He ran the New York City government program that repossessed run-down real estate and sold the property at low prices to new landlords eager to house low-income tenants responsibly. Jerry Salama practically gave these buildings away, hundreds of them during the 1990s, along with government subsidies to help keep rents reasonable.

When Salama left the housing department, he decided to get into the business himself (with the blessing of the mayor's Conflicts of Interest Board). When the city ran out of abandoned buildings to redevelop and sell, he and his partner in Janus Property Company started looking for real estate to purchase in the private market. "We've been trying to buy multifamily rentals and fix them up--stabilize them, make capital investments, get rid of drug dealers," explains Salama. Subsidies would help them maintain low rents.

City Limits Magazine


November 2004:
New York Unplugged

For a while, the projects kept coming. But with New York City's real estate market too hot to touch, being a savvy and connected entrepreneur just isn't enough anymore. "I haven't been able to buy anything in the last year and a half," Salama laments. Everything is priced way out of reach.

Speculators are now purchasing these apartment buildings for as much as seven and a half times their annual rent rolls. With that kind of overhead, there may not be enough money left over to pay for heat, maintenance and other basics. A lot of buyers don't care--they are looking to flip the buildings within a year or two, for a quick profit. Often they've never even seen the real estate they're purchasing.

Salama's former employer, the Department of Housing Preservation and Development (HPD), is just now trying to figure out how to respond. When Salama met recently with two new men in charge--Commissioner Shaun Donovan and Deputy Commissioner for Development Rafael Cestero--they asked him, "What can we do to help?"

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Lessons in Creativity

There's no shortage of ideas for how HPD and the city's housing finance agency, the Housing Development Corporation, could help build more affordable housing: Give community development corporations (CDCs) immediate access to cash for down payments; offer low-interest bond financing and subsidies; have the city help financial institutions shoulder the risk on loans. And while HPD has succeeded in transferring to private ownership tens of thousands of units of housing that had been taken over for nonpayment of taxes, the City of New York still owns various pieces of property and could make them available for development.

As HPD gears up to address these needs [see "Rafael's Reforms"], its partners in the private sector haven't waited. Determined to keep making new low-cost, high-quality housing available to low- and moderate-income New Yorkers, CDCs, supportive housing organizations and entrepreneurs like Salama are diving headlong into the private market--on their own, without a net.

The creative prevail. When he was looking for a Bronx site last year for a new 118-unit apartment building for formerly homeless people, Eric Galloway, executive director of the Lantern Group, didn't bother looking in a residential neighborhood. He went to an industrial zone in Bathgate and picked up three lots for $925,000. A loan from the Corporation for Supportive Housing tided him over until state financing came through. There was just one problem--he needed a zoning variance to build apartments there, and there was no guarantee the city's Board of Standards and Appeals would grant one. As it happens, it did.