by Terry Pristin NYTimes
Melbourne Apartments is a new 84-unit building in Des Moines, where a three-bedroom apartment rents for $775 a month but comes with restrictions — a family of five, for example, can earn no more than $47,460 a year. What is remarkable about this otherwise modest project is that the equity came from the search-engine giant Google, whose Mountain View, Calif., headquarters are more than 1,500 miles away.
The investment by Google and other large corporations in Melbourne Apartments and similar projects is one reason a cloud of gloom has lifted for developers of income-restricted housing. These developments depend heavily on low-income-housing tax credits, which provide the equity that makes the difference between whether a project gets built or not.
But when the economy collapsed in 2008 the market for these tax credits dwindled, and many projects never got off the ground. Just $4.5 billion in tax credit equity was raised in 2009, compared with $9 billion in 2006, said Frederick H. Copeman, who heads the tax credit practice at the Reznick Group, a national accounting and consulting company. “People were ready to walk off gangplanks,” he said. Mr. Copeman estimated that $7 billion was raised last year.
Created more than two decades ago to instill market discipline into the development of subsidized housing, low-income-housing tax credits are allocated by the federal government and awarded by the states to projects that meet strict requirements. Developers sell the credits to investors — generally financial institutions — that are seeking to reduce their federal income tax over a 10-year period. The banks have another incentive, because investing in tax credits helps them fulfill their obligations under the Community Reinvestment Act to invest in poorer neighborhoods where they have customers.
But after the collapse of Lehman Brothers, “the banks were focused on their long-term liquidity,” rather than on offsetting profits, said another income-restricted housing expert, Michael Novogradac, the managing partner in the San Francisco office ofNovogradac & Company. Fannie Mae and Freddie Mac, which had been major investors in tax credits, stopped buying them in 2007. Weakened demand for tax credits led to lower prices, which made them less valuable to developers.
But if you can buy $1 worth of tax credit for 59 cents, you are getting a better return on your investment. That made the credits attractive to a new class of investors looking for double-digit yields. In addition to Google, new investors include Verizon and the insurance companies Liberty Mutual and Allstate, said James L. Logue III, chief operating officer of Great Lakes Capital Fund, in Lansing, Mich., which invests in income-restricted housing in the Midwest and upstate New York.
Now that the pool of investors has grown and many financial institutions are once again healthy, prices for tax credits are rising and many long-delayed projects are getting under way.
John Hayes, the chief executive of Ginosko Development Company in Milford, Mich., said he waited almost two years to begin a $7.7 million rehabilitation of Devon Square, a 1970s garden apartment complex in Ferndale, Mich., a suburb of Detroit. “We closed five deals in 2008, and then we had nothing from September 2008 on,” Mr. Hayes said. “Our next closing was in April 2010.” Great Lakes provided more than $3 million credit equity.
Some tax credit specialists say that coastal states have an unfair advantage over other regions where the need for this type of housing is just as pressing. In the Midwest, for example, the going price for a dollar’s worth of tax credits is about 70 cents or so, with some metropolitan areas getting 80 cents, Mr. Logue said. In New York, by contrast, Capital One Bank is paying 97 cents on the dollar for about $29 million worth of tax credits for Sugar Hill, an ambitious project that will replace a former garage on 155th Street between Saint Nicholas Avenue and Saint Nicholas Place in Harlem. Just two years ago, though, a dollar’s worth of tax credits in New York was selling for about 20 cents less, said William Traylor, the president of Richman Housing Resources, a New York-based division of the Richman Group of Greenwich, Conn., which brought together Capital One Bank and the Sugar Hill developer, Broadway Housing Communities.
Mr. Copeman attributed the differential today in tax credit prices from one region to another to “the unintended, perverse consequences” of the Community Reinvestment Act, despite what he said was a need for five million more units in all 50 states. He said banks generally did not make these investments in places where they had no depositors.
Joe Hagan, the president and chief executive of the National Equity Fund, a nonprofit organization based in Chicago that raised $800 million in tax credit equity last year, said he favored a regional approach so that a financial institution with branches only in New York could fulfill its community reinvestment duty in Albany.
A second reason for the spread in tax credit prices is the perceived risk in communities where market-rate housing has declined in value. Tax credits are forfeited if a foreclosure occurs.
