AFL - CIO HOUSING INVESTMENT TRUST NEW YORK CITY HOUSING INVESTMENT STRATEGY

Transcription

1 AFL - CIO HOUSING INVESTMENT TRUST NEW YORK CITY HOUSING INVESTMENT STRATEGY October 15, 2015

2 When it comes to promoting affordable housing and generating new jobs in our City, Economically Targeted Investments are a crucially-important tool. The HIT s model shows that we can create the housing we need and also generate safe returns on pension investments. That s why I m happy to continue the New York City Pension Funds long and proud history by contributing an additional $150 million to the HIT as part of their commitment to invest $1 billion in New York s affordable, union-built housing over the next seven years. It s a fiscally smart marriage of resources and housing policy, and I m pleased that the New York City Pension Funds will play a pivotal role in this effort. - SCOTT STRINGER, Comptroller, City of New York The HIT has been a friend and ally of New York City for decades. As a lifelong New Yorker, I am proud to be its Chairman. - RICHARD RAVITCH, Chairman, HIT, former Lieutenant Governor, State of New York The HIT is committed to New York s working families. The HIT has created thousands of jobs for members of our building and construction trades unions, and has helped to preserve and create affordable housing for the working men and women of this great City. The demand for affordable housing in New York City is higher than ever. The HIT s new $1 billion commitment could not come at a better time. " - VINNY ALVAREZ, President, New York City Central Labor Council "One of the most critical issues facing working families in New York City is affordable housing. I commend HIT its commitment to addressing the lack of affordable housing in our City." - LETITIA JAMES, Public Advocate, Office of the New York City Public Advocate We look forward to a long-term partnership with labor to provide jobs and affordable housing to our communities. - BISHOP ANGELO M. ROSARIO, Chairman and CEO, Bronx Clergy Task Force The issue here really is very, very simple and very clear. There is tremendous power in our pension funds. We can use the power of our pension capital, not only to put our members to work and create more hours for our funds, but ultimately to be able to have an environment where our members can live affordably in good, affordable units and stable communities. - GARY LABARBERA, President, Greater New York Building and Construction Trades Council The HIT has been a sound investment and a great partner in financing projects and creating family-supporting union jobs for the members of IBEW Local 3. We look forward to working with the HIT during the next phase of their commitment to New York City. - CHRISTOPHER ERIKSON, Business Manager, IBEW Local Union 3

3 THE AFL-CIO HIT s $1 Billion Commitment: The New York City Housing Investment Strategy The AFL-CIO HIT has held several months of discussions with key stakeholders in developing a response to the challenge of affordable housing in New York City. They include affordable housing developers, labor leaders, government officials, the Comptroller s office, community groups, and other organizations. The result of this ongoing dialogue is the New York City Housing Investment Strategy, a three-part program designed to help finance the preservation and construction of up to 20,000 affordable housing units across New York City. The Strategy will build on the success of the HIT s prior investment programs in the City. It will take seven years to accomplish and will produce more than $2.5 billion in total economic impact, including 14,700 jobs across industries, with 7,300 on-site union construction jobs. When completed, the HIT will have financed more than 50,000 affordable units in the City. I. Preservation of Affordability for 12,500 to 15,000 Housing Units As part of the New York City Housing Investment Strategy, the HIT will begin implementing its preservation program this fall with a goal of financing the preservation of up to 15,000 affordable homes over the next seven years. The primary objectives of this part of the Strategy are: Preservation of affordable housing options for low- and moderate-income residents. Preservation of those affordable housing developments in need of renovation through HIT rehabilitation financing. Maintaining a strong labor union role in housing by helping to preserve housing originally sponsored by organized labor in New York City, which currently house thousands of New York City working families. The HIT has considerable experience financing preservation of affordable housing, particularly in New York City. Of the 31,000 units financed by HIT during the New York City Community Investment Initiative Phases I and II, and the Workforce Housing Initiative, the HIT preserved more than 23,000 affordable and workforce housing units at 28 housing projects since Preservation of housing stock at Mitchell-Lama and Limited Dividend developments is the key to preserving affordable housing in New York City going forward. Mitchell-Lama and Limited Dividend projects were built prior to Of the 149,000 units originally built, an estimated 40,000 units have opted out of these programs, and 77,000 units are potentially eligible to opt out. Many of the units in this inventory would benefit from repair and refinance. 1

