By Erik Brush
Editor, iD World
Pandemic Rental Aid was funded through the NYC Budget Stabilization Fund, the Special Supplemental Budget for Health Care and Food Security (GISHA), and the Mayor’s Rental Assistance Program. The program provides cash grants to landlords to cover uninsured real estate assessments. Rental assistance supports the housing stock of low- and moderate-income households, particularly those displaced by the 2007-2008 NYC housing crisis. It can enable these households to rent housing that might otherwise have been inaccessible to them.
New York’s sustained economic recovery is enabling a return to normal rental rates. Year over year average rent in midtown Manhattan increased 4.8 percent from 2016 to 2017, and 5.2 percent between 2015 and 2016. Rent decreases were reported in the East Village, Williamsburg, Greenpoint, the Bronx, and in portions of Brooklyn.
These increases have put increasing strain on the New York City Department of Housing Preservation and Development’s (HPD) lending programs. Before 2008, the agency was able to finance new apartment buildings via HPD – direct HPD loans helped spur the development of 275 developments totaling 36,574 rental units that are now subject to Rental Assistance. This year, 35 percent of new affordable rental housing is funded by Rental Assistance, which is comparable to the support provided in 2006-2007, before the financial crisis hit. The financing gap, a dollar for dollar replacement of Rental Assistance, remains at 11 percent.
The Rental Assistance Program contains several mechanisms for reducing this gap. Beginning in 2009, HPD began working with these construction projects to convert some loans into actual construction loans. Today, more than $5 billion in loans are funded through the program, but these loans have contributed to the 14,000 affordable housing units lost to vacancy since 2009.
And these small loans contribute to a risk related to a still growing number of over-development projects in high-demand New York City neighborhoods. Last week, HPD announced a modification to the requirements on subsidy-receiving non-profits, which now provides them with unprecedented refinancing opportunities. The changes will pave the way for some of these institutions to reduce the over-development of these locations, while at the same time making it easier for them to weather future storms.
The Housing Opportunity Grant program is also important because it supplies a means to give rental assistance to residents in communities with a growing minority and low-income population. And it continues to find ways to respond to the market, not only in areas hardest hit by the financial crisis, but in lower income areas and places with higher poverty rates. Even when other funding is strained, HPD remains available to fund these communities with Section 8 vouchers and rehabilitation projects.
Because these programs remain effective, there has not been pressure to reduce the amount of rental assistance to residents in these communities. And, in the cases where they have been reduced, there has been pressure on these programs to match funding with housing crisis-specific needs. For example, because of New York City’s housing crisis, nursing homes were unable to secure funding for land redevelopment and foreclosure counseling. In Brooklyn and Staten Island, now that these projects have received funding for these services, they will be able to take down the last of the foreclosed properties in those communities and reverse the blight.
HPD is currently in a budget crunch, and may not be able to adequately cover the gap for existing programs that require significant resources or even new partnerships. To assist in plugging this gap, Mayor de Blasio has also proposed to secure non-homeless rental assistance through the new Rental Assistance Opportunities Fund (RFOF), which aims to raise $300 million per year in an 8 year period to fund housing vouchers, demolitions and rehabilitation projects. Once finalized, the RFOF would complement existing rental assistance programs while offering tenants a valuable assistance program to cope with home price increases. In addition, the new RFOF would provide credit enhancements and leverage capital to build affordable housing, in contrast to the poor success of New York’s Rural Housing Investment Corp. effort, which relied solely on loan leveraging.
As housing prices continue to rise, the future of the Rental Assistance Program is at risk. Other states have been able to pay for programs by enacting rent stabilization policies, so New York should consider requiring landlords to remain in compliance with existing laws in a system that addresses the unique needs of different neighborhoods. Currently, landlords can refuse to rent homes to individuals without checking if they’re eligible for this program or pay a penalty for failing to comply. Doing so is completely unacceptable, particularly in neighborhoods where