The developer's
price estimates
for the units
are in
the following chart:
TYPE
First Fl.
Two BR
Second Fl.
Third Fl.
UNITS
$84,400
$82,500
13
Two BR(P)
87,400
85,500
11
Three BR
95,000
93,500
91,000
25
ThreeBR(P
98,000
96,500
94,000
23
TOTAL
$8,015,300
Analysis of Pro Forma
Total revenues from the sale of the units are projected
at
$8,015,300.(refer to
costs of
components
the project are
of
the
Exhibit
1)
The total
development
estimated at $7,436,383.
total
development
-41-
costs
The key
are
land
FLATBUSH CONDOMINIUMS
DEVELOPMENT PRO FORMA -
PERCENT OF
TOTAL
TOTAL COST
PER SQ. FT.
PER UNIT
LAND COSTS
$207,500
230,400
115,200
2.797
3.10Z
1.55
$2.85
3.17
1.58
$2,882
553,100
7.44%
7.61
7,682
3.787
19.36Z
3.207
5.307.
4.947
1.557.
13.167
6.6371
3.86
11.09
19.81
3.27
5.42
5.05
1.58
13.46
6.78
3),900
11,200
20,000
5,112,736
68.75Z
70.33
71,010
175,000
90,000
95,000
150,000
7,500
1,047,775
2.357
1.21%
1.287.
2.02%
0.10%
14.09%
2.41
1.24
1.31
2.06
0.10
14.41
2,431
1,250
1,319
2,083
104
14,552
Sub Total/Soft Costs
MISCELLANEOUS
CONTINGENCY
1,565,275
21. 05.
21.53
21,740
205,272
2.767
2.82
2,851
TOTAL DEVELOPMENT COST
7,436,383
102.29
103,283
Land Aquisition
Site Costs
Excavation/Fill
Sub Total
3,200
1,600
CONSTRUCTION COSTS
Foundation
Masonry
Carpentry
Electrical
HVAC
Plumbing
Roofing
Other Costs
General Cond.
Sub Total/Hard Costs
280,800
806,400
1,440,000
237,600
10.84Z
394, 200
367,200
115,200
978,336
493,000
3,300
5,475
5,100
1,600
13,588
6,847
DEVELOPMENT COSTS
Arch./Eng.
Legal/Acct.
Sales/Mktg.
Insurance
Taxes
Misc.
PROFITABILITY
Total Revenues From Sellout
Public Subsidy
100. 007.1
$6,550,605
$1,464,500
$8,015,105
Less Total Development Costs
Developer's Fee
Subsidy Percentage Contribution
$7,436,383
578,722
19.697
Source: Author's calculations per figures provided by developer of
Flatbush Condominiums, Alan Bell and Nick Lembo, June 19,1987
-42-
acquisition, hard
preliminary
(construction) costs,
fees such
This reflects
as architecture
land acquisition
total development costs).
(68.75%), and
and soft
costs for
and legal
expenses.
costs of
$207,500,(2.79% of
Construction costs were $5,112,736
soft costs were $1,565,275,
reflecting 21.05%
of total development costs. 5 1
The
subsidies
in
this
project
lowered
acquisition costs and the cost of construction.
the structure of The New
of
the land
lowered.
from The
As
City
described in
on the
land
By virtue of
Homes Program, the acquisition cost
of New
York was
substantially
the Program description
was conveyed to the developer for
built
the
parcel, amounting
the land
the price of $500 per unit
to $3,000.
The difference
between the appraised value of the parcel and the amount paid
($24,500) becomes a non-amortizing, non-interest bearing lien
on the property distributed over the total number of units in
the project.
defer
As well, The
a portion
of the
Holy Cross Church has
land acquisition
$155,000 , to be repaid from
units.
The
effect of
acquisition
cost of
appears
be
to
$1,440,000
was
construction costs.
subsidy
2.79 percent
applied
payment equalling
the proceeds of the sale of the
this
relatively
agreed to
of the
low.
to
The
total cost
public
infrastructure
The application
-43-
is reflected
in
the
which
subsidy
and
of the subsidy
of
hard
to the
construction
costs
had
a
substantial
impact
because
construction costs made up 68.75% of total development costs.
In
addition there
is an
implied subsidy
derived from the tax waiver.
from the
savings
The New York City transfer tax
is 1% of the sales price of the unit.
The State transfer tax
is equal to 4/10ths of 1 % of the sales price of the dwelling
unit.