But demand is so high in New York that the 124 units at Sugar Hill will be allocated by lottery. A three-bedroom apartment at Sugar Hill will rent for about $1,200, less than half of market rent, Broadway Housing officials said. About 5,000 applications are expected, they said.
Perched on the promontory known as Coogan’s Bluff, near where the old New York Giants played baseball at the Polo Grounds, the $73 million Sugar Hill development will also include a children’s museum named for the Harlem artist Faith Ringgold, and education and other services for the low-income residents and the surrounding neighborhood. By augmenting housing with services, “we can serve more families than can be accommodated in a residential development,” said Ellen Baxter, the executive director of Broadway Housing, a nonprofit organization that has redeveloped six other buildings in Harlem.
Outside New York and a few other places, investors may worry about whether the units will fill up. Capital One will not invest in a project unless market-rate rents in the area are at least 10 percent higher than the subsidized rents, said Laura Bailey, a managing vice president.
Beth Stohr, the director of the low-income housing tax credit program for the U.S. Bancorp Community Development Corporation, a subsidiary of U.S. Bancorp, said the investors needed to be sure that a project would be viable over a long period of time. “The key to all of this is getting a good market review,” she said, “so you understand the dynamics of the market.”
But for certain types of cash-rich investors, the riskier markets have presented a lucrative opportunity because of the high returns. Robert J. Wasserman, the managing director for tax credit syndications at U.S. Bancorp, said he had logged 170,000 miles since a 2009 meeting with potential new investors like Google. The bank arranged an $86 million fund for Google to invest in 480 income-restricted apartments in the Midwest and California, including the Melbourne Apartments in Des Moines.
Brent Callinicos, a Google vice president, took note in a statement of the “void in affordable housing investment” and said the tax credit investments “allows us to further our goal of providing relief to people who otherwise may not have access to quality housing.” But will tax credits seem less attractive now that the annual rate of return has declined to about 8 percent from a high of 15 percent?
Mr. Wasserman acknowledged that the answer was unknown. “Will these new investors stay in the market?” he said. “So far, we think it will go on for another year. I don’t know what’s going to happen after that.”
Wednesday, January 26, 2011
Thursday, January 6, 2011
Council Approves Safe Housing Act
by Courtney Gross
06 Jan 2011
06 Jan 2011
Taking aim at the city's worst landlords, the City Council expanded a housing program Wednesday that forces property owners to make improvements to the city's most uninhabitable buildings.
The program targets 200 dilapidated apartment buildings a year and requires landlords to address their housing code violations. If they do not fix the problems, the city does it for them and sends them the bill.
Under the expansion, the city will target larger buildings to more than double the number of units under the program. It will also include housing violations directly related to asthma, such as vermin and mold, for the first time.
"Imagine if you were sick and every time you went home it made it worse," said Council Speaker Christine Quinn. "Unfortunately, that is what's happening all over the city."
The bill, Quinn said, would fix that. Dilapidated roofs be gone and say sayonara to some heatless winters.
Despite widespread support for the program, dubbed the Safe Housing Act, it has come under scrutiny since the city failed to capture all of the funds it has invested in improvements from landlords.
Nonetheless, Wednesday's unanimous approval was hailed by tenant and housing advocates, who say the expansion will be a large step toward ridding the city of its most unsafe structures.
"The city will recoup those costs in the future," said Javier Valdes, deputy director for the advocacy group, Make the Road New York. "What's really good for the tenant is that those repairs are done now."
Advocates and residents have horror stories.
Leaky ceilings, mold-infested bedrooms, rats.
Sebastian Riccardi, a staff attorney at the Legal Aid Society, recalled one building that made the city's top 200 in Crown Heights. It had a gaping hole in the roof that was so large someone "nimble" could climb through it, Riccardi said.
To be targeted by the city, these buildings must have the highest ratio of housing violations per unit. Most of them already have tax liens, a city official said. In order to get out of the program, under the initial version of it, all improvements had to be made and all city debt paid.
The initial program, approved in 2007, inadvertently included a disproportionate number of smaller buildings. The expansion will instead target larger buildings.
As a result, the program, which will continue to target only 200 buildings, will go from about 1,000 units to nearly 3,500, said council officials.
