Will the dangling of city money be enough to get stalled condo projects moving again?
The city is launching a $20 million initiative to restart stalled condo projects, turning some of the unfinished developments into below-market-rate housing. Details are still hazy, but Council Speaker Christine Quinn and the commissioner of the Department of Housing Preservation and Development, Rafael Cestero, said Wednesday that the city would solicit proposals from developers and lenders by the end of July.
The target is 400 units, meaning that the average subsidy of the apartments—which are designed to be for moderate- and middle-income families—would be about $50,000, well below the typical level usually doled out for new subsidized housing construction in the city. (It should be noted that this initiative, a pilot program, is smaller than previously imagined. Ms. Quinn said in February the program would “add thousands of new affordable homes.”)
Scores of condo sites in the city have stalled amid the economic crisis, and the concept in the plan is to find a way to offer enough incentive to restart them. The developer would commit to leaving a number of its units as affordable for moderate- and middle-income families; in return, the developer gets the subsidy and is also promised a buyer or a rent stream (unlike luxury condos, there is still demand for subsidized housing).
Ms. Quinn, who created the concept and is funding half of it through the Council’s capital projects money, also said that the plan would allow developers of properties that are finished and filled with unsold condos to take advantage of the plan. She said the developers would sell their units at a lower-than-market price.
However, Mr. Cestero, who will be administering the plan, said he did “not expect” the money to be used for anything but restarting stalled construction sites.
As seems common in government these days, the plan can be seen as something of a bailout to lenders and developers who were hit especially hard by the economic crisis, albeit one that creates new subsidized housing efficiently. The bailout stigma seems like it would apply less in the case of subsidizing the stalled condos than of the unsold-but-completed condos, as the former would catalyze the creation of new units in the city, as opposed to simply subsidizing the purchase of a completed condo.
The plan is innovative, to be sure, though its success will depend on what offers developers and lenders make to the city . Mr. Cestero said that in terms of the stalled condo projects, HPD would evaluate the proposals when they come in, and award the money at its discretion based on the proposals.
“If we don’t believe that our subsidy makes a difference between, one, starting construction on a site, and, two, gaining affordability, we’re not going to fund it,” he said.