The sales tax on building
materials is equal to 8% of
the hard cost building materials.
is computed as
1 % of the face amount
capital gains transfer tax is
developer's
unit.
profit on
These costs are
benefit
The mortgage recording tax
to the
of the mortgage.
The
usually computed as 10% of the
a single
family home
or condominium
quantifiable and constitute a subsidy
developer.
Because
the developer
does not
hold title to the site under the New Homes Program, he is not
subject to these taxes.
As mentioned
fee
of $578,722
in the
previous chapter,
is calculated
as 10
development costs minus subsidies
the developers
percent of
the total
and contingency costs, and
in this case, is less the $155,000 of Church owned land.
The significant impact of
the
subsidy
is considered
development cost.
as
In the case
subsidy contribution as
the subsidies are evident if
a
percentage of
of the Flatbush
a percentage is @
-44-
the
total
Project the
20 percent.
This
constitutes a
substantial contribution to
of the
deal.
Without
the subsidies available
this
project
would
program
feasible.
-45-
not
have
the profitability
been
through this
economically
WOODHAVEN ESTATES
The Project
Woodhaven
homes
Estates consists
located
on a
Woodhaven section
January 1985.
the project.
previously
of Queens.
owned parcel
The project was
The units of @ 1,144 sq.ft.
in
the
completed in
each, are intended
with an income generating rental
Rental units are common in this area of Queens,
moreover, "as of right"
The owner occupied
zoning permitted this configuration.
unit has a small
gives it additional space.
the New Homes
City
two-family detached
All ten homes were sold prior to completion of
for single family occupancy
tenant unit.
of 10
unfinished cellar which
This project was initiated under
Program in conjunction with The
New York City
Partnership. 52
Eligible purchasers,
the program,
$48,000.
could not have
The homes
required downpayment
year
term, and
income
than
generated
market
payment
as per
the
from
a
were
the income
a family income
sold for
of 10%.
A
a piece
with
mortgage at 10%, with
a 30
comparables,
enabled the
would
of $48,000.
the rental
when
buyer
unit,
to have
require a
However,
estimated
applied to
-46-
which exceeded
$125,000
10% downpayment
limit
guidelines of
the
a
the
higher
income
as $600
monthly
using
housing
lower income.53
The
market value of
the homes was estimated by
the developer to
be $175,000.
The
designated developer
builder/contractor,
originally
for Woodhaven
Estates is
an
by
architect
a
training.
Initially, the parcel was offered for sale through an auction
conducted by the Department of Real Estate of the City of New
York.
The minimum bid for the parcel started at $60,000 with
no takers at this price.
The Woodhaven area is primarily an
owner-occupied residential neighborhood.
of a
bid as
site
was
an indicator, the
not
Citing the absence
developer deduced
"economically
feasible"
for
that this
conventional
development and therefore an
excellent candidate for the New
Homes Program.54 The low bid
was indicative of reluctance on
the part
of builders to
undertake the risk of
the project.
The risk being that development of the parcel would not yield
substantial
After
two
returns, despite
years
of
the surrounding
lengthy negotiation,
released to the New York City
the
neighborhood.
parcel
was
Partnership for use in the New
Homes Program.
Project Summary
The
derived
prices for
as a
the
homes in
Woodhaven Estates
function of
the cost
of development.
-47-
were
Total
development
costs on
$159,000
prior to
subsidy
was applied
a
per unit
any public
of
sales price of $125,000.
high.
This
fact is
to each
The
month time frame.
closed
A
due to the
public
subsidized
configuration of
the homes
per home, entitling the developer
Actual
unit, as opposed
completed during
a fifteen
construction was completed in nine
of 1985, a list of
to further
per unit
The subsidy in this project appears
project was
By January
approximately
resulting in
subsidy consideration for each
home.
months.
subsidy.
$35,000 ,
which allows for two units
to separate
basis were
applicants.
potential buyers was
Within a
three month
time
period the project was completely sold. 5 5
Developer Objectives
The
developer
of
Woodhaven Estates
is
primarily
a
developer of luxury homes and condominiums in the Long Island
area.
Woodhaven
Estates
developer's career,
track record as
was
which aided in the
a developer.
Bushwick section of
is
projects.
