Dina Levy Has a Very Bold Mandate for Affordable Housing in New York City – Commercial Observer

One is a change that happened at the federal level involving low-income housing tax credits (LIHTC). The LIHTC program, which has 4 percent bonds and 9 percent bonds, has been a major driver on how affordable housing gets built.

There was a change at the federal level called the 50 percent test, which became the 25 percent test, which nearly doubled the capacity of the LIHTC program, enabling us to issue tax-exempt bonds to enable the construction of affordable housing. That’s been a huge boon to finance production, not just in New York City, but the whole country.

Then there are some mixed-income sites, where there is an ability to stretch what we can produce using a cross-subsidy model. Some of the affordable units are supported by the higher market-rate units, and that increases our capacity to produce without having to put in the same level of subsidy.

We’re also looking at financing small to mid-size new construction. Those are deals too small to benefit from the tax credit program. We’re looking at private financing from banks and community development finance institutions, in addition to our subsidy to do a 50-unit affordable project where the zoning and density is more consistent with the fabric of certain neighborhoods.

And we’re doing a ton on homeownership. We have a program called Open Door, typically always limited equity co-ops, and we are also creating a new program for conversion of privately owned, non-affordable rental buildings into affordable cooperatives. And we’re increasing our down payment assistance program that will enable individuals to go into the private market and purchase homes.

Next year, we’re looking to build 300 units through the Open Door program. We’re looking to do 150 units next year through the new conversion program, Our Home, which is converting small rent-stabilized buildings to co-ops.

And we’re looking to increase down payment assistance from 175 families to 300 families this year, and another 300 next year.

How will you be reducing the red tape for nonprofit housing operators who work with developers? Are there any kinds of innovations you’d like to see?

There is a new collaborative effort with us and the Department of Buildings that will be a working group on how to bring down the cost of construction. A lot of that includes getting rid of red tape. So, making sure we don’t have duplicative reviews in order to get permits or approvals; how many agencies you actually have to touch and how to minimize that so that it’s more of a straight line. De-duplicating efforts is a big focus right now.

The SPEED effort [Streamlining Procedures to Expedite Equitable Development, another Mamdani initiative] is dedicated to identifying efficiencies in our process workflow. It’s a multi-chapter report on many different ways that we can make government more efficient, more effective, easier to work with, and to move more quickly.

A big portion of that for this agency will be reforms to the housing lottery system, which has struggled to move at the pace it needs to move at. We have proposed significant reforms over the next six to 18 months to really reform how quickly, once we build a building or finance a new building, how long it takes to get leased up.

Now that the Rent Guidelines Board (RGB) approved a rent freeze, some rent-stabilized owners may decide to sell their properties. What role does HPD have in acquiring and managing distressed properties or ensuring they are maintained properly?

I want to challenge a little bit about the impact of the rent freeze on rent-stabilized building owners.

Historically, even if there is an RGB rent increase it’s 2 percent or 4 percent. What we’re seeing now causing stress is not about whether or not rents can go up by those small margins, but whether the expense side of the ledger can be brought under control. What we’re seeing is this huge spike in expenses — primarily, but not exclusively, driven by insurance.

Secondarily, taxes and interest rates are high. So, if you got a mortgage during COVID with a 3 percent rate, that’s resetting and now you’re seeing 8 percent. These are the kinds of stressors pushing the rent-stabilized housing stock. I think a lot of our focus needs to be on how to get the expense side under control. A big one would be insurance, taxes and utility.

Do you have any role on the expense side?

One of the initiatives we rolled out is a new $100 million effort to create a city-backed insurance vehicle targeted for affordable and rent-stabilized housing owners that will significantly reduce insurance premiums. The target is 20 to 30 percent reduction. 

We’re in the process of onboarding an operator for the program. The goal is to insure 20,000 units by the end of 2027 and 100,000 units by 2030. Bringing insurance premiums down by 20 to 30 percent would be far more impactful than the most generous rent freeze from RGB.

What response have you gotten for your city-backed insurance pilot? Why is the city doing this, and when will it be up and running?

The response has been even better than we hoped. We issued the request for expressions of interest, and we got 22 responses to that. We’re now in the process of reviewing those responses and holding meetings with the respondents. We expect to select one or more entities by the end of the calendar year and potentially have a launch in the first quarter of 2027.

What programs would the agency use to aid struggling owners?

We’re spending a lot of time on the expense side of that question. There’s a lot of talk about rent freeze or no rent freeze, but I think the important point here is that expenses have shot up significantly across all types of housing. Insurance alone has gone up almost, depending on who we are talking to, 200 percent. So there is no rent increase that’s going to correct for that. 
And what we need to do is get expenses under control.

For that reason, we’ve launched this city-backed insurance initiative. We are working very hard on thinking about ways to reduce tax liability for rent-stabilized buildings, and we are bringing back the J-51 program, which will be extremely meaningful for owners who need to make repairs, particularly in vacant units, in order to get them back online and improve their cash flow.

In your recent testimony at the City Council, you said J-51 would help vacant units get back online. But some attorneys and industry leaders are having trouble understanding how the current law can be helpful with vacant rent-stabilized units. How will you be able to get these units online?

One of the keys to using J-51 involves some of the improvements made in the state legislation that reauthorized J-51 this year, including to the cost schedule, which is how we sort of size the reimbursement for expenditures laid out by landlords. Historically, we were paying a percentage of the cost, and now the cost schedule will be 100 percent. 
So landlords will be fully reimbursed for what they spend to get their units back online. We’re also updating cost schedules to make sure we’re using reasonable estimates for what these repairs actually cost, and we intend to do very aggressive outreach and marketing to rent-stabilized landlords to make sure they’re taking full advantage of the new law.