In most of the buildings in the program, city officials said, landlords are spurred to make improvements just by landing on the list. But with a third of the owners, who may have abandoned the building, the city is forced to step in to make improvements.
Since the program started, a spokesperson at the Department of Housing Preservation and Development said the city has spent $17 million on improvements to these buildings. It has only received $4.5 million back from landlords.
Arguing in support of the program, officials and advocates say the city will recoup improvement costs plus the cost of any liens on the property eventually.
"It's sort of an investment," said Riccardi.
Over the course of three years, the city has seen only 192 property owners out of 600graduate from the program. Fiscal year 2010 was the city's worst performing year to date with only 57 buildings exiting the program.
To spur landlords to actually pay back the money, the city's retooled program will include a new payment plan that will enable property owners to pay back the city in installments instead of one lump sum.
Council officials and advocates say the cost of the program will eventually even out. To save tenants' lives, Quinn said, it's well worth it.
"You can't have tenants living in that state of disrepair, while we get the money," said Quinn. "We have to make peoples' conditions livable."
The program targets 200 dilapidated apartment buildings a year and requires landlords to address their housing code violations. If they do not fix the problems, the city does it for them and sends them the bill.
Under the expansion, the city will target larger buildings to more than double the number of units under the program. It will also include housing violations directly related to asthma, such as vermin and mold, for the first time.
"Imagine if you were sick and every time you went home it made it worse," said Council Speaker Christine Quinn. "Unfortunately, that is what's happening all over the city."
The bill, Quinn said, would fix that. Dilapidated roofs be gone and say sayonara to some heatless winters.
Despite widespread support for the program, dubbed the Safe Housing Act, it has come under scrutiny since the city failed to capture all of the funds it has invested in improvements from landlords.
Nonetheless, Wednesday's unanimous approval was hailed by tenant and housing advocates, who say the expansion will be a large step toward ridding the city of its most unsafe structures.
"The city will recoup those costs in the future," said Javier Valdes, deputy director for the advocacy group, Make the Road New York. "What's really good for the tenant is that those repairs are done now."
The Expansion
Advocates and residents have horror stories.
Leaky ceilings, mold-infested bedrooms, rats.
Sebastian Riccardi, a staff attorney at the Legal Aid Society, recalled one building that made the city's top 200 in Crown Heights. It had a gaping hole in the roof that was so large someone "nimble" could climb through it, Riccardi said.
To be targeted by the city, these buildings must have the highest ratio of housing violations per unit. Most of them already have tax liens, a city official said. In order to get out of the program, under the initial version of it, all improvements had to be made and all city debt paid.
The initial program, approved in 2007, inadvertently included a disproportionate number of smaller buildings. The expansion will instead target larger buildings.
As a result, the program, which will continue to target only 200 buildings, will go from about 1,000 units to nearly 3,500, said council officials.
In most of the buildings in the program, city officials said, landlords are spurred to make improvements just by landing on the list. But with a third of the owners, who may have abandoned the building, the city is forced to step in to make improvements.
Since the program started, a spokesperson at the Department of Housing Preservation and Development said the city has spent $17 million on improvements to these buildings. It has only received $4.5 million back from landlords.
Arguing in support of the program, officials and advocates say the city will recoup improvement costs plus the cost of any liens on the property eventually.
"It's sort of an investment," said Riccardi.
Over the course of three years, the city has seen only 192 property owners out of 600graduate from the program. Fiscal year 2010 was the city's worst performing year to date with only 57 buildings exiting the program.
To spur landlords to actually pay back the money, the city's retooled program will include a new payment plan that will enable property owners to pay back the city in installments instead of one lump sum.
Council officials and advocates say the cost of the program will eventually even out. To save tenants' lives, Quinn said, it's well worth it.
"You can't have tenants living in that state of disrepair, while we get the money," said Quinn. "We have to make peoples' conditions livable."
Wednesday, January 5, 2011
In the South Bronx, Blight Returns to a Rehabilitated Block
By DAVID GONZALEZ NY Times
The four-story wreck that is 920 Kelly Street is a South Bronx time machine for Harry De Rienzo. Its broken windows, garbage-choked halls, mold-mottled rooms and smoky stench remind him of what much of the area looked like nearly 35 years ago, when he first arrived to work at a settlement house.