As a developer of
development of
portfolio
in
the
of his experience
1986 he will develop 39 units
Brooklyn.
incentive
project
establishment of his
As a result
with the Woodhaven project, in
in the
an earlier
balance
In this
relative
to
instance his
his
other
luxury units in Long Island the
affordable housing is a
-48-
stark contrast.
The
market
for
luxury
construction
is
is vulnerable
experienced
controlled
units
builder,
and
he
the
precarious,
to interest
feels
project
be
well
volatility.
confident
will
as
costs
delivered
the
As
an
can
be
on
time.
However, the market for luxury units is subject to absorption
rate changes.
Absorption rates may differ from the outset of
the project to the end
the
demand
experience
for
affordable
with
replicated in
of the project.
the
housing
sellout
Bushtick, the
affordable units
in the
for affordable housing.
of
As previously cited,
is
strong.
Woodhaven
capacity for the
Estates
his
is
absorption of
market will demonstrate
The
If
the demand
structure of the projects under
the New Homes program offer the developer a profit limited to
10% if
cost over runs
"core crew" of
the
able
to
need
for
luxury
units is
soft.
addition, his
in the event
The developer
projects accordingly, anticipating he
do luxury
workers on
In
laborers are assured employment
market for
scheduled his
can be controlled.
building
and
both these projects are
additional
contingency cost
labor,
they
of the project.
has
will be
affordable housing.
The
the same, if there
is a
are
The
hired
out
of
the
subsidies he received
as the designated developer were accepted by his construction
lender as his share of equity in the project. 5 6
-49-
Pro Forma Analysis
Total
development
costs
for
the
project
were
$1,488,070, which included land acquisition and site costs of
$321,320,
representing 21.59%
construction
$198,450
costs of
(13.34%).(refer
cost
of
the
acquisition cost of
total development
$847,500 (56.95%)
to
costs for the project were
total
of
Exhibit 2)
this particular
Homes
Program.
As
Total
costs of
acquisition
$77,000 representing 5.18% of the
project.
Relative
to
a
2.79% of total development
Flatbush project, this figure is high.
of
and Soft
costs,
parcel were
previously
subsidized
costs in the
The acquisition costs
not subsidized
stated, prior
by the
New
to 1985,
the
guidelines for the program stated that land acquisition costs
were carried
Funds
at appraised
value.
in the
amount of
to
infrastructure
applied
substantially
incurred,
higher
bringing
$70,000
However,
or $7,000
costs.
Land/Site
the
City Assistance
per unit,
Without
costs
percentage
to
this
were
subsidy
would
have
26.30%
of
been
total
development costs . The effect of the subsidy is reflected in
the lower 21.59% of total development costs.
Hard construction costs for
homes
constituted
56.95%
the development of the ten
of total
-50-
development costs.
The
THE WOODHAVEN PROJECT
DEVELOPMENT PRO FORMA
PER SQ. FT.
PERCENT OF
TOTAL
TOTAL COST
PER UNIT
LAND COSTS
$77,070
114,250
130,000
5.18
7.681
B.74Z
$3.37
$4.99
$5.68
$7,707
$11,425
$13,000
321,320
21.591
$14.04
$32,132
5.71Z
4.70Z
5.04Z
3.161
2.69Z
5.38Z
1.681
25.91Z
2.691
$3.72
$3.06
$3.28
$2.05
$1.75
$3.50
$1.09
$16.85
$1.75
$8,500
Roofing
Other Costs
General Cond.
85,000
70,000
75,000
47,000
40,000
80,000
25,000
385,500
40,000
$7,500
$4,700
$4,000
$8,000
$2,500
$38,550
$4,000
Sub Total/Hard Costs
847,500
56.951
$37.04
$84,750
13,000
12,000
10,000
5,000
3,000
155,450
0.87Z
0.812
0.671
0.34%
0.20Z
10.451
$0.57
$0.52
$0.44
$0.22
$0.13
$6.79
$1,300
$1,200
$1,000
$500
$300
$15,545
Sub Total/Soft Costs
198,450
13. 34Z
$8.67
$19,845
MISCELLANEOUS
CONTINGENCY
319,250
120,800
8.121
$5.28
$12,080
1,488,070
100.00-1
$65.04
$148,807
Land Aquisition
Site Costs
Excavation/Fill
Sub Total
CONSTRUCTION COSTS
Foundation
Masonry
Carpentry
Electrical
HVAC
Pluabing
$7,000
DEVELOPMENT COSTS
Arch./Eng.
Legal/Acct.
