For about three years, New York affordable housing developers had access to a program that gave them a little wiggle room when things were tight. Now, that program has been paused, and its chances of returning are slim.
The program, called Section 610, allowed landlords to collect the full value of a federal rent voucher when it was more than the rent. But money came from the federal Section 8 program.
In March, when Section 8 funding appeared in jeopardy, the city paused authorizations. In July, New York State’s housing department seemed to put the final nail in the coffin, ending authorizations for landlords who receive certain city subsidies.
Advocates for affordable housing developers and landlords are looking to both federal and local authorities to fund the program as expenses grow.
Diminishing collections, rising costs
Samantha Magistro, CEO at affordable housing developer Bronx Pro Group, has applied to the program for 15 different projects. Her first 10 requests were granted, giving her portfolio some room to breathe. But her most recent five requests have yet to be processed.
Magistro, who chairs the board of the New York State Association for Affordable Housing, said her concern is for smaller and nonprofit developers.
“They’re not going to have this really important tool to help increase income and help them pay the most important bills,” she said. “If your expenses are more than your income, it’s hard to spend on that extra paint job or do all the repairs that an owner might want to do.”
Launched in 2022, Section 610 was aimed at projects facing financial difficulties. Certain building owners who had agreements with the city to limit rent could demonstrate financial need. With a Section 610 authorization, they could amend their agreements upon lease renewal to collect the full amount of a federal voucher, without changing costs for tenants.
At Bronx Pro Group, that made a difference. Expenses have risen sharply, especially in insurance costs. Rent collections have been more sporadic than expected. Projects were underwritten with the assumption they would collect 95 percent of the rent, a conservative projection before 2020. Now, collections stand around 93 percent, Magistro said.
“I’ve been doing this for close to 25 years, and my father longer before that,” she said. “This is the first time that I’ve seen our portfolio really distressed.”
The company’s older projects were less able to withstand those expense and income shocks. Magistro can still collect the full voucher amount on those buildings where her applications were already approved.
“We feel pretty confident that 610 is going to help us support getting those portfolios out of financial distress,” she said. “We were very proactive.”
But newer buildings in the portfolio can struggle too, faced with a difficult interest rate environment and unexpectedly low collections.
“Most affordable housing developers are mission-based,” she said. “A lot of us aren’t looking for some kind of boondoggle profit here, but we are looking to make sure that we can operate sufficiently and be compensated for the work that we do.”
Solutions stuck in bureaucracy
Federal budget negotiations are deadlocked in Congress, which has until September 30 to avoid a government shutdown. The Senate has proposed raising funding for Section 8 by about 4 percent, while the House has proposed flat funding.
Unless funding for Section 8 is increased during federal budget negotiations, Section 610 is unlikely to be revived. Even flat funding, which is typical for short-term funding bills, may not be enough to bring back authorizations, said Rachel Fee, executive director of the New York Housing Conference.
“As rents go up, if you don’t add additional appropriation, you’re serving fewer households,” she said. “We’re really at the mercy of what happens in Washington.”
Some have been looking for solutions closer to home.
The New York Apartment Association has been lobbying for a state pilot program that would allow owners of rent-stabilized housing to collect full voucher amounts when they’re more than the legal rent, according to executive vice president Jay Martin. The expansion would incentivize landlords to rent out vacant apartments and specifically to tenants with vouchers, who they otherwise might avoid. The provisions was included in a state senate bill introduced in March, but is still in committee.
“It was a proposal that we thought was going to get broad support and build off the momentum of 610,” he said. “It did not move.”
If New York wants to address housing challenges, he said, it needs to fund solutions.
“We keep telling property owners and, obviously, these poor people in shelters that getting them into permanent housing is the most important thing,” he said. “And then we try to do it on the cheap.”
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