Back then, 920 was among a handful of tidy buildings maintained by a landlord who was struggling against the arson and abandonment encroaching all around. His pluck inspired Mr. De Rienzo to organize the block and its beleaguered residents into the Banana Kelly Community Improvement Association, which renovated three crumbling buildings on the street and started Mr. De Rienzo on a career providing housing for poor and working people.
Half a lifetime later, Mr. De Rienzo is back on the block. But this time he is trying to save 920 and four neighboring buildings, which have fallen into such disrepair that they are considered among the city’s worst, with more than 2,000 housing code violations among them.
If Kelly Street was once an outpost of hope, Mr. De Rienzo and others worry that it may now be a harbinger of trouble for the South Bronx and beyond. In the feverish real estate speculation of the past decade, buildings like these were passed back and forth among landlords and banks. But since the bubble burst, the properties have fallen into financial limbo; many owners cannot keep up on mortgage payments, much less repairs.
“This is a real big problem,” said Mr. De Rienzo, 57, a plain-spoken, streetwise New Yorker who is now chief executive of Banana Kelly. “They thought they could always cash out their equity and flip the property. But when the recession hit, that kind of predatory investing stopped — and the tenants got stuck.”
Back in 1976, the fires that would incinerate so much of the South Bronx had begun to nip around the edges of Kelly Street when Mr. De Rienzo, fresh out of Manhattan College, started working at the settlement house, Casita Maria, running a basketball program.
Cooling down after games, he chatted with residents about the neighborhood, where a near-bankrupt city was taking over scores of tax-delinquent and abandoned buildings, but doing little to make them livable.
He befriended Leon Potts, whose father, Frank, a hard-working jack-of-all-trades, owned several buildings on Kelly, living with his family in one of them.
“Potts was totally at variance with everything that was going on in the South Bronx at the time,” Mr. De Rienzo said. “Here was a landlord who was staying put. He used to wake up at 5 in the morning to go to work on the trucks in Hunts Point. Then he’d come back and work on his buildings. He’d be so tired, sometimes I saw him sitting on the stoop, too tired to walk up three steps to his apartment.”
It was wrenching for Mr. De Rienzo to watch adjoining buildings go vacant, but he saw them as an opportunity.
“The city had written off the area,” he said. “Landlords had run away. So all we could do was sweat equity and do it for ourselves, since nobody else was going to do it.”
By the end of the 1970s, the three buildings that prompted the formation of Banana Kelly had been renovated and were being run by tenants. The organization expanded into social services and education. Mr. De Rienzo went to law school, and then to work for a foundation that supported community-based housing groups. And Mr. Potts, long the mainstay of his block, sold his buildings and moved away.
Today, to tour the blocks around Kelly Street is to see a world transformed. On Longwood Avenue, neat brick town houses line the wide street. Modest apartments have risen from empty lots. Even Little Korea, a stretch of Fox Street notorious for its murders, looks suburban with its boxy white homes.
Banana Kelly, the group that helped with the rebirth, did not fare so well. Mr. De Rienzo and others watched with alarm throughout the 1990s as the group sought international attention for its ideas on urban development while neglecting the housing that had been its original mission. In 2002 the state attorney general, spurred by complaints of mismanagement, forced out the group’s leadership.
As part of the deal, Mr. De Rienzo was coaxed into returning temporarily to get the group back on solid financial ground. He wound up staying on.
This year, conditions in the old Potts properties became so bad that two advocacy groups, Mothers on the Move and the Urban Justice Center, began speaking with tenants and city officials. In recent years, the city had placed four of the five buildings in a program that made emergency repairs and then billed the landlord.
Mr. De Rienzo began inquiring about the buildings after he noticed several boarded-up apartments while walking on his old block. A few weeks ago, he joined Mothers on the Move on an impromptu inspection and was alarmed by what he saw — particularly because a number of tenants have H.I.V. or AIDS.
Visitors to 935 Kelly Street have to step over a pool of water formed by drips from a gaping hole in the ceiling. A pile of garbage and liquor bottles fills a corner of the lobby. In one of the 32 apartments, Victoria Rosario has laid out brick-size rat traps — she has caught 12 so far — and sealed the holes in the walls with plywood.
