The Jean Nouvel-designed luxury condominium building at 100 11th Ave. at 19th St. and the West Side Highway in Chelsea sits partially completed. Last year, the Wall Street Journal reported that, as a result of the current credit climate, the project was $50 million over budget and needed to be refinanced, and was nearly a year behind schedule.
Condo buyout plan building up support with builders
By Heather Murray
Ten months after City Council Speaker Christine Quinn convened an affordable housing task force charged with creating permanently affordable housing for middle-income New Yorkers, she recently unveiled a plan that could capitalize on the current condominium glut by converting thousands of vacant apartments into affordable units.
In her State of the City address last month, Quinn briefly described the housing boom-to-bust.
Seemed everywhere you looked, from Chelsea to Corona, a new luxury building was cropping up, she said. Thousands of these homes never sold, left like tarnished trophies of the building boom. These vacant apartments now represent our best asset in the fight for affordable housing.
Few details have been released on the plans specifics, which is being worked out in conjunction with the Mayors Office and the Department of Housing Preservation and Development. But Quinn spokesperson Andrew Doba said that more information would be released in the next few weeks.
According to Doba, the plan, dubbed the Affordable Housing Recovery Program, would allow the city to draw on already budgeted capital funds to turn unsold units into affordable housing for middle-income residents and families to rent or buy.
Those qualifying for the program would need to earn between 80 percent and 150 percent of the annual area median income. A family of four would make the cut if they earn between $61,440 and $115,000.
Lucas Shapiro, a community organizer at the Hells Kitchen-based Housing Conservation Coordinators, said, Were definitely for all sets of creative solutions that develop new affordable housing. Although Shapiro said he couldnt comment on the new plan for lack of details, he agreed there is a need for more middle-income units.
Current affordable housing incentives for developers often generate very low-income units, Shapiro pointed out. His organization has been working to create a balance of low-, moderate- and middle-income units.
Shapiro added that he thinks a comprehensive review of local communities needs should be done before the plan is implemented, saying that in some communities middle-income units would be too expensive for many residents to qualify.
Developers that The Villager contacted seemed largely on board with the concept, but are waiting for more specific details before passing final judgment.
David Kramer of the Hudson Companies, builders of the new New York University dormitory on E. 12th St., was so enthusiastic about the plan that he called the Speakers Office to get more information.
Im actually very excited about it. I think its a tremendous idea, Kramer said, adding he feels the concept could possibly be implemented in several of his projects.
You have a bunch of developers throughout the city who were hoping to sell condos for $700 a square foot or more, he said. Instead, these builders are being forced to settle on a number in the $400s or $500s in hope of breaking even, he explained.
But he cautioned, It wont work if the numbers are too lean, referring to the offer the city would give developers.
Kramer heralded the effort to make more middle-income units available, saying, As we all know, most of the affordable housing subsidies are for very low-income individuals. Theres really nothing for middle income.
Developer Ben Shaoul of Magnum Management, developer of such projects as Sky East, at 636 E. 11th St., and the A Building, at 425 E. 13th St., said of the speakers proposal: I think its a very smart idea. Shaoul said he thinks developers and banks would be very interested in the proposal as long as the city establishes a platform that would make the plan work. One obvious question on Shaouls mind is how much the city would be willing to pay per square foot to buy a unit.
Shaoul doesnt own any properties that he feels would benefit from the plan, but said, Im always looking for opportunities, adding that he could see himself developing a property if it could benefit from the citys program.
He feels the city would need to have a hand, not only in buying vacant apartments, but also in financing development to make the plan work.
Right now, there is no financing available in the marketplace to finance the development of a new building, he noted.
Shane Neuringer, vice president of acquisitions and development for CB Developers, called the idea of the city acquiring vacant luxury units killing two birds with one stone it would allow developers to get rid of some inventory and the city to increase its commitment to affordable housing.
Neuringers company, run by principal Charles Blaichman, focuses its development primarily in Downtown Manhattan neighborhoods. Blaichmans projects include the Urban Glass House condominiums on Spring St., the Theory Building on Gansevoort St. and the condos at 173/176 Perry St.
While Neuringer is unsure whether his company would take advantage of the program that Quinn outlined, he feels big projects in less ritzy areas of the city than where his company typically develops such as the Financial District, Brooklyn, Queens and potentially the Bronx could benefit.
Theyre geared toward a more affordable price point in the first place, he said of these other projects. Itd probably be a lot easier to get something like that done there than in a very high-end building that is supposed to sell for over $1,000 a square foot.
Neuringer said his company would support affordable housing, particularly for middle-income workers who contribute to the community, such as teachers, police officers and firefighters. He is in favor of programs in which the city subsidizes affordable housing either through tax abatements or Quinns plan to buy vacant apartments as opposed to rent stabilization and rent control, which, he said, put the onus on landlords.
Neuringer likened tenants living in housing subsidized directly out of private owners pockets to people walking into Whole Foods Market and expecting to buy a cartload of groceries for 10 percent of market value.
He added, Most people agree that society should pay for it [affordable housing] in one way or another.
Abe Shnay of SK Development, who has a West Chelsea hotel project with Jay-Z and Blaichman on hold due to lack of financing and is a partner in the Urban Glass House, said he didnt feel Quinns plan would be viable in Manhattan without a hefty subsidy.
He wonders whether the idea would work even in his projects in the outer boroughs, citing the prohibitive rising costs of operating buildings in New York City.
Shnay feels a middle-income, home-ownership plan would be a more advantageous program for condo developers than one mainly offering rentals. Middle-income rentals simply wouldnt provide the income that developers depend on to pay off construction loans fast enough, he said.
Mike Slattery, senior vice president of the Real Estate Board of New York, said hes heard some of his members speak positively of the plan, and he thinks its a creative idea.
Slattery surmised, however, that it might not be as enthusiastically supported by new occupants in luxury buildings, who would have to adjust to the fact of neighboring units being sold to families at a far lower price than what they shelled out.
But from a taxpayers point of view, the REBNY vice president felt the citys purchase plan would smartly address both affordable housing needs and the weak housing market.
Robert Lieber, deputy mayor for economic development, who was at Quinns State of the City address, told The Villager immediately afterward that the adminstration is on the same page with the speaker on the idea of acquiring vacant luxury units if not about where the money for buying these units would come from.
Were concerned about it, and foremost, about the destabilizing effect on having vacant buildings in neighborhoods, Lieber said of vacant units. He indicated that a combination of government money and private-sector capital would be used to buy the units in what he termed a partnership. Lieber said a $100 million acquisition fund had been amassed, including money from the Ford and Rockefeller foundations. He said the acquisition fund had not been raised specifically for buying vacant luxury units in new developments, but for anything, but that it could be used to buy these units.
The deputy mayor said the point at which the city would step in would be when a developer defaulted on his or her underlying mortgage or loan.
The city may be able to buy these assets at a cheaper price, Lieber added. The conversation wont really be with developers, but with lenders. The need for affordable housing in New York has not gone down at all.
Weve been looking at this for a long time. We want to prepared if the opportunity comes up. Theres likely to be an excess of inventory of units intended to be sold as market-rate units.
With reporting by Lincoln Anderson