Defining Affordability

Mayor Bill de Blasio stood before a capacity crowd at the downtown Brooklyn Marriott in late March for an assembly hosted by the housing organizing group Metro Industrial Areas Foundation. Many of the audience members had come to hear the mayor lay out his strategy to achieve his stated goal of creating or preserving 200,000 units of affordable housing over the next 10 years, but de Blasio instead spent most of his brief speaking time recapping highlights from the first three months of his administration. Still, in the course of his speech the mayor did hint at part of what his approach may be. 

“We respect the real estate industry, but we need more from the real estate industry for the people of this city … by adding affordable housing into the plans we’ve made with the real estate industry,” de Blasio said. 

While the mayor, to the disappointment of some, did not detail those “plans,” his mention of tipping the scales of real estate in favor of the people, while hardly an original notion, was consistent with de Blasio’s central campaign pledge of taking aim at bridging the city’s yawning income disparity. 

Perhaps the most important factor yet to be addressed by the administration in determining how it will tackle its goal of 200,000 units is how it will define affordable—a critical understanding, yet one upon which housing experts, advocates and real estate developers do not necessarily agree. 

To elucidate the de Blasio administration’s understanding of affordable, it may prove instructive to consider the first—and so far only— major real estate deal it has brokered: the redevelopment of the Domino Sugar refinery on the Williamsburg waterfront in Brooklyn. After pressure from the mayor, Two Trees, the firm that manages the project, agreed to increase the number of affordable housing units in the development in exchange for the permission to build taller towers—a fairly straightforward trade that reflects a model for structuring deals for residential buildings that de Blasio hinted in a closed door meeting with real estate executives several weeks ago would be the norm under his administration. 

The threshold for affordability, as it pertains to Domino and all of the city’s new housing developments, is determined largely by the Area Median Income (AMI) of the New York City region, a metric defined by the U.S. Department of Housing and Urban Development. For the Domino project, 15 percent of the affordable housing units will be set at 40 percent of the AMI, and 85 percent of the units will be set at 60 percent of the AMI. 

The problem with AMI, however, according to experts, is that it can be a misleading figure for allocating housing to those who need it the most—i.e., low-income New Yorkers—because of the wide range of income levels across the city’s five boroughs. 

“You have a lot of sets and subsets in Manhattan. For example, you have the neighborhood I represent, Harlem, and Manhattan is categorized with all the five boroughs, but in addition to all the five boroughs it’s categorized with Rockland and Westchester County, very high-income counties,” said Keith Wright, the chair of the state Assembly Housing Committee. “Let’s say the average income in Westchester is much higher than the average income in Harlem is, so all of those numbers get lumped in together—so the area median income is lifted up because of the Westchester-Rockland numbers.” 

The broad sweep of the AMI scale is why some advocates say that the thresholds for measuring affordability should be set much lower in order to take into account the growing number of low-wage workers in the city, such as those who work in food service and retail. 

“The minimum wage is $16,000 a year—so, forget it, we’re not even building for people that get paid minimum wage,” said Ismene Speliotis, the executive director of the Mutual Housing Association of New York. “You have to have two minimum wage jobs to pay for an apartment. So when I talk about affordability, it incorporates the need for units down to 30 percent of [AMI].” 

Speliotis’ concerns echo a criticism leveled against former mayor Michael Bloomberg’s New Housing Marketplace Plan. Critics of that plan—which created and (mostly) preserved over 165,000 units of affordable housing over 10 years—say that the administration focused primarily on the number of housing units produced as the measure of its success. In other words, the administration made no distinction between the value of a unit targeting a family of four earning a household income of 30 percent of AMI, and one aimed at a family of four earning 165 percent of the AMI. 

Furthermore, a study commissioned by the Association for Neighborhood and Housing Development on Bloomberg’s housing plan found that between fiscal years 2009 and 2011, the city developed a mere 3,049 units for households earning less than 40 percent of the AMI, a demographic that encompasses around a third of all city households. 

But satisfying the housing needs of the city’s lower-income population becomes more complicated depending on where the new housing developments are located, since neighborhood cost of living factors come into play. For example, the real estate developer TF Cornerstone is planning a 1.9 acre residential complex on the far West Side of Manhattan, which would include 1,189 units of housing, 237 of which would be permanently affordable. It is unclear what percentage of AMI the city has determined will be utilized for those affordable units. If the city goes by the Domino standard, those who make 40 percent of AMI—roughly $35,000 a year for a family of four—would have great difficulty affording even staples such as groceries in that neighborhood, where the median income, according to the 2011 Census, is $171,000. 

Building in areas of the city that are affordable for this population presents its own difficulties, namely profitability. Several real estate developers, who were reluctant to speak on the record on the subject until Mayor de Blasio has released the details of his housing plan, indicated that while they are willing to upzone their building proposals in return for increasing affordable housing density, the cost of land in New York City is still prohibitive, meaning it will be difficult for the mayor to meet his 200,000-unit goal with the type of 80/20 developments—80 percent market rate, 20 percent affordable— that are currently the norm in the city. 

“It’s not like building on a sprawling flat suburb where land is cheap and building is cheap,” said Ed Wallace, a former real estate developer and current co-chair of the law firm Greenberg Traurig’s New York office. “You can cut profit a little bit for a developer, but if you eliminate profit, they’re not going to want to build.” 

Of course, keeping real estate companies profitable is hardly the concern of housing advocates, nor does it seem to be the paramount priority of some members of the city’s newly elected, more progressive government, who will likely be less amenable to “giving away the store” to developers—the perception that many hold of the Bloomberg administration’s record. 

“Profitability can’t be the only thing we are doing here,” said Jumaane Williams, chair of the City Council Housing and Buildings Committee. “I want people to make money, I just don’t want them to make all of the money on the backs of people who also need assistance in living here. So a lot of developers get a lot of assistance to build what they are building, but they have a problem when they want to trickle some of that assistance down to people who really need it.” 

These competing views are an indication of the tightrope that de Blasio will have to walk as he and his Deputy Mayor for Housing and Economic Development Alicia Glen determine the evolving definition of affordable housing. Their ambitious 200,000-unit goal will likely depend on it. 

Azure Gilman and Jon Lentz contributed reporting.