4 By using its direct lending authority to make short-term, low loan-to-value, first lien direct loans, the HIT can help affordable/workforce housing developments in New York City to remain affordable and to make critical repairs. Investments totaling $146 million were made to Electchester Housing Companies in Queens (2012), Amalgamated Warbasse in Brooklyn (2013) and Harry Silver Housing Corporation (2015, shown) also in Brooklyn. These loans have been or will be taken out by permanent financing through banks or other entities, which could include the HIT. To finance preservation projects, the HIT also has the ability to invest in government-sponsored enterprise guaranteed and Federal Housing Administration insured loans as well as municipal bonds, such as those issued by the New York City Housing Development Corporation (HDC). Please see Appendix A for more information on recent HIT-financed preservation projects. The HIT will target between $300 million and $400 million for preservation projects as part of the New York City Housing Investment Strategy. II. New Construction of 5,000 to 7,500 Housing Units The HIT also intends to invest in transactions that can have substantial and positive impact on the City s new supply needs, provide a significant number of workforce housing units and thousands of on-site union construction jobs. While the HIT will seek to identify such projects throughout the City using its traditional network of developers, mortgage bankers and City officials, it plans to enter into a partnership with the United Clergy Task Force, taking a more programmatic approach to UCTF s development pipeline. The United Clergy Task Force was recently founded to assist local houses of faith in developing their communities through the building of sanctuaries, schools, community centers, care facilities, and low and moderate income housing. A coalition of union labor and development groups, the UCTF has identified seven faith-based institutions and created a pipeline of mixed-use projects. The links between these communities of faith, affordable housing developments and the labor movement are strong. These seven faithbased institutions have a combined total of 8,500 members, 30% of which are union members. Additionally, 38% of their members live in New York City Authority Housing (NYCHA) properties. Each institution has served as a community anchor for decades and wishes to increase its ability to provide social services and economic opportunities for its respective blighted community. The focus of these projects is to provide each community with quality 2

5 housing affordable to working families, modern schools, and public recreation facilities and to do so in a way that maximizes the local economic impact in a sustainable manner. Each project will be built with a union workforce with participation and training for community residents. UCTF intends not just build mixed-use projects but to provide careers to people through a pre-apprenticeship program in a comprehensive community development effort. Together, these seven developments could create more than 840 additional units of affordable housing throughout New York City generating more than $325 million of development and creating nearly 1,500 union construction jobs. HIT s investment could exceed $250 million. The projects in this pipeline are in line with New York Mayor Bill de Blasio s Housing New York Plan, which calls for increased up-zoning in the outer boroughs to accomplish his goal of building 80,000 units of affordable housing over the next ten years. The Labor movement and the HIT consider this faith-based communities approach to the affordable housing problem the most unique and forward-looking community development initiative in the country. It could very well be a model for other cities to follow. The HIT will target $400 million for affordable housing construction. When other required sources are considered, this element of the Strategy will represent more than $600 million of development investment. III. Working with City and State Agencies to Finance Affordable Housing and Improve Existing Public Housing The HIT will continue to work with New York City and New York State agencies to finance new construction, substantial rehabilitation, modernization of affordable and workforce housing and improvements to public housing in the City. These agencies include: New York City Housing Authority (NYCHA) New York City Housing Development Corporation (HDC) New York City Housing Preservation and Development (HPD) New York State Homes and Community Renewal (HCR) New York State Housing Finance Agency (HFA) As an example of HIT s ongoing relationships with these agencies, the HIT has purchased $135 million of HDC bonds between 2008 and Further, HIT staff meets 3

