Press Release

Joint Statement: CSS responds to NYCHA sale of properties

David R. Jones, President and Chief Executive Officer
Victor Bach, Senior Housing Policy Analyst

Pending a briefing tomorrow by the New York City Housing Authority (NYCHA), at which time we will get further details, this is our assessment of the just-released news of the NYCHA sale of 900 apartment units to private developers.

It needs to be understood that the six developments involved are “hybrid” NYCHA developments, financed under project-based Section 8 arrangements, which are subject to expiration.  Three were inherited by NYCHA when the private owner defaulted. As such, NYCHA has a unique opportunity to take advantage of the HUD Mark-Up-To-Market (MUTM) program to sustain this housing and increase federal Section 8 rent subsidy streams to support market rent levels.

However, under federal law, only for-profit owners receive this kind of favorable treatment.  As a result, it is necessary for NYCHA to transfer the property to a for-profit entity in order to qualify the developments.  The arrangements will enable the owner to finance capital improvements, increase rent streams, and move to alternative management. Under this arrangement NYCHA and the developer will receive substantial revenues.  In addition, there seem to be special agreements providing residents with access to construction training/jobs and permanent jobs. 

While all of this appears to be a good deal, there are several unanswered questions:  What are the implications for property tax levels to be paid to the City?  What happens in the event a project defaults and goes into foreclosure? What happens at the end of the 30-year MUTM arrangement? Will it remain affordable, or under nonprofit/public ownership?

Whether this is a model for NYCHA’s other 328 public housing developments we believe is open to question, since it will require going through an alternative HUD approval process under Section 18 disposition regulations.  While this proposal may be a real opportunity for NYCHA, we are concerned that the process used for engaging residents and the housing community was fast-tracked.  Indeed, NYCHA did November presentations to residents and then electeds, with a closing of the deal expected by late this year or early January. Such an approach offers insufficient time for resident associations to obtain independent legal and technical assistance as they negotiate their way through these complex deals. 

More importantly, the sudden announcement to the public and the advocacy community raises the question once more of NYCHA transparency and its new commitment to resident engagement. Resident leaders seeing today’s headlines, without benefit of further information, may well react with fear and suspicion of NYCHA’s motives which only weakens efforts to generate community support.

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