Marc Altheim, one of the partners behind the controversial affordable apartment towers on Manhattan’s East Side, wrote in to us with a rebuttal.
Chief among them: that even though the apartments are expensive to build (a function of high construction costs and land prices, Atlantic has said), they are not taking money away from other low-income projects since they would use tax-exempt bonds–not grants–that the developers would pay back with interest.
We should remember that this subsidy is not entirely free to the U.S. taxpayer, however: the investors are paying no taxes on proceeds from the bonds, which means the I.R.S. has to go begging elsewhere–to ordinary folks, perhaps–to keep the federal budget balanced (or not balanced, as may be the case these days). But we’ve checked and the city’s Housing Development Corporation backs up Atlantic’s claim that there are plenty of tax-exempt bonds–authorized by Congress and doled out by the state–to finance qualified projects in New York.
Outright grants, administered by the city Housing Preservation and Development, may be another story.
His full response, which was posted as a comment to a previous post with some of the back story, is after the jump.
Statement from Marc Altheim, Atlantic Development Group
These two affordable housing developments play an important role in promoting the economic diversity of NYC neighborhoods.
For readers to understand why the developments cited in this article merit public support, several points need to be clarified:
1. These projects are valuable to all New Yorkers because they help fulfill the universally supported public policy goal of achieving economically integrated neighborhoods in New York City.
The primary stated goal of the City’s Inclusionary Housing Program — when it was created in the 1980’s by NYC Department of Housing, Preservation and Development — was to foster economically integrated communities in areas in which the poor and working class would not be able to live without the program.
This is exactly what these projects achieve. We believe that all readers would agree that our public officials should proudly champion economically integrated communities in all five boroughs.
2. The resources are not scarce. Affordable housing is scarce.
The two projects in question do not sacrifice any affordable housing that might have been developed elsewhere through other programs. There is no trade-off here. This is not a zero-sum situation.
It is incorrect and inappropriate for public officials to assert that “scarce” government resources are being wasted because tax-exempt bonds, tax credits and inclusionary housing benefits are being used to develop these projects.
Over the last several years, New York State has not been able to fully utilize its full allocation of tax-exempt bonds. In 2004, the State had an excess of $500 million in tax-exempt bonds. For 2005, excess bonding capacity was expected to exceed $500 million. The creation of these two projects thus in no way impedes development of other affordable housing projects in NYC and NYS.
3. An independent audit determined that the projects’ costs are reasonable and appropriate.
These two affordable projects, 385 Third Avenue (a senior citizen project) and 250 East 60th Street, are being built with union labor, which is expensive in NYC. To confirm that cost levels were appropriate, the NYS Housing Finance Agency hired an independent outside consultant to conduct an exhaustive analysis of the construction budget. The consultant found the budget to be in accordance with current market prices. In addition, the Central Trade Council in NYC and the financial institutions that fund residential construction in Manhattan on a regular basis have confirmed that these costs are entirely consistent with today’s market.
4. The projects do not use New Yorkers’ taxpayer dollars.
The projects do not use any NYC or NYS taxpayer dollars. City and State officials are leveraging the strength of the Manhattan real estate market to create affordable housing. The use of federal low-income housing tax credits is good for NYC and NYS, because it allows NY to leverage a federal program to build housing here in the city. In addition, by using tax credits, the projects become even more affordable than the City’s inclusionary housing program dictate, dropping rents from 80% of area median income to 60% of area median income. This means that rental prices would decline from $800 a month for a one-bedroom unit to about $600 per month.
5. The developer works with not-for-profits to make affordable housing possible.
Atlantic has engaged in other affordable housing transactions with the not-for-profit Senior Living Options. Those transactions were satisfactorily completed with full disclosure provided to all City and State agencies. Atlantic has created affordable housing in cooperation with many other not-for-profit groups, including the Manhattan Valley Development Corporation, The Highbridge Development Corporation, Metropolitan Council on Jewish Poverty, and The Doe Fund. The two projects cited in the article have The Doe Fund and Met Council as local sponsors.
6. These developments help build the local economy.
The two projects act as economic multipliers. They contribute to economic vitality and generate additional tax revenue for NYC and NYS by fueling other real estate development in the City. Without these developments, hundreds of thousands of square feet of additional luxury housing in Manhattan would not be built. These developments create new employment, they generate new income tax revenue for the City and State, and they add to the City’s real estate tax rolls.