Today’s Post describes a public-private real-estate deal that perfectly encapsulates New York’s housing policy. David Seifman writes that the city will lavish nearly $3 million on a Brooklyn developer, Tali Realty LLC, to turn the company’s failed condo project into “affordable” housing.
The Post says the 46 tenants who will move in are “lucky” — but it’s really the developer (and the company that financed it) that is lucky.
If the city didn’t step in with its bailout, the financiers would have to foreclose on the unfinished project, take losses, and re-sell the property at a lower price, allowing some other developer to come along starting at a lower cost base, finish the project cheaper, and sell the units at lower prices to clear a profit for itself and help the lenders limit their losses.
Instead, the initial developer and lender get taxpayer money to do what they would have done anyway — sell units at lower prices in a down market. As the press release notes, to accept the financing, the developer only has to rent the units to single people earning $55,500 or families earning $79,200 — the same people who could have afforded cheaper Brooklyn units anyway.
The new $20 million program that financed this pilot deal is a special project of City Council Speaker Christine Quinn (and, apparently, if belatedly, Comptroller John Liu, who got his name in the release). The Post reports that “developers are clamoring to join the program.”
Gee — no wonder. I would like a city subsidy to do what market forces would have already forced me to do anyway, too. This isn’t housing policy — this is taxpayer transfer to the real-estate and financial industries disguised as affordable-housing advocacy.
[I wrote about this program in the Post here, nearly two years ago, and here and here for the old FW blog, before Quinn announced any completed deals. One should be grateful that though the city does bad things with other people’s $$$, it does them slowly and inefficiently.
And, also housing-relatedly, I wrote about rent regulation today here.]