At 920 Kelly, doors to empty apartments swing open to reveal garbage and feces-smeared rooms where windows have been knocked off their frames. A smoky odor wafts from the burned-out apartment next to Hector Claudio’s fourth-floor home. Inside, his walls are gray from mildew and soot.
“I threw out my sofa,” Mr. Claudio said in a raspy voice that rose barely beyond a whisper. “I had to throw out my clothes. I have asthma, fatigue and H.I.V. It’s too much. This has to stop.”
Just who owns the buildings is uncertain. While city records identify the owner as John Abraham, the city’s housing agency can find no deed in his name. Tenants said they had been dealing with owners at an office on Washington Avenue, but the people who work there said they no longer managed the building because Mr. Abraham had refused to pay for repairs.
Mr. Abraham did not respond to phone messages, and a letter sent by messenger to the address listed in city records was returned as undeliverable.
Ridgewood Savings Bank holds a $5 million mortgage on the buildings. Mr. De Rienzo said he would try to force the bank to either repair the buildings or assign ownership to his community group.
Joseph T. Curcio, the bank’s vice president and marketing director, said that the properties were in good repair when the mortgage was issued “several years ago,” and that he had no idea of their current state. When told of the worst violations, he said, “Oh, my God.”
Mr. Curcio said the bank had begun foreclosure proceedings. “We’re left holding the bag as much as these poor tenants,” he said. “It’s unconscionable the landlord allowed these conditions to exist.”
The city, which continues to make repairs on the buildings, is now in discussion with Banana Kelly to see if the group can take over the buildings and avail itself of loan and repair programs. City officials have also been talking with banks to alert them to loans they have made to owners of similarly distressed properties in other neighborhoods.
For Mr. De Rienzo, who helped Kelly Street rebuild itself brick by brick, his latest crusade is about a much more personal debt.
“After more than 30 years dealing with this block, these people are like friends and family to me, so I can’t just walk away,” he said. “I’m not looking to save the world. I’m just looking to build something that will last beyond me.”
The four-story wreck that is 920 Kelly Street is a South Bronx time machine for Harry De Rienzo. Its broken windows, garbage-choked halls, mold-mottled rooms and smoky stench remind him of what much of the area looked like nearly 35 years ago, when he first arrived to work at a settlement house.
Back then, 920 was among a handful of tidy buildings maintained by a landlord who was struggling against the arson and abandonment encroaching all around. His pluck inspired Mr. De Rienzo to organize the block and its beleaguered residents into the Banana Kelly Community Improvement Association, which renovated three crumbling buildings on the street and started Mr. De Rienzo on a career providing housing for poor and working people.
Half a lifetime later, Mr. De Rienzo is back on the block. But this time he is trying to save 920 and four neighboring buildings, which have fallen into such disrepair that they are considered among the city’s worst, with more than 2,000 housing code violations among them.
If Kelly Street was once an outpost of hope, Mr. De Rienzo and others worry that it may now be a harbinger of trouble for the South Bronx and beyond. In the feverish real estate speculation of the past decade, buildings like these were passed back and forth among landlords and banks. But since the bubble burst, the properties have fallen into financial limbo; many owners cannot keep up on mortgage payments, much less repairs.
“This is a real big problem,” said Mr. De Rienzo, 57, a plain-spoken, streetwise New Yorker who is now chief executive of Banana Kelly. “They thought they could always cash out their equity and flip the property. But when the recession hit, that kind of predatory investing stopped — and the tenants got stuck.”
Back in 1976, the fires that would incinerate so much of the South Bronx had begun to nip around the edges of Kelly Street when Mr. De Rienzo, fresh out of Manhattan College, started working at the settlement house, Casita Maria, running a basketball program.
Cooling down after games, he chatted with residents about the neighborhood, where a near-bankrupt city was taking over scores of tax-delinquent and abandoned buildings, but doing little to make them livable.
He befriended Leon Potts, whose father, Frank, a hard-working jack-of-all-trades, owned several buildings on Kelly, living with his family in one of them.
“Potts was totally at variance with everything that was going on in the South Bronx at the time,” Mr. De Rienzo said. “Here was a landlord who was staying put. He used to wake up at 5 in the morning to go to work on the trucks in Hunts Point. Then he’d come back and work on his buildings. He’d be so tired, sometimes I saw him sitting on the stoop, too tired to walk up three steps to his apartment.”
