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CityLaw Breakfast: Shaun Donovan

New York City has always had housing challenges, but those the City faces today are “fundamentally different” from those that existed in the past, Shaun Donovan, Commissioner of the New York City Department of Housing Preservation and Development (HPD) told a capacity audience at a CityLaw Breakfast on Friday, October 20.

Mr. Donovan explained that 1977 was a “touchstone year” in the history of affordable housing development. During the World Series that year, sportscaster Howard Cosell had a camera pan from Yankee Stadium to the burned-out buildings in the surrounding neighborhood and declared. “Ladies and gentlemen, the Bronx is burning.” That also was the year that President Jimmy Carter made an historic visit to Charlotte Street in the South Bronx, and as a result, that site became the epitome of New York’s affordable housing crisis across the nation.

During the 1970s, Mr. Donovan continued, parts of the Bronx lost 75 percent of their housing. Abandoned and burned-out buildings were common sights. Eventually, HPD took over more than 100,000 units of housing. Although HPD is dedicated to development, not management, the agency eventually owned 60 percent of the housing in Harlem.

The great challenge of affordable housing became “fuel for a housing renaissance,” Mr. Donovan said.

HPD initiated a program of renovating abandoned housing and constructing new buildings that is ”one of the great untold stories of success,” according to Mr. Donovan.

Citing such examples as the new buildings constructed in Melrose Commons and the renovation of housing on Boston Post Road, both in the Bronx, Mr. Donovan told the audience that as housing stock grew, so did the population of the area. During the 1970s, he explained, the City lost the equivalent of the entire population of Boston or Washington, D.C. In 1970, the population of New York City was almost eight million people, Mr. Donovan noted. In 1980, the population had fallen to just over seven million. In 2000, he said, the City’s population rebounded back to eight million people, due largely to “a scale of immigration we haven’t seen since the Ellis Island days.”

The housing market has gone up tremendously in recent years,” Mr. Donovan stated. Currently, the City has “the highest level of housing production since the 1970s.”

Mr. Donovan added that this expansion is not confined to Manhattan.

“In fact, I think the real story of resurgence is in the other four boroughs,” he said, and explained that this amazing expansion is driven largely by the rebuilding of formerly decimated neighborhoods.

The challenges the City faces today are “a problem of success,” Mr. Donovan said, and defined the primary issue as “the challenge of housing affordability.”

Currently, New York City is experiencing a housing gap of approximately 100,000 units, and projections indicate that the City’s population will grow by 400,000 people per decade, Mr. Donovan commented. Concurrently, City-owned seized properties have been reduced from 100,000 units to 1,500 units.

“We’re running out of the very resources we have used to create affordable housing,” Mr. Donovan noted.

In addition, while some neighborhoods remain troubled, rising rents put increased pressure on landlords to abandon programs, such as Mitchell-Lama, that control rents.

Mr. Donovan said that Mayor Bloomberg began to address this issue in 2002 with a five-year, $3 billion plan to create 65,000 units of affordable housing. In January 2006, the Mayor revised the plan to create 165,000 units of affordable housing in ten years at a cost of $7.5 billion.

This is, Mr. Donovan said, the largest housing plan of any U.S. city ever.

To make the plan succeed, New York needs to develop new resources and strategies.

Mr. Donovan outlined four points to be considered. The first is finding new land for affordable housing, which will require rethinking land use strategies, developing more interagency partnerships, looking at current public housing sites as locations for additional development, and considering the use of under-utilized City land, including some municipal parking lots or sites of former mental hospitals.

Mr. Donovan’s second point is the need to create incentives to develop housing for new populations. He explained that the City is purchasing the Queens West site to build the largest middle class housing in New York since the construction of StarrettCity in Brooklyn decades ago. This housing will be available to families with incomes ranging from $60,000 to $145,000 per year.

New York City and State also have a $1 billion agreement to finance and develop 9,000 new units of supportive housing for a variety of populations, including families with disabled heads of households, youth aging out of foster care, individuals with substance abuse disorders, people with HIV/AIDS, and people with mental illness. Mr. Donovan said that while the cost of maintaining a person in a shelter can be exorbitant, supportive housing reduces the use of shelters, jails and emergency services enough to make its cost less than $100 per month.

Harnessing the private marketplace to create affordable housing represents a “signature change,” Mr. Donovan remarked, and is the third factor that must be addressed. Rezoning initiatives have spurred the development of sites, including the Hudson Yards, which will contain 14,000 new units of housing, the High Line/West Chelsea area, which will have 5,000 units of housing, and the Greenpoint/Williamsburg area, which will gain 11,000 new units of housing.

Mr. Donovan explained that the City has pursued inclusionary zoning, which gives private developers incentives if affordable housing is part of their projects. He said that studies clearly show that the return to developers is better than if they create only market rate housing. Mixed income communities also are important, Mr. Donovan noted, because these kinds of neighborhoods “give New York City its strength.”

Finally, Mayor Bloomberg has proposed changes to the outdated 421-a property tax exemption program that will generate new tax revenues to fund affordable housing.

Mr. Donovan’s fourth point is the need to preserve government-assisted affordable housing in New York City. He said HPD was working in partnership with foundations and banks to create a $230 million Acquisition Fund to buy sites and preserve them or build new government-assisted housing units.

During a question-and-answer period, Mr. Donovan addressed a number of significant issues. He agreed with one audience member that building in New York City always is controversial and required partnerships with tenants, local community boards and others. It is essential, Mr. Donovan commented that the actions taken “benefit not only the City, but also the residents.”

In response to another question about whether rent control and stabilization were threatened, Mr. Donovan said that the number of rent regulated units in the city actually has increased because of new regulated housing being constructed. He added that rent regulation is not really a solution to the need for affordable housing because “there are limits to what rent regulation can do. It will not create new housing.”

Another speaker who identified himself as a real estate agent argued that rent control and stabilization “strangle” affordable housing.

“It is very hard to show any evidence of that,” Mr. Donovan countered. He added that both the amount and quality of housing has gone up during rent regulation, a phenomenon that could not occur if rent regulation was, in fact, “strangling” affordable housing.

Finally, Mr. Donovan agreed with an audience member who pointed out that transportation improvements may be needed to make some of the sites to be developed with affordable housing more easily accessible to potential residents. One such example, Mr. Donovan said, is the extension of the #7 subway line to the Hudson Yards site.