Sales/Mktg.
Insurance
Taxes
Misc.
TOTAL DEVELOPMENT COST
PROFITABILITY
Total Revenues From Sellout
Public Subsidy
$1,250,000
$350,000
$1,600,000
Less Total Development Costs
Developer's Fee
Subsidy Percentage Contribution
$1,48S,070
111,930
23. 52i
Source: Author's calculations per figures provided by developer
Leslie J.Lerner, Woodhaven Estates, June 23,1987
-51-
bulk
of the
costs.
public subsidy
Total soft
costs.
The
was applied
costs were
effect of
13.34% of
the waiver
sales taxes, is demonstrated
to these
building
total development
of specific
property and
by taxes contributing less than
a third of one percent to total costs.
Total
revenues constituted
sold at $125,000
each.
$1,250,000
The developers fee
for ten
homes
of $101,700, was
calculated as 10 percent of the total development costs minus
the subsidies
and the contingencies.
the subsidy on
The
the project is recognized
subsidy percentage
contribution to total
overall effect of
by calculating the
development costs.
Almost a quarter, 23.52%, of the total development costs were
paid for by
the
the subsidy.
homes might
In this case,
have been
able to
without the subsidy
command a
market price
igher than the per unit cost of production, depending on the
faith of
the potential purchasers
neighborhood.
However,
not be affordable
income bracket.
it is
in the attributes
clear that these
to families within the
The subsidy
of the
homes would
$25,000 to $48,000
therefore, actually lowered the
purchase price of the home for the target market.
-52-
COLUMBIA TERRACE
The Project
Columbia Terrace is a
180 unit residential condominium
project located in Carroll
project is
Gardens section of Brooklyn.
built on a site
originally owned by The
New York, and developed under
it
was
phased
out.
The
The
City of
the Section 235 program before
developer
of
the
project
was
designated through the Request for Proposal process, to build
a mix of affordable and market rate residential condominiums.
The site was zoned for residential and commercial use and the
ensuing
development
initial
three phases,
immediately.
was
constructed "as
completed
These first three
by 1984,
for the
for both types of
moderate rate units
exceed $48,000.
Phase
out period.
sold out
The
almost
60% market rate units.
units, buyers qualified
if total family income
IV of the project,
market rate units is in the
right".
phases had approximately 40%
moderate/affordable units and roughly
There were buyers
of
did not
comprised of only
midst of a normal six-month sell
Phase V, which is
the focus of this case study,
is currently being negotiated.
The figures used in this case
study
are
discussion
hypothetical
in the
figures
prepared as
negotiation process,
and do
reflect the ultimate outcome of the process. 5 7
-53-
a
basis
for
not at
all
Project Summary
The terms
development
of
negotiation.
for the structure
Phase
V
of
of the agreement
Columbia
Terrace
for the
are
under
The proposed structure of the deal is not final
and will in all likelihood
included in these case
undergo extensive changes.
It is
studies for purposes of illustration.
For a project of this large a scale it is not unusual for the
development
and
Phasing
used when
is
whether or
project
construction
there
not the project
were developed
early 1986,
some of
demise
of
is
be
will sell.
in
segments.
as
Prior phases
Section 235
the guidelines
Section
phased
market uncertainty
under the
revised before Section 235
the
to
of the
program.
under the
negotiating
solely
Preservation
and Development
with
the
,
The
developer
Department
for
subsidies
In
program were
was phased out altogether.
235
to
Since
has
of
been
Housing
from the
City
Assistance Fund. 5 8
Under the revised Section
parcels
appraised
developed
value.
under
As
program guidelines, at
of units
in the
City will share
the
235 program, after 1986, all
program were
described
in a
previous
least 40 percent of
project have to
sold
under
their
the
the total number
be affordable
in the profits derived from the
-54-
at
units.
The
sale of the
market
rate
negotiating
units.
The
the projected
City
and
market
profits from which they will share.
the
developer
are
price of
the units,
any
The actual amount of the
subsidy payment from the city is also being negotiated. 5 9
Development Objective
At
the
time
developer it was
this
project
was
the largest project he
undertaken
by
the
had ever developed.
As well it provided the opportunity to develop a large parcel
at what the developer felt,
Subsidies were
was an acceptable level of risk.
being provided during the
construction phase
such that the developer had to put forth a relatively minimal
amount of equity.
the
Moreover, the construction lender accepted
subsidy payment
construction loan.
as an
equity contribution
The developer
personal guarantees
towards the
as standard procedure gave
for the project.
