Comments (25)

Aug 1, 2022 - 2:56am
flipcre, what's your opinion? Comment below:

Gov program that is trying to build something that is "affordable." What do you expect?

Aug 1, 2022 - 1:14pm
Ozymandia, what's your opinion? Comment below:
flipcre

Gov program that is trying to build something that is "affordable." What do you expect?

It's a private developer, though, so I don't think this is the argument you think it is...

Aug 1, 2022 - 1:13pm
Ozymandia, what's your opinion? Comment below:

PEarbitrage

Average price per home in the Bronx? $349,000.   No corruption to see here. 

Could you source the project?  I assume you're talking about Starhill, which is actually supportive housing, which means much deeper affordability than the typical 60% AMI housing and additional services and amenities (and by amenities, I mean non-profits on site helping out with residents).

More to the point, what exactly is the "corruption" you're alleging?  The idea that it costs more money to construct a modern, code compliant rental building than it does to buy decaying older housing stock isn't exactly rocket science.  And even if you think there is cost inflation (certainly possible), why would you use the scare quotes for "Affordable Housing"?  What about the housing isn't affordable?  

EDIT: Also, can you show a source for that average home price?  Redfin says the median sale price is north of $600,000 in Bronx County; obviously there can be a fair bit of daylight between a median and an average (though I'd argue the median is a more accurate number for the purpose of this conversation), but to be nearly double seems unlikely.

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Aug 1, 2022 - 7:42pm
PEarbitrage, what's your opinion? Comment below:

The point is you could buy 330 homes in this area and completely renovate them cheaper than this project.  I am predicting that the 198M budget will likely end up closer to 250M by the time this is done.

  • Associate 3 in RE - Comm
Aug 1, 2022 - 8:17pm

Right, this has been debated before on this forum, but I completely agree. For the same amount that it costs to provide X number of brand new affordable units, you could provide 1.5X or 1.75X affordable units in older buildings in the same area. The affordable housing advocates will protest that this isn't "equitable", but in pursuit of equity they're creating fewer overall units, and many lower-income people get nothing.

I live in an older building in a nice area myself. It's fine. This is exactly the type of building where affordable units would be provided in a more rational system. Instead, the building is totally market rate and nearby developers doing high-end projects are stuck with 10% or 25% affordability at 80% AMI. Creating nicer, but fewer, units.

A big part of the explanation is that many affordable housing people are more motivated by the idea of socially engineering lower-income people into certain locations than they are by the idea of maximizing the amount of housing created.

Aug 2, 2022 - 3:04pm
Ozymandia, what's your opinion? Comment below:

Right, this has been debated before on this forum, but I completely agree. For the same amount that it costs to provide X number of brand new affordable units, you could provide 1.5X or 1.75X affordable units in older buildings in the same area.

You can assert this all you want but that won't make it true.

The affordable housing advocates will protest that this isn't "equitable", but in pursuit of equity they're creating fewer overall units, and many lower-income people get nothing.

No one is stopping you or anyone else from creating new units.  I mean, you're making the same obviously inaccurate argument as PEarbitrage.  The market isn't creating new units and the existence of subsidies has nothing to do with that.  And for what it's worth, not that you know or care, there is a massive argument going on in government and the private sector in NYC in regards to exactly the argument you are making - e.g. is is better to create more units in the outer boroughs or fewer and avoid the same exact problems we ran into with Robert Moses in the 60s, whereby the poor were relegated to the edges of the city?

But the larger point remains that either market forces are working to create new housing, or they aren't.  Your laughable assertion that you could create 75% more housing by buying existing buildings is just that - a joke.  When you show me that underwriting, that gets 495 units (50% more) to a new-construction standard of renovation, with services, for under $200mm, I'll bow down and acknowledge you as the greatest developer in the country.  You know why?  Because it isn't possible.  At the end of the day, the only economic way to build this kind of housing is to subsidize it, and nothing either you or PEarbitrage have said (or more accurately, baseless asserted) has pointed to an alternate route to getting housing built.  Yes, in an ideal world, we'd have enough housing and the market would adjust.  We're not there, and won't be for years and years and years even under ideal circumstances.  In the meantime, this is the best way to go.

I live in an older building in a nice area myself. It's fine. This is exactly the type of building where affordable units would be provided in a more rational system. Instead, the building is totally market rate and nearby developers doing high-end projects are stuck with 10% or 25% affordability at 80% AMI. Creating nicer, but fewer, units.

How are they doing fewer units?  Explain that to me.  They're not being forced to build 80% of the density - they're being forced to set aside a certain number of units, either in return for higher density or for a tax abatement.

Again, this argument sounds nice until you actually read it.  It doesn't make any sense.  Subsidizing the construction of new housing isn't somehow removing it from other places, and buying and rehabbing units in your building isn't increasing the housing stock, either.  What, exactly, are you arguing for, and why is this project garnering your ire?

A big part of the explanation is that many affordable housing people are more motivated by the idea of socially engineering lower-income people into certain locations than they are by the idea of maximizing the amount of housing created.

This is partly true, but unlikely in the way you mean it.  This seems like another tired talking point that you hear from the right wing all the time; "housing activists/proponents of active government/etc are the real racists, the real evil people, all they care about is control."  As if this isn't something that isn't discussed all the goddamn time.  So yes, there is some interest in "social engineering" because the history of development in this country, both private and public, has conclusively and repeatedly proven that left to it's own devices, will opt for de facto segregation.  So NYC, at least, has made a point of occasionally not opting to maximize the number of units, so that it creates vibrant mixed income communities and doesn't send every poor person to the Bronx, or the Rockaways, or Brownsville.