It was wrenching for Mr. De Rienzo to watch adjoining buildings go vacant, but he saw them as an opportunity.
“The city had written off the area,” he said. “Landlords had run away. So all we could do was sweat equity and do it for ourselves, since nobody else was going to do it.”
By the end of the 1970s, the three buildings that prompted the formation of Banana Kelly had been renovated and were being run by tenants. The organization expanded into social services and education. Mr. De Rienzo went to law school, and then to work for a foundation that supported community-based housing groups. And Mr. Potts, long the mainstay of his block, sold his buildings and moved away.
Today, to tour the blocks around Kelly Street is to see a world transformed. On Longwood Avenue, neat brick town houses line the wide street. Modest apartments have risen from empty lots. Even Little Korea, a stretch of Fox Street notorious for its murders, looks suburban with its boxy white homes.
Banana Kelly, the group that helped with the rebirth, did not fare so well. Mr. De Rienzo and others watched with alarm throughout the 1990s as the group sought international attention for its ideas on urban development while neglecting the housing that had been its original mission. In 2002 the state attorney general, spurred by complaints of mismanagement, forced out the group’s leadership.
As part of the deal, Mr. De Rienzo was coaxed into returning temporarily to get the group back on solid financial ground. He wound up staying on.
This year, conditions in the old Potts properties became so bad that two advocacy groups, Mothers on the Move and the Urban Justice Center, began speaking with tenants and city officials. In recent years, the city had placed four of the five buildings in a program that made emergency repairs and then billed the landlord.
Mr. De Rienzo began inquiring about the buildings after he noticed several boarded-up apartments while walking on his old block. A few weeks ago, he joined Mothers on the Move on an impromptu inspection and was alarmed by what he saw — particularly because a number of tenants have H.I.V. or AIDS.
Visitors to 935 Kelly Street have to step over a pool of water formed by drips from a gaping hole in the ceiling. A pile of garbage and liquor bottles fills a corner of the lobby. In one of the 32 apartments, Victoria Rosario has laid out brick-size rat traps — she has caught 12 so far — and sealed the holes in the walls with plywood.
At 920 Kelly, doors to empty apartments swing open to reveal garbage and feces-smeared rooms where windows have been knocked off their frames. A smoky odor wafts from the burned-out apartment next to Hector Claudio’s fourth-floor home. Inside, his walls are gray from mildew and soot.
“I threw out my sofa,” Mr. Claudio said in a raspy voice that rose barely beyond a whisper. “I had to throw out my clothes. I have asthma, fatigue and H.I.V. It’s too much. This has to stop.”
Just who owns the buildings is uncertain. While city records identify the owner as John Abraham, the city’s housing agency can find no deed in his name. Tenants said they had been dealing with owners at an office on Washington Avenue, but the people who work there said they no longer managed the building because Mr. Abraham had refused to pay for repairs.
Mr. Abraham did not respond to phone messages, and a letter sent by messenger to the address listed in city records was returned as undeliverable.
Ridgewood Savings Bank holds a $5 million mortgage on the buildings. Mr. De Rienzo said he would try to force the bank to either repair the buildings or assign ownership to his community group.
Joseph T. Curcio, the bank’s vice president and marketing director, said that the properties were in good repair when the mortgage was issued “several years ago,” and that he had no idea of their current state. When told of the worst violations, he said, “Oh, my God.”
Mr. Curcio said the bank had begun foreclosure proceedings. “We’re left holding the bag as much as these poor tenants,” he said. “It’s unconscionable the landlord allowed these conditions to exist.”
The city, which continues to make repairs on the buildings, is now in discussion with Banana Kelly to see if the group can take over the buildings and avail itself of loan and repair programs. City officials have also been talking with banks to alert them to loans they have made to owners of similarly distressed properties in other neighborhoods.
For Mr. De Rienzo, who helped Kelly Street rebuild itself brick by brick, his latest crusade is about a much more personal debt.
“After more than 30 years dealing with this block, these people are like friends and family to me, so I can’t just walk away,” he said. “I’m not looking to save the world. I’m just looking to build something that will last beyond me.”
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