The
developer was and
continues to be an active developer in the Brooklyn area.
saw an
commonly
opportunity to develop
available)
established.
The
in
an
a large site, (which
area
developer was
where
was
familiar with the
felt confident that the project would sell. 6 0
-55-
he
He
are not
already
area and
Analysis of Pro Forma
Total
Revenues
revenues
are derived
are
estimated
from
the
to
sale of
be
the
$3,928,000.
units at
the
following prices: 6 1
TYPE
PRICE
Efficiency
$69,000
2
$138,000
One BR
89,000
6
$534,000
Two BR
109,000
8
$872,000
Two BR/Market
149,000
16
$2,384,000
32
$3,928,000
UNIT
TOTAL
Total
estimated
development costs
at
development
include
$163,000,(3.74%) total
soft costs
for
$4,361,473.(refer
costs
TOTAL
the
to
the
Exhibit
land
representing $480,883(11.02%).
price for the
3)
Construction costs
total development
allowed
under
make up a portion of these
The
at,
The $163,000 purchase
value of the
the program
subsidies from the
construction costs.
-56-
total
(65.13%) and
are estimated at approximately
costs.
are
Land acquisition
land reflects the full appraised
which is
The
acquisition
hard costs of $2840,800
costs constitute 3.74% of total costs.
property,
entire project
guidelines.
65.13% of
City will
Soft costs
COLUMBIA TERRACE
DEVELOPMENT PRO FORMA
HHHHHHHH+Hf*~~ff~H*HHHffHH
H
HH
H
HH+H
TOTAL COST
HH
PERCENT OF
TOTAL
H
*f*
H ff****
HHH*HfffffffffffffHf*
PER SO. FT.
HHI
PER UNIT
LAND COSTS
3.74%
7.867
5.73
$163,000
342,750
250,000
Land Aquisition
Site Costs
Excavation/Fill
Sub Total
$5.09
$10.71
$7.81
$5,094
$10,711
$7,813
$23,617
755,750
17.33%
$23.62
140,400
403,200
720, 000
115,300
192,100
184,100
75,100
485,163
525,437
3.221
9.24%
16.51%
2.64%
4.40Z
4.22%
1.727.%
11.121
12.05%
$4.39
$12.60
$22.50
$3.60
$6.00
$5.75
$2.35
$15.16
$16.42
$22,500
$3,603
$6,003
$5,753
$2,347
$15, 161
$16,420
65. 137
$88.78
$88,775
$5.86
$1.50
$5.00
$1.72
$0.20
$0.75
$5,859
$1,500
$5,000
$1,719
$197
$752
CONSTRUCTION COSTS
Foundation
Masonry
Carpentry
Electrical
HVAC
Plumbing
Roofing
Other Costs
General Cond.
2,840,800
Sub Total/Hard Costs
$4,388
$12,600
DEVELOPMENT COSTS
Arch. /Eng.
Legal/Acct.
Sales/Mkta.
Insurance
Taxes
Misc.
187,493
48,000
160,000
55,000
6,300
24,050
4.30%
1.10%
3.67%
1.267
0.14%
0.557
Sub Total/Soft Costs
480,843
11.02%
MISCELLANEOUS
CONTINGENCY
765,300
284,080
17.55-7
6.51%
TOTAL DEVELOPMENT COST
$15,026
100.00%
4,361,473
Public Subsidy
$23,916
$8,878
$136.30
$136,296
SUBSIDIZED
Total Revenues
Public Subsidy
PROFITABILITY
Total Revenues From Sellout
$8.88
$23.92
$3,928,000
$472,000
$4,400,000
Less Total Development Costs
Developer's Fee
Subsidy Percentage Contribution
$2,016,000
$472,000
$2,488,000
Development Costs
(Subsidized Units)
$4,361,473
38,527
10.82%
Developer's Profit
Subsidy Percentage Contribution
Source: Author's calculations per preliminary figures provided
by developer, Frederick W. Hilles of Columbia Terrace,June18,1987
-57-
$2,180,737
$307,263
23.411
are 11.02 %
of total development costs.
In
this case study
the developer's fee is not limited to 10 percent of the total
development
costs,
represent the
developer's fee
therefore
total
developer's profit.
on the
However, these figures
revenues
less
costs
Under this
scenario the
subsidized units would
be $307,263.
are used to illustrate
the effect of
the subsidy.
