In 2015, the new owners of two huge Manhattan developments, Stuyvesant Town and Peter Cooper Village, agreed to keep 5,000 apartments affordable for middle- and low-income residents for 20 years, the biggest such deal the city has ever done.
It was part of a grand plan by Mayor Bill de Blasio to create and preserve affordable housing in New York. In exchange, the city agreed to provided the owners with $220 million in subsidies and other assistance.
But a study expected to be released Friday by the city's Independent Budget Office found that the affordable-housing benefits were overstated. It said that even without the agreement, existing tenants were likely to continue to occupy their current apartments under existing rules for two-thirds of the 20-year period.
The agreement also promised that 10% of units at the developments would be turned over to low-income New Yorkers as they became vacant, at rents limited to 30% of income. But because of the low turnover, the study forecast that during the 20 years, on average only 3% of apartments would be occupied by low-income tenants.
"The magnitude of the benefits received by city tenants is less than suggested," the report said.
In announcing the deal in 2015, Mr. de Blasio said it was "an achievement that helps us ensure we can keep this a city for everyone." A press release noted that "This agreement represents the largest number of affordable apartments ever preserved in a single City-led transaction in the history of New York City."
Eric Enderlin, president of the New York City Housing Development Corp., who helped negotiate the deal working with the mayor's office, said the study by the budget office was "an academic, ivory tower analysis" that focused on accounting procedures. "It is pretty outrageous," he said.
The deal provided certainty to current and future occupants of all 5,000 affordable apartments in the developments, Mr. Enderlin said, and removed any incentive by the owners to try to push up rents to market levels as apartments became vacant. A cost/benefit analysis showed that tenants in the 5,000 affordable apartments would save at least $500 million in rent, far exceeding the $220 million cost to the city, he said.
Stuyvesant Town and Peter Cooper Village have a total of more than 11,000 apartments in 110 red-brick buildings on an 80-acre stretch of Manhattan north of East 14th Street and east of First Avenue.
They were developed by the Metropolitan Life Insurance Co. between 1945 and 1947. It sold the project at a record price of $5.4 billion in 2006 to a venture led by Tishman Speyer and BlackRock Inc., who stepped up efforts to deregulate apartments in the complex.
But in 2009, the state's highest court, the Court of Appeals, forced the deregulated apartments back into the regulation system, and the owners lost control of the project.
When a deal was struck to sell it again for $5.3 billion to Blackstone Group and Ivanhoé Cambridge, the city stepped in to negotiate over the future of the project.
As part of the deal the city agreed to support efforts by the new owners to sell excess development rights on the project to nearby parcels.
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(END) Dow Jones Newswires
January 04, 2018 23:14 ET (04:14 GMT)