6 monthly with HDC staff to discuss future bond offerings and potential workforce housing projects. The HDC bonds the HIT has purchased have helped to finance 8,753 affordable or workforce housing units at 19 developments. Fourteen of these projects preserved 8,325 affordable/workforce units, while five projects constructed 428 new units. The preservation bonds included $21 million purchased in 2010 to help to finance renovations at three NYCHA projects, The Stapleton in Staten Island, and The Boulevard and The Bayview in Brooklyn. These projects have a total of 3,726 housing units affordable to very low-income families. The HIT will work with NYCHA leadership to identify investment opportunities. NYCHA recently signed a project labor agreement (PLA) with the New York City Building Trades, requiring union labor on construction work at its projects for more than $3 billion of construction over the next three years. NYCHA recently received $3 billion from FEMA to repair and protect from additional flood destruction 33 developments severely damaged by Superstorm Sandy in However, NYCHA needs up to $18 billion in additional capital beyond the FEMA grant to make critical repairs and modernize its 30- to 70-year old buildings. The HIT expects to continue to provide capital by its purchase of bonds financing NYCHA modernization in the period ahead. The HIT will work to develop an innovative program to finance the NYCHA modernization work. Under consideration is an approach that would have the HIT provide the primary financing of NYCHA s low-rise housing developments. In addition to working with NYCHA to address the capital needs of its existing housing stock, the HIT is also reviewing the requests for proposals that NYCHA is putting out for use of its land for new affordable housing projects. The HIT is looking for opportunities to work with local developers to construct new affordable housing on NYCHA land. The HIT will target between $250 million and $400 million for these kinds of investments. HIT s Commitment to New York City Accomplishments during NYCCII The New York City Community Investment Initiative (NYCCII) Phase I was started in 2002 with an initial goal of $250 million of HIT investment in multifamily projects. That goal was met during 2005, resulting in the creation or preservation of 12,337 units of housing with an estimated value of close to $1.2 billion. 4

7 After its completion, the HIT launched Phase II in 2006, with another $250 million goal. This phase was completed in 2013 with an investment of nearly $355 million of HIT capital, creating or preserving 9,297 additional housing units. At the request of the New York City Comptroller s office, a related Workforce Housing Initiative was launched in 2009 with a goal of creating or preserving 5,000 to 10,000 workforce housing units to meet the dire shortage of affordable housing for working families throughout the City. This initiative has met its goal by creating or preserving 9,135 workforce-housing units. Through September 2015, the HIT has: Invested nearly $900 million in 43 projects in all five boroughs of New York City. Created or preserved over 31,000 units of housing, of which 96% are affordable or workforce housing. Supported the preservation or creation of housing with a total estimated value of more than $5.7 billion. Created some 9,600 jobs across industries, including 4,830 union construction jobs. The next phase of the HIT s commitment the New York City Housing Investment Strategy has a goal of financing 20,000 housing units affordable to working families and low-income people over the next seven years. The HIT expects to finance the preservation of 12,500 to 15,000 existing housing units and 5,000 to 7,500 new housing units. The HIT estimates that it will invest more than $1 billion of its capital in New York City to meet these objectives. Initiative HIT Initiatives in New York City 2002 through September 2015 Total Housing Units Low/Mod. Or Workforce Housing Units HIT Investment Estimated Value NYCCII Phase I 12,337 12,024 $249,123,500 $1,158,400,000 NYCCII Phase II 9,297 8,673 $354,968,100 $1,970,785,437 NYCCII Total 21,634 20,697 $604,091,600 $3,129,185,437 Workforce Housing 9,465 9,135 $293,597,000 $2,632,800,078 Total to date 31,099 29,832 $897,688,600 $5,761,985,515 5