Actual impact
against the portion
subsidy
contribution
portion of the
these terms
of the subsidy should
of the project that
is
project.
23.41% of
the
If the project
the contribution of the
only be evaluated
is subsidized.
affordable
The
income
is negotiated under
subsidy is substantial.
According to the developer the subsidy figures are also being
negotiated.
-58-
CHAPTER V
CONCLUSIONS
The objective of homeownership
programs is to increase
production of affordable housing by the private sector, for a
targeted population.
affordable is
lower the
The implication of making homeownership
that it must
be subsidized in some
purchase price for
the buyer.
An
manner to
implication of
increased production is that some incentive is being provided
for developers
the
former
subsidies
these
to produce
issue,
these
for homebuyers
programs are
comparable units.
programs
such
that
substantially
With regard to
studies sited in this
by the private
this type of
sector.
housing.
have
Regarding
provided
ample
purchase prices
under
below
market prices
for
the latter issue, the case
thesis provides evidence of production
Whether this level
of production is
sufficient to meet demand is an unanswered question.
The affordable homeownership programs
have provided clean, decent
of affordable
under
these
and affordable units.
homeownership opportunities has
programs because
subsidy to the
portion
in New York City
of
the
More importantly,
risk
inherent in
the subsidy
-59-
been possible
contribution of
projects and program's ability
of the
Provision
to mitigate a
the development
also lowers
the
the cost
process.
of the
home
to the
purchaser.
studies, the pro forma
made
at least
projects.
a
20
Without
served
as
evidenced in
percent contribution
the subsidy
to
the case
each of
contribution it
have been undertaken.
the lower acquisition
equity
each of
analysis indicates that the subsidies
that the projects would
contributed to
As
in construction
is doubtful
The subsidies
costs of the
loans.
the
land and
Basically,
the
application of subsidies helped to mitigate some of the risks
of
the project.
In
the Flatbush
Condominium project
the
subsidy contribution was 19.69%. to the overall project.
For
Woodhaven Estates, the subsidy contributed 23.52% towards the
project.
Moreover, the subsidies
in these two projects help
to decrease the purchase price to the homebuyer.
features
of the
programs made
the provision
These three
of affordable
homeownership opportunities possible.
Despite
examination
the
attributes
indicates that
appeal to developers.
in the
This
decision making
developer considers
also consider
of
their
the
programs,
structure
has a
further
limited
illustrates the opportunity cost
process of
an affordable
each developer.
As the
housing project,
he must
the projects he forgoes.
He weighs financial
risk he must assume in the project versus the profit he earns
which compensates
him for taking
issues which must
be resolved before a
-60-
that risk.
These
are the
developer is willing
to
undertake
developer
an
will
affordable housing
go forward
with
compensates him for the risk.
affordable housing
project.
a
Hence,
project if
the
the
profit
Since the profit scheme under
programs are
limited the
developer will
often opt for a more lucrative project.
While there
the
housing
developers
attempts
are limited
programs,
who
fall
in
to mitigate
exchange for
programs
in
benefits to
addition,
a select
some of
the risks
development
construction loan, a
and building
attributes,
additional
Flatbush
the developer's
Condominiums
In
of the
in
experience
to
otherwise
not
establishing
their
235 program
develop a
Aside
be
careers these
tend to
-61-
first
In the case of
from participation
of land
To
programs offer
the
and
the opportunity
tract
entering
have
Estates project
there was
available.
themselves or
from these
projects represent
large
includes
the product,
participate
of Columbia Terrace, aside
the Section
The
which qualify as equity
large undertaking for the development entity.
the developer
project in
opportunity which
the Woodhaven
these
program
limited profit.
experience.
who
entice
The
strong market for
and development
motives.
programs
category.
lowered acquisition costs, subsidies
in the
the
the developer accepting a
provide a
participation in
that
developers
a
and
would
who
different phase
experience, a
are
of
forum in
which
to test
design ideas
development community.
and establish
contacts in
the
Consequently, as a developer's career
progresses these motivations become less important.
There are
these programs.
existing
several approaches to broaden
First, change or
programs.
increase the
project.