That being said.... this project is in the Bronx.  It is maximizing the number of units to be built, given it's location.  All the objections and outrage about the price tag are premised on this idiotic, completely uninformed notion that somehow spending $600k/door to build a modern, code compliant building with on-site services is too much.  And to back this up, we have one person with one obviously fictitious number asserting that his unknown, unnamed firm could do it for half the announced cost - you know, despite spending, by his own admission, more than that.  Think about that.  PEarbitrage could have made up any number in the world, and even so, he wasn't so oblivious as to choose a number that truly supported his argument.

  • Associate 3 in RE - Comm
Aug 2, 2022 - 4:47pm

There are a few different things going on here. I'll respond to this at length later, probably in a new post, because I think it requires laying out some numbers to make it clear what I'm saying.

I will say right off the bat, though, that I'm not advocating for affordable housing to be built to "a new-construction standard of renovation, with services" or in the same location. To the extent that it's provided, I think it should be within the same distance of jobs and other opportunities and at a reasonable standard of quality. But there is absolutely a tradeoff between location/premium construction and total number of affordable units created. I'm not in NYC, and there is no such argument going on about this in my area. The advocates' push is strongly for affordables to be in the premium spots.

Aug 2, 2022 - 5:24pm
Ozymandia, what's your opinion? Comment below:

There are a few different things going on here. I'll respond to this at length later, probably in a new post, because I think it requires laying out some numbers to make it clear what I'm saying.

I would love to see that.  I mean that without an ounce of sarcasm - if it's possible, it'll be interesting to see how and if it's possible to export those lessons to NYC.

I will say right off the bat, though, that I'm not advocating for affordable housing to be built to "a new-construction standard of renovation, with services" or in the same location. To the extent that it's provided, I think it should be within the same distance of jobs and other opportunities and at a reasonable standard of quality.

Well, part of the issue is that when you say "hey, affordable housing doesn't need to be built to the same standards as market rate housing" you start to teeter on the edge of a very steep, very slippery slope.  Again, we've been here before.  We know what happens.  Building codes and zoning regulations - all of that exists in the first place because developers couldn't be trusted to build safe, livable homes, especially not for the urban poor.  None of the red tape that bedevils developers sprang up out of nowhere; they were rational responses to specific issues (though they may have had knock on negative effects, I'm not here to defend all regulation).

More importantly, who is doing the building?  It's all well and good to say that maybe affordable housing should be built outside NYC but in commuting distance, but that runs into a lot of issues about municipal priorities and funding.  Sure, it would be better to build 1,000 units in Rockland County (relatively low cost suburb of NYC) right next to an MTA station; functionally, why are Rockland County officials allocating time and resources to helping NYC find places to put affordable housing?  That kind of intelligent urban planning is a victim of a highly and deliberately fragmented political system.  And within NYC, it's not that much cheaper to build in Pelham Bay than it is in Kips Bay.

But there is absolutely a tradeoff between location/premium construction and total number of affordable units created. I'm not in NYC, and there is no such argument going on about this in my area. The advocates' push is strongly for affordables to be in the premium spots.

There is no such thing as "premium construction" in affordable housing.  Everything gets value engineered down.  There are additional costs when building senior-focused buildings, or supportive housing, like putting roll-in shower/tubs, grab bars, accessible kitchens, etc.  But that isn't the same thing.  In NYC, which I know isn't your market but is what I know and where the project which OP complained about is, there is essentially a soft maximum of how much one can pay for land before the project becomes unfinanceable for a variety of reasons.  

As for your market and the preferences of tenant advocates there... well, what's the history?  Does your municipality have a history of redlining?  Is there good public transit?  If you want to relegate poor folks to live an hour outside the city, you have to also think about whether they have any means of getting where job opportunities are (which you do mention in passing).  As I said, NYC has a distinct and documented history of pushing affordable housing out of the desirable parts of the city and to the fringes, which led to a lot of urban decay and effective segregation.  That may not be true wherever you live and work, but at least learn the lesson that we did, which is that kind of economic segregation, as much as it sounds like a plus from a creation of more units standpoint, can really eat away at the social fabric of a city.  As with many things in life, some kind of middle road is preferable, whereby you are trying to build a lot of housing but also maintain mixed-income communities.

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  • Associate 3 in RE - Comm
Aug 2, 2022 - 5:48pm

Okay, I'll write something up. Some of the disagreement may come because we're talking about different things. For example, your comment that "there's no such thing as 'premium construction' in affordable housing" does not match my experience.

We do high-end projects in expensive areas where land costs are very high and you need to hit premium rents to make the deals pencil. So that requires a premium amenity package, nice unit finishes, etc. We're generally forced to do a significant number of affordable units or else we won't be granted a permit at all. That's the norm for larger residential projects in my region now; it has no connection to LIHTC or anything like that.

In these projects, we have state and local bureaucrats breathing down our necks to make sure that we don't make the affordable units less nice than the (very high rent) market units in any meaningful way, and distribute them proportionately with respect to location and number of BRs. Some lucky 80%, 70%, or even 50% AMI people are getting the same amenities, finishes, and appliances that people paying $4700 a month in rent are getting. (And that I don't get myself- not that I'm complaining, only pointing out that there's a big range between a unit marketed to a dual-income tech couple and a derelict slum.)

Aug 1, 2022 - 8:19pm
Ozymandia, what's your opinion? Comment below:

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