8 Economic and Fiscal Impacts of HIT s Construction-Related Activity on New York City Significant economic and fiscal impacts on New York City s economy have resulted from construction and rehabilitation of 18 HIT-financed projects between 2002 and September Total economic activity generated is estimated at $1.6 billion, with 9,600 jobs created across industry sectors. 1 The creation of union construction jobs through new construction and substantial rehabilitation projects is an important collateral benefit of the HIT s investments. The economic benefits do not end with the on-site employment, but continue to ripple through the local economy as the project moves through permitting and construction. The HIT s investments leverage additional spending for construction, which provides wages and benefits for union construction workers and others such as architects and engineers. Businesses directly impacted by the spending buy goods and services from other businesses, which in turn generate additional sales, jobs, and income for others. In addition, increased purchasing power for families directly and indirectly impacted by the construction lead to still more spending on goods and services, impacting other sectors of the economy. Over the past 13 years, the HIT s investments have resulted in: $1.6 billion in total economic benefit 9,600 total jobs across industries 4,830 union construction jobs $676 million in personal income, including wages and benefits $108 million in state and local tax revenue generated to purchase goods and services for local residents The HIT s $1 billion new commitment should result in the following impacts over the next seven years: $2.6 billion in total economic benefit 14,700 total jobs across industries 7,300 union construction jobs $1.0 billion in personal income, including wages and benefits $227 million in state and local tax revenue generated to purchase goods and services for local residents 1 Estimates of economic and fiscal benefits in this section were calculated by Pinnacle Economics and the HIT, and are in 2014 dollars. 6

9 Conclusion The HIT has helped New York City to preserve and build over 31,000 units of housing, 96% of which are affordable to low and moderate income families, since Many of these projects came to fruition after months or years of working with developers and sponsors. To execute this new strategy to build and preserve 20,000 housing units over the next seven years, the HIT will use its expertise, relationships, ability to provide flexible financing, and long-term perspective to assist the City in meeting its needs for affordable and workforce housing. 7

10 Appendix A: Recent HIT-Financed Preservation Projects Since launching the New York City Community Investment Initiative (NYCCII) in 2002, the HIT has preserved more than 23,000 affordable and workforce housing units. Over the years, the HIT s preservation program has evolved as the conditions of New York City s affordable housing stock have changed. In the early years of the program, many of projects required debt restructuring in order to maintain affordability with very little need for rehabilitation of the property. Because many of these projects had significant capital reserves, the projects were well maintained. However, in recent years, the HIT has seen more projects in disrepair that were in need of an immediate infusion of capital to rehabilitate and stabilize the project. Since 2011, the HIT has invested in four projects that exemplify the changing needs of this aging housing stock. Penn South Chelsea, Manhattan (2011 and 2014) This large and centrally located property of 2,820 units was in significant need of repairs. In 2011, the HIT invested in a $134 million Fannie Mae mortgage-backed security (MBS). The majority of the funds were utilized for the replacement of the HVAC system and removal of asbestos. Residents voted to keep prices restricted until 2030 in exchange for continued property tax abatement and City-provided subordinate financing. In 2014, the HIT purchased a supplemental MBS of $45 million to complete HVAC work and replace lobby ceilings, refurbish lobby walls and complete ground floor mechanical work. Electchester Housing Flushing, Queens (2012) This union-sponsored cooperative consists of five separate ownership entities with a total of 2,399 units. In late 2012, the HIT provided a direct loan of $49 million to take out the existing high interest rate mortgage loans and provide funds to begin needed repairs and upgrades to the buildings. The term of the loan was up to 24 months. The loans were paid off in the second quarter of 2014 when the ownership entities were able to secure conventional long-term financing. Amalgamated Warbasse Coney Island, Brooklyn (2013) This cooperative, consisting of 2,583 housing units affordable to working people, suffered significant damage in October 2012 as a result of Superstorm Sandy. In early 2013, the HIT committed $89 million for an interim loan to take out the existing loan and begin emergency repairs needed to relocate the buildings 8

11 transformers above the flood plain. The loan was paid off in early 2014 when the cooperative was able to secure permanent financing. Harry Silver Housing East Flatbush, Brooklyn (2015) This 288-unit development had fallen into disrepair and its permanent loan term ended in December After securing a short-term extension from the lender, the project s new management team approached the HIT to provide an $8 million loan for 18 months. The low loan-to-value, strictly underwritten first-lien direct loan is being used to retire the existing loan and provide emergency repairs on the project. The HIT management team intends to assist the owner in securing a fixed-rate permanent loan. 9

12 AFL-CIO Housing Investment Trust 2401 Pennsylvania Avenue, NW, Suite 200, Washington, DC Phone (202) Fax (202) October