Existing
This
change
of the
is the
limited
developer must assume.
developer
must
perhaps
larger
provide
a
greater
Moreover, the weakness
profit relative
to
in a
profit
to
of these
the risk
the
A better balance between the risk the
undertake
potential profit
be modified
sector developer through the sale
market rate units.
programs
can
units and market units
would
motivation for the private
modify the features of the
programs
mix of affordable
the appeal of
under
would be an added
scale
these
programs
incentive.
projects could
be
and
the
In addition,
encouraged
where
possible,to provide the developer some economies of scale and
therefore
increase
cost savings.
the number
of units
greater profit potential.
structure of
hence,
Larger scale
produced as
well as
also
provide
These modifications would make the
these programs
increasing
projects would
more attractive
production
opportunities.
-62-
of
affordable
to developers,
homeownership
SOURCES
Appel, Willa."Facing the Urban Housing Crisis."Real
Estate Finance Journal, vol.2,n.s.3 (1987): 37-43.
Bell, Alan R., and Nicholas Lembo, of Flatbush Condominiums.
Interview by the author, 19 June 1987, Brooklyn, New York.
Brown, James H. and Yinger, John.Homeownership and Housing
Affordability in the United States:
1963-1985 Cambridge
M.A.: The 1986 Report, Joint Center for Housing Studies
The Massachusetts
Institute of Technology
and Harva
University, 1986.
DePalma, Anthony. "Rental Apartments Are Getting Harder to
Find."New York Times, 12 April 1987, Section 8, page 1.
"In Northeast, Prices Rising Faster Than Family
Incomes."New York Times,8 February 1987, section 4, page 6.
Downs, Anthony.The Revolution
in Real Estate
Washington D.C.:The Brooking Institute, 1985.
Haar,
Finance.
Charles M.
ed."New York City's J-51 Program:
A Redefinition of Housing Objectives".Lincoln Institute
of Land
Policy
Roundtable, Policy
Analysis
Series.
Cambridge: Lincoln Institute of Land Policy, 1983.
Hilles, Frederick W., of Columbia Terrace. Interview by the
author, 18 June 1987, Brooklyn, New York.
Kayden, Jerold S.Incentive Zoning in New York City: A CostBenefit Analysis. Cambridge:
Lincoln Institute of Land
Policy, 1978.
Klebaner, Benjamin J.New York City's Changing Economic
Base. New York :Pica Press, 1981.
Lerner, Leslie J.,of Woodhaven Estates. Interview
by the author, 23 June 1987, Long Island, New York.
The
New York City Department of Housing Preservation and
Development.Homeownership Programs New York: The New York
City Department
of
Housing
Preservation
and
Development.:1986.
New
York
City Housing Partnership.New
Homes Program:
Invitation to Builders New York:
The New York City Housi
Partnership.: 1986.
-63-
New
York State Division of Housing and Community Renewal.
Consolidated Report on Community Development Programs 1986
Bronx, New York.:1987.
New
York
State
Division of
Housing
and
Renewal.Housing Programs of New York State
Bronx, New York.: 1986.
Community
Robbins,
I.D.
"Affordable Single Family Housing Grows
Brooklyn".Real Estate Finance Journal, vol.2,n.s.3
in
(1987) :49-55.
Rosen, Kenneth T.Affordable Housing:
New Policies
for the
Housing and Mortgage Markets.
Cambridge: Ballinger
Publishing Company, 1984.
Sinnreich, Masha.New York: World City Cambridge:
Oelgeschlager,Gunn & Hain, Publishers,Inc., 1980.
Sunneborg, Karen. The New York City Partnership. Interview
by the author, 23 June 1987, New York, N.Y.
Stegman, Michael A., with Hillstrom, Douglas.Housing in New
York: Study of a City. New York: Study for The City of N
York, 1984.
Viola, Thomas.Housing New York: Progress and CommitmentNew
York: New York State Division of Housing and Community
Renewal, Annual Report, 1985-1986.
U.S.
Department of Housing and Urban Development: Office
of Policy Development and Research Affordable Housing: A
Selected Resource Guide. Germantown,MD.: February,1985.
-64-
ENDNOTES
1 The
Random House Dictionary,1980 ed.,
based on The
RandomHouse Dictionary of the English Language-The Unabridged
Edition, s.v."afford",page 15.
2 H.James
Brown and John Yinger,Homeownership and
Housing Affordability in the United States: 1963-1985
(Cambridge, M.A.:
The 1986 Report, Joint Center for Housing
Stusies of the Massachusetts Institute of Technology and
Harvard University, 1986),appendix II, page 18.
