As New York City experienced rampant arson and neighborhoods saw continued disinvestment in the 1970s, many residents stayed and stuck it out — even as landlords abandoned them. They organized and began working with the city to take over foreclosed and neglected properties, transferring them to nonprofit community development corporations to stabilize neighborhoods and preserve affordable housing. Many of those same groups today face tough competition in a pricey New York City real estate market, and a new nonprofit, JOE NYC, has several of them joining together to get an edge.
St. Nicks Alliance, which works in North and Central Brooklyn, is a CDC that’s been around for decades. “We’ve been managing and developing affordable housing for almost our entire 41 years,” says Frank Lang, director of housing. The organization has developed around 2,200 units of housing and has a current portfolio of around 1,650 units across 100 buildings, a positive impact that’s likely to be magnified by JOE NYC.
St. Nicks Alliance, as part of the JOE NYC membership, recently purchased a portfolio of 43 buildings from a for-profit developer, which ensured that the 248 units in those buildings will remain affordable instead of being sold to an investor who is more interested in flipping the buildings into market-rate or luxury housing.
JOE stands for joint-ownership entity. It’s a member-controlled organization, and its members are the community-based nonprofit developers that transfer properties into JOE NYC’s portfolio of ownership. There are 10 current members and at least two more pending. Each member gets a seat on the board and thus a vote over key decisions like which acquisitions to make. Their goals: preserve their existing portfolios of affordable housing; acquire portfolios of affordable housing developed by others in the city; and pursue new affordable housing projects.
Here’s how power in numbers works in the case of preserving buildings. Say you’re one of the community