Opinion: Why NYC Should Fund The Developers Who Stay Invested

Nonprofit developers by virtue of their governance and ownership are the only segment of the affordable housing sector that s required to reinvest their financial benefits of maturation back into their neighborhoods and people they serve The groundbreaking for a city-financed affordable housing project in Sunset Park Brooklyn in John McCarten NYC Council New York City s City of Yes and City for All initiatives and the state s plans for a billion financing to expand housing are welcome actions towards addressing the largest part severe housing emergency we have seen in decades Coupled with proposals being considered by two City Charter Revision Commissions these plans investments and proposals promise to increase housing supply overall But there is much more we should be doing to ensure that the populace investments we make in the operation of increasing housing supply are also sound investments in our communities At a time when the current administration in Washington is committed to the retreat of regime it s more fundamental than ever to make sure that New York City s housing investments endorsement the city s civic infrastructure and advance equity and inclusion function d u ac var s d createElement 'script' s type 'text javascript' s src 'https a omappapi com app js api min js' s async true s dataset user u s dataset campaign ac d getElementsByTagName 'head' appendChild s document 'u kmqsczew vunxutxmd' To achieve the city and state s goals notable residents investments will need to be made and the inhabitants will need to rely on an array of developers to get this housing built We ought to be mindful that not every dollar of masses capital has the same general benefit Specifically we should recognize that nonprofit developers by virtue of their governance and ownership are the only segment of the affordable housing sector that s required to reinvest their financial benefits of rise back into their neighborhoods and people they serve The public-private model of housing maturation was born a generation ago in the face of wavering commitments from the population sector to fully fund the cost of building and operating affordable housing At that time we fundamentally shifted our housing initiative Rather than citizens housing agencies using federal funds to build own and operate population housing we outsourced substantial portions of this process in favor of privately owned affordable housing In current times the populace sector sets protocol priorities and then makes available the inhabitants subsidies and incentives that private developers compete for Broadly speaking the populace sector finances and regulates and the private sector builds owns and operates In New York City where this new public-private paradigm began mission-oriented nonprofits were the first private movers When the Koch Administration in the early s began experimenting with this approach the city was in emergency Neighborhoods like the South Bronx and Central Brooklyn were being abandoned and the city became a major landowner because of tax foreclosures In partnership with the city local nonprofits bought abandoned properties from the city for a dollar and then rebuilt and renovated them into affordable housing bringing neighborhoods back to life This proof of concept was encouraged and replicated nationwide buoyed by the invention of the federal Low Income Housing Tax Credit undertaking in and other financial tools that accelerated information available for this type of public-private partnership model of housing improvement While nonprofits piloted this approach almost this instant for-profit developers entered the field They recognized that companies specializing in affordable housing could make a good business out of it That was by design To incentivize a broader range of enhancement partners to enter the field and address the need at scale our policies made it profitable for them to do so It took patience and nerve to tackle the society processes and secure the necessary incentives but those that could finance and manage the construction process built a real estate asset with limited sphere menace Particularly in high-cost markets like New York City demand for affordable housing outstrips supply by thousands for each unit brought to domain Now that we are a generation into this public-private paradigm we can begin to see how the paths diverged between for-profit companies and nonprofits Private developers took the financial upside and often reinvested in their businesses growing their balance sheets and taking on larger projects Their enterprises took on equity investors to grow their companies And multiple of the early vintage private affordable housing developers cashed out of their companies and became wealthy themselves Nonprofits however took a different path Their organizations were never owned by their principals but governed by volunteer boards They didn t take on equity investors Profits at the enterprise level may have been partially invested back into the enterprises but more often they were used to subsidize the nonprofit s other mission or programmatic work often within the just-completed housing maturation projects themselves Take the example of the Brooklyn-based Fifth Avenue Committee FAC where the authors are executive director Ms de la Uz and board member Mr Marks The organization began in the s as a coalition of local neighbors merchants and block associations to address abandonment in Brooklyn s lower Park Slope neighborhood which had previously been redlined Encouraged by the city under the Koch Administration FAC soon moved into real estate enhancement and by the end of the s the organization owned and renovated just over apartments for low- and moderate-income Brooklynites This year the organization celebrates its th anniversary and its real estate sessions have fueled not just its affordable housing pipeline now over homes but its organizational advancement as well Between FAC and its affiliates their million annual budgets encouragement over low-and moderate-income New Yorkers annually through programs in adult coaching workforce improvement tenant organizing and eviction prevention financial coaching region fitness worker services and first homebuyer assistance to name just a meager FAC has also become a major voice shaping a more inclusive maturation and planning agenda for rapidly changing neighborhoods like Gowanus Its advocacy has resulted in tangible benefits for low- and moderate-income people percent of the units of housing being built in Gowanus as part of the neighborhood rezoning will be permanently affordable and set aside for low- and moderate-income residents and as part of its negotiation with the city FAC and its coalition members secured a commitment of million in much-needed capital upgrades to local general housing The scale and breadth of this work cannot be separated from its real estate sessions Although FAC has secured considerable city and state contract funding and private grants to help its programs generally one-third to half of its revenues in a given year come from earned income and developer fees are a sizable portion of that In short its ability to deliver affordable housing has subsidized its society work In the last three years alone FAC has reinvested nearly million of its earned income directly into programs serving low- and moderate-income New Yorkers But for all the support FAC has plowed back into its locality in the form of services and programs it now operates at a disadvantage when competing for community subsidies against private developers While nonprofit organizations like FAC used the guidance it earned from projects to build up neighborhoods and aid residents private developers used their revenue to build up their businesses and attract equity investors This puts the private developers at an advantage for securing citizens subsidies because a key criterion for winning evolution contracts is the financial maximum of evolution entities As the city and state focus on rapidly increasing housing supply there s a liability that we will miss an opportunity to build housing that builds neighborhoods invests in residents and advances equity at the same time by prioritizing for-profit advancement companies that can build at scale To make sure that we don t miss this opportunity to build neighborhoods not just buildings the general sector should weigh investments in nonprofits differently than investments in for-profits Consideration should be given to the multiplier effects that investing in nonprofits brings to surrounding communities the lives touched and improved beyond the residents of the new housing A more focused understanding of mission financing could focus not just on nonprofit developers but public land trusts limited equity co-ops and other forms of mission-ownership that will keep populace assets invested in the civic sector for future generations not just the current one There s an pivotal role for philanthropy as well Private foundations corporate foundations and individuals should consider building the financial maximum of nonprofits so they have the ceiling and infrastructure to build housing at scale What we re calling for is not only operating grants but investments in nonprofits at the enterprise level This funding would help nonprofits build their financial strength empowering them to develop even more ambitious affordable housing projects that include essential guidance for the people and communities in which they are built Michelle de la Uz is executive director of Fifth Avenue Committee a Brooklyn-based district rise organization Sam Marks is the chief executive officer of FJC A Foundation of Philanthropic Funds and serves on the Board of Directors of Fifth Avenue Committee The post Opinion Why NYC Should Fund The Developers Who Stay Invested appeared first on City Limits