CITY LIMITS INVESTIGATES HOUSING:
HIGH COSTS INTERFERE WITH PLAN

Even more significantly, rising prices might change who ends up living in affordable housing. Higher costs could alter the income groups that housing developers target. While there's broad agreement that this risk is real, there are differing views on what the impact will be. HPD worries that moderate-income families—those earning just under $57,000—will be squeezed out. But some developers believe instead that lower-income families will see their share of the affordable housing pool decrease.

The challenge of higher construction costs comes at a time when affordable housing has been identified as one of the city's most pressing needs. The 2005 federal Housing and Vacancy Survey had 29 percent of New York City households paying more than 50 percent of their income toward rent, an uptick of 3 percent over the 2002 survey. Over those three years, average rents in the city climbed 8 percent while household income slipped 6 percent.

HPD says by keeping a close eye on costs and "value engineering" the projects in its pipeline, it can complete the mayor's plan on budget. But the New Housing Marketplace Plan itself is only one of the Bloomberg administration policies that affect affordable housing creation. Zoning and economic development also play a crucial role, as do tax incentives like the 421-a program. Looking ahead, Albany and Washington, D.C., could also be important players if housing advocates convince the Spitzer administration and the Democratic Congress to push for more housing assistance to the city.

So far, data is limited on what the mayor's plan has delivered. An HPD survey of people who occupied units created in fiscal year 2006 shows the agency falling short of its goals to devote more than two-thirds of the new housing to people making less than 80 percent of area median income, or roughly $57,000. But HPD says the survey is an inaccurate indicator, and under its interpretation of the data, it is exceeding its goals.

While City Hall recently celebrated the completion of funding for a third of the target 165,000 units, the number left to be funded is still sizable – more than exist in the whole city of Newark, for example. What’s more, not all units that have been funded have been built: HPD will have to double its annual amount of new construction over the remaining years of the plan to reach its goal. Meanwhile, the steady loss of affordable units as buildings exit the Mitchell-Lama program and other rent stabilization programs threatens to offset any gains made by the mayor's plan.

Rising construction costs only add to these challenges. Some developers are hoping the Bloomberg administration will re-evaluate its approach given the rising prices. "I think this is a good group of people to have that conversation, but we haven't had it yet," ACORN housing director Ismene Speliotis says of HPD and the mayor's advisers. "They're struggling to make the numbers work."

- Jarrett Murphy