On October 10, 2014, The Real Estate Finance Bureau of the New York State Attorney General’s office released a memorandum on a policy change that could potentially preserve thousands of affordable housing units in New York City. Currently, most of the city’s affordable housing units are in mixed-income rental buildings that have an 80/20 split between market rate and affordable housing rentals. The developers of these buildings agreed to keep at least 20% of their rental units as affordable to those making up to 60% of the area median income in exchange for extra floor space, tax exemptions or other subsidies.  According to the Attorney General Office memorandum, many of the buildings which participate in such programs are required to maintain their affordable housing units for at least 30 years as well as keep all of the units in the building as rentals.

In today’s real estate market however, many building owners would rather sell their market rate units than keep them as rentals. The New York Times reports that “Figures from the Rent Guidelines Board show that the city lost a total of 1,719 rent-stabilized units last year to either the expiration of benefits or overall conversions of rental buildings to condos and co-ops.” After the required time period, building owners frequently choose to turn the affordable housing units into market rate rentals or market rate condos or co-ops.

The exemption proposed by the Real Estate Finance Bureau would allow the owners of the buildings to sell their market rate units instead of keeping them as rentals, as long as they keep at least 20% of their affordable housing units permanently affordable. With a strong real estate market, it may be more profitable to sell the apartments rather than keep them as market rate rentals.

Although this attempt to preserve affordable housing may fall in line with Mayor DeBlasio’s ten year housing plan, Housing New York, it may not be as effective as the city hopes it to be. For those who do apply, there are large profits to be gained. Because these mixed income buildings may have taken advantage of land rezoning or tax breaks, taking advantage of this exemption provides a financial windfall in addition to the profits they are already making.  While this may be an attractive option for some mixed income building owners, many may not apply.

There are many reasons why building owners might not opt into this program. One of them is that their building’s affordable units may be close to the end of the required time period. If a building is only required to keep its affordable housing units for another five years or less, there is no incentive for the owner to apply for this exemption.  It would be more profitable to wait for the time to expire and turn the entire building into a condo or co-op. Another reason could be that the current residents of the market rate units would the ones presented with the option of buying their unit. If there isn’t enough interest in buying the apartments, the building owners won’t apply for this exemption.  There needs to be another incentive for this program to effectively preserve affordable housing in New York City.

This post was written by a student enrolled in the Capstone Seminar course in the undergraduate program in public policy at Hunter College. Any opinions expressed here are solely those of the student.