Some officials in City Hall want to see more government-owned social housing throughout the city. Do you have any thoughts about how HPD would take a role in that?

I think social housing is interesting because it doesn’t have a single definition. When you talk to anybody about this, they have differing definitions. Social housing generally tries to get at the idea that profit is not the driving force, or it could be community control as the driving force.

A community land trust where you are separating land from housing and making sure the land is retained as affordable is one aspect. Limited-equity co-ops, where tenants are controlling and owning as a cooperative — their building is a form of social housing. But I also think you can have social housing in which there are partnerships between nonprofits and for-profits in which tenants have active decision-making roles in what’s happening in the building.

I think New York City is quite famous for its advancement of limited-equity co-ops. Other urban cities have tried to replicate it with not the same success as New York. We’ve had an innovative front seat in what it means to create a very healthy robust market of limited-equity co-ops. I get calls all the time from other cities asking, “How do you do this, how do you finance this?” It’s not as complicated as folks make it. It does need to be done mindfully because you have tenants running a business and you want it to succeed.

Moving to a co-op should be a thoughtful decision by the participants, but it’s a very unique-to-New York City model that has been very successful.

I also think land trusts play a critical role here. There has been a wide proliferation of land trusts in New York City. We have a few dozen of them now. We have to be thoughtful about how many land trusts there should be, where they should be, how they should collaborate, and how we support them. It also has become a very helpful model in terms of creating permanent affordability and taking speculation out of the housing market.

How will rising interest rates and inflation affect your ability to deliver your affordable housing goals? 

One of the ways that we create affordable housing is by lowering interest throughout investment in tax credit subsidies and our own true subsidies. Our lending into a project by definition brings down interest. That’s always been true.

We’ve been in markets where interest rates were more favorable or less favorable. It’s been the government’s role to do these public-private partnerships to bring down costs on debt, which is what allows us to create so much affordable housing. I hope we’ve seen the crest of rising interest rates, and we do hope to see these things tempering a little but on their own. 

How have you been navigating federal cuts, and how will you fill in those gaps?

Generally speaking, we rely heavily on the federal government for Section 8. That has been very challenging because the Section 8 budget has not grown to meet the need. That puts us in a difficult position because it is a huge program that will be very hard for the city and state to replicate without the federal government. Section 8 is the No. 1 place where we have felt pain points.

There’s also the Continuum of Care, which is supportive operating subsidies paid for by the federal government that has been tied up in lawsuits for 18 months. The federal government is continually trying to retreat from the core of the program and attaches strings to how it can be used. That remains in active litigation, and, while the funds are still flowing, it’s something we’re watching and are concerned about. It’s hard to plan if you don’t know if the program is going to survive.

The emergency housing voucher program was a special form of Section 8 allocated during COVID. They were supposed to go out to 2030, and they were suddenly cut with an end point this December. So we’ve had to step up and convert folks on the federal subsidy over to a different type of Section 8 subsidy in order to make sure there wasn’t a gap in services. We’ve had a whole division that has had to work diligently to capture something on the order of 8,000 emergency housing voucher recipients to make sure they don’t have any gap in subsidy.

What’s the latest on rental ripoff hearings? What did you learn from the last round of them?

I don’t know that there will be another round, but there was a full report issued in June. It was very cool to go and be able to hear directly from New Yorkers in each of the different hearings telling their story about what they see as their challenges as renters.

I actually ran into a number of tenants who it turned out I was the organizer in their building two decades ago. Same building, same leadership in some cases.

I think it was informative. It helped frame our notion of really chronic bad landlords. I was talking with tenants who I knew were struggling 20 years ago because of their owner’s refusal to maintain their building in compliance with the housing maintenance code. Here we are 20 years later, and now I’m in a very different seat. Same owner, same problems.

So that really led us to frame out our thinking about Fix the City, an initiative to make sure these chronically negligent landlords are finally forced into compliance or are forced to sell their building. We want to use the enforcement tools in a very thoughtful and layered way to push for a change in behavior. Where we cannot make a landlord comply, especially if it’s been years and years, or decades, we would push really hard for a preservation transaction: a sale of a building to a willing or responsible landlord.

We don’t take property, but there are ways to use enforcement in a strategic and aggressive way when an owner is chronically and consistently negligent. There’s the 7A program, where we can ask a court to appoint a different property manager. There are programs where we can really start going in and fixing the buildings ourselves and charging the landlord for those repairs — and fees and penalties. And, if the penalties aren’t paid, we can sue the landlord.

There are lenders who are involved here who have an obligation to make sure, if they are lending on buildings, that owners are maintaining them. So there are negotiations we can have with lenders that can lead to foreclosure, a technical default or a financial default.

This is a relatively small universe of landlords. We need to be very strategic, and we need to be very aggressive.

There are also common sense changes with how our code enforcement teams work. One is, we heard a lot about how folks wanting every unit that calls in for a heat complaint inspected. For a while, we had a system where, if we had multiple calls for a building, we would check a couple units but not every unit that called. Now we will be inspecting every unit where someone identifies a heat complaint during the heat season.

We heard a lot about scheduling follow-up inspections. Going forward, we’re going to adopt a protocol where, if we do not gain access on the first attempt, you can call HPD and schedule an appointment at a date and time when you will be home.

What do you think of the 100 Gold redevelopment plan?

There’s not nearly enough housing or affordable housing in Lower Manhattan, and being able to put 4,000 units of housing, of which 25 percent will be affordable units, in Lower Manhattan is super exciting. So we are happy to move out of the way to make room for that housing

You recently relocated to the city from New Jersey. How has that process been? Was it difficult to find a new home?