3 Ibid.,page
7
4 Ibid.
5 Ibid.
6
Ibid.
7
Ibid.,page 24
8 Kenneth
T. Rosen,Affordable Housing: New Policies for
the Housing and Mortgage Markets (Cambridge M.A.: Ballinger
Publishing Company, 1984), page 31.
9
Brown, "Homeownership and Housing Affordability,"
page 8.
1 0 Anthony
DownsThe Revolution in Real Estate Finance
(Washington D.C.: The Brookings Institute,1985), page 119.
11
Ibid.,page
117
12
Anthony
DePalma, "In Northeast, Prices Rising Faster
Than Family Incomes,"New York Times,8 February 1987,
section 4, page 6.
13
14
Ibid.
Ibid.
1 5 Downs,The
Revolution in Real Estate Finance,
page 126.
16
Ibid.
17
Michael A. Stegman with Douglas Hillstrom,Housing in
New York:
Study of a City,1984,
(New York: The City of New
-65-
Department of Housing
Preservation and Development, February
1985)
1 8 Anthony
DePalma, "Rental
Apartments Are Getting
Harder to Find,"New York Times, 12 April 1987, Section 8,
page 1.
1 9 StegmanHousing
in New York: Study of a City,
1984,page 5
2 0 Assistant
Commissioner Thomas Viola,New York State
Division of Housing and Community Renewal, Annual Report
1985-1986, Housing New York:
Progress and Commitment, (New
York: Division of Housing and Community Renewal, 1986), page
36
21
"Deloitte, Haskins & Sells Announces Decision
Relocate,New York Times, 19 June 1987, Section A, page
to
1.
2 2 Willa
Appel, "Facing the Urban Housing Crisis,"The
Real Estate Finance Journal(Winter 1987),page 37
2 3 New
York City Housing Partnership,New Homes Program:
Invitation to Builders
(New York: The New York City Housing
Partnership, 1986).
24
Karen Sunneborg, The New York City Partnership,
interview by the author, 23 June 1987, New York, N.Y.
2 5 The
New York City Housing Partnership,New
Homes, page 3.
26
Ibid.
2 7 The
New York City Department of Housing Preservation
and Development, Homeownership Programs (New York: The New
York
City
Department
of
Housing
Preservation
and
Development,1986).
2 8 The
New York City Housing Partnership, New
Homes,page 4.
29
Ibid.
30
Ibid.
31
Ibid.
3 2 Karen
Sunneborg,
The
-66-
New
York
City
Partnership,
interview by the author, 23 June 1987, New York, N.Y.
3 3 The
New York City Housing Partnership, New
Homes,page 5.
34
Ibid.
3 5 Ibid.
3 6 Ibid.,page
37
4.
Ibid.
3 8 Ibid.,page
6.
3 9 Ibid.
4 0 Ibid.
4 1 Ibid.
42
New
York State Division of Housing and Community
Renewal.Housing Programs of New York State (1986), page 12.
4 3 The
New York City Housing Partnership, New
Homes, page 5.
4New York State Division of Housing and Community
Renewal.Housing Programs of New York State (1986), page 15
45
Ibid.
4 6Ibid.,
page 18
4 7 Karen
Sunneborg, The
New York City Partnership,
interview by the author, 23 June 1987, New York, N.Y.
48
Alan R.
Bell ard
Condominiums,
interview
by
Brooklyn, New York.
49
Ibid.
50
Ibid.
Nicholas Lembo
the author, 19
of
Flatbush
June
1987,
51 Author's Calculations
52
Leslie J. Lerner of Woodhaven Estates,
interview by the author, 23 June 1987, Brooklyn, New York.
-67-
5 3 Under
the New York City Partnership guidelines,
normally income eligible buyer's could not have incomes which
exceeded $48,000. Due to the unique configuration of the
2-family
homes
available
in Woodhaven
Estates,
one
owner-occuppied unit and one rental unit, the guidelines were
relaxed. The Partnership agreed to accept up to 75% of the
annual rental income generated by the unit as an addition to
the homebuyers income. This modification allows the buyer to
afford the higher priced house.
54
Ibid.
55
Ibid.
56
Ibid.
57
Frederick W. Hilles of Columbia Terrace, interview by
the author, 18 June 1987, Brooklyn, New York.
58
Ibid.
59
Ibid.
60
61
Ibid.
Ibid.
-68-