NYC offers developers a deal: Build affordable units, we'll help cover tenants' rent

New York City officials are trying out a novel way to move longtime residents of homeless shelters into new permanent housing — by guaranteeing most of their rent.

Under the Affordable Housing Service program, the city is eliminating one of the biggest hurdles developers face when it comes to building or buying buildings: money. Through the program, the city offers nonprofit developers a steady stream of tenants who can pay rent using city housing vouchers for years to come.

Builders and nonprofit leaders say the program is innovative, and will boost the city’s housing stock as well as help long-term shelter residents navigate the competitive real estate market. It comes as the population of non-asylum-seekers in city shelters is increasing and as vacancy rates across the city remain strikingly low.

“It really is cutting edge,” said David Schwartz, cofounder and principal of Slate Property Group, an affordable housing developer. “I don't know of any other cities that are doing this. The only way out of this [housing] crisis is to build more housing and New York City's figured out a tool to do it.”

Last week, the city celebrated the opening of the program's newest site, a 64-unit building in the Bronx's Wakefield neighborhood. It’s the seventh location to open since the program launched two years ago, bringing the total number of apartments to 461. Under the contract, leased buildings will remain set aside for voucher-holders for nine years and owned buildings will remain affordable for 30 years.

“ If somebody moves on … that unit then will re-rent to somebody else coming out of the shelter system as opposed to when it's just a plain vanilla unit out in the market that that could go to anybody,” said Department of Social Services Commissioner Molly Wasow Park, who runs the program.

Chanda James-Govan, 46, said moving out of the shelter where she lived with her son was a huge relief.

“The moment I closed that door and locked it and put the chain on, it was just a wave and a weight that was lifted,” said James-Govan, who lived in a shelter for six months before moving into the Wakefield building with her voucher.

“Just a freedom feeling of just having your own again and privacy, peace again, and windows again,” she said.

The city initiative prioritizes families or individuals who have lived in shelter for more than two years, or families like James-Govan's, which are at risk of staying in shelter for a long period of time. James-Govan lives with her 18-year-old son, who has autism.

The program relies on the city’s rental assistance vouchers known as CityFHEPS, which help pay rent for people in shelter or on the brink of homelessness. Voucher recipients pay about 30% of their income toward rent and the city covers the rest.

While there are 52,000 households that use vouchers across the five boroughs, another 11,000 families have vouchers but are still in shelter because they can’t find housing or landlords who will take them.

The program also aims to even the playing field for voucher-holders who often face discrimination in the housing market or are priced out.

“ At any viewing for an open market unit, there could be 20, 30, 40 people competing for the unit,” Park said. “That point of competition and that tension really absolutely does create challenges for those who are experiencing homelessness.”

The city has a 1.4% vacancy rate, or percentage of available apartments, and that’s even lower for units costing less than $1,100 per month.

City officials say the model helps nonprofits that want to enter the affordable housing space or developers waiting with projects who can’t access low-income housing tax credits, the main way affordable housing is built in the city. Low-income housing tax credits are controlled by the federal government and limited.

Under the new program, the city contracts with nonprofits to bring those vouchers to the building, promising tenant referrals for the units and that most of the rent for the tenants will be covered by the city every month. That payment stream is enough for lenders to feel comfortable financing the affordable housing project, allowing nonprofits to purchase or lease buildings.

Think of it like getting a mortgage for a home and trying to convince a bank you can make your payments. When a nonprofit can show it has a city-funded rent stream, that’s enough to convince a bank to make a loan.

“ What's innovative about doing the contract on a new building is that you deal with the supply-side solution, which is really important,” Schwartz said. “We have to make the pie bigger.”

On average, adult families stay in shelters for a year and four months, single adults and families with children stay roughly an average of one year, data from the Mayor’s Management Report shows.

“Shelter is not a home, it's temporary. To have your own home, the dignity of having your own bed and your own kitchen is critical,” said Ron Abad, CEO of Community Housing Innovations, which manages James-Govan’s building.

Most people who are able to leave shelters do so with a CityFHEPS voucher and the average number of monthly exits have increased this year as the city works to permanently house more New Yorkers, according to data from the comptroller’s office.

Adolfo Abreu, housing campaigns director at VOCAL-NY, a grassroots group focused on homelessness, said it’s important for the city to better connect homeless people to deeply affordable housing.

“It makes it easier for folks who might need support,” he said. “If we have that balanced approach, we can get more people housed.”

As part of the program, the city also pays nonprofits so they can provide support to tenants by helping them apply for food stamps or cash assistance to make sure they can remain housed and not return to shelter.

The city said more than 500 units are set to open in Manhattan, Queens and Brooklyn.

Schwartz is building affordable housing at the site of the former JFK Hilton Hotel in South Jamaica, Queens, where 192 units will be for voucher-holders. The building is set to open later this year and will be owned and managed by the nonprofit RiseBoro.

“For tenants like me, we don't get gifted with wonderful landlords,” said James-Govan, who was evicted from her apartment before landing in a shelter.

“People that actually want to support you and make sure that you not only have a good house, but you maintain it," she said. "You maintain the stability that you have what you need, and if you don't, they'll help you get it. As opposed to, 'Hey, well, you better figure it out or you're out of here.’”