Bloomberg A.D.

browndonovan Bloomberg A.D.Shaun Donovan looked very much at ease during his Jan. 13 confirmation hearing in the Dirksen Senate Office Building. The 42-year-old leaned forward onto a green-clothed table in front of the Senate Banking Committee, eloquent and gracious in his answers, sharp and timely in his policy points, an apparent shoo-in to be secretary of Housing and Urban Development who knows he’s just that.

Assuming he is indeed confirmed, Mr. Donovan’s departure as commissioner of the city’s Department of Housing Preservation and Development marks the end of an era for housing policy in the Bloomberg administration during a time of economic turmoil.

The architect of the mayor’s housing strategy has been known for his commitment to using the market to help solve affordability problems, pushing a cocktail of programs and incentives that, in large part, rode the building boom and a robust lending climate to leverage creation of tens of thousands of units of below-market-rate housing.

But the city now faces a drastically different economy and will soon get new leadership at HPD. While no announcement has been made by the Bloomberg administration, multiple people familiar with the decision-making said a former HPD deputy commissioner, Rafael Cestero, is the leading candidate.

Regardless of the individual, many housing advocacy groups and other observers say they expect a shift in housing policy in order to adapt to the economic conditions.

“You had a plan, and the plan was designed in a very different economic time, and it was really about capturing the excess value in the marketplace and directing it toward affordable housing,” said Jerilyn Perine, a former HPD commissioner who designed an earlier version of the mayor’s housing plan. “You don’t have that excess in the marketplace anymore.”

“I think you’ve got to look at the plan in the context of a very changing environment,” added Ms. Perine, who is now director of the affordability-focused policy group Citizens Housing and Planning Council. “Where would the city’s resources best be spent, and what are the primary objectives now?”

 

MR. DONOVAN ARRIVED at his position at HPD as the number of new apartments being built in the city began soaring. Land prices and rents were shooting upward, the city’s population was swelling, and construction prices were up as well, a storm of conditions that made for a desperate need for more affordable housing.

A creative and adept housing policy die-hard, Mr. Donovan crafted a 10-year affordability strategy that laid out tools to build about 92,000 new below-market-rate units and to preserve about 73,000 units. The $7.5 billion plan, hailed as visionary by housing advocates, offered an array of programs for both low- and middle-income families. The housing programs for the latter were particularly notable, as federal incentives almost exclusively cater to low-income families given that the majority of the country, unlike New York, does not have a housing shortage for middle-income earners.

While the plan was varied and contained initiatives that would spawn housing in bad times or good, much of the new production was slated to come from various incentives that relied on a hot market.

Mr. Donovan implemented the inclusionary zoning program, for instance, which offered developers the chance to build bigger in newly rezoned areas if they set aside 20 percent of the units as affordable rentals. Thousands of units from Harlem to the far West Side to Williamsburg were expected to be created with this tool.

Other programs supplemented the Federal Low Income Housing Tax Credit program to spur development of low-income housing, a tool that relied on financial firms buying the credits to offset taxes on their profits.

And part of the plan relied on affordability requirements in a few key mega-developments, such as the Atlantic Yards project in Brooklyn that planned over 6,400 units of housing, more than 2,200 of which would be for low- or middle-income families.

But with financing in short supply and the market for new development at a standstill, affordable housing production is taking a hit across the board. Development in the rezoned areas is expected to proceed far more gradually; demand for the federal tax credits has dropped as banks have no profits on which to be taxed; and large projects including Atlantic Yards are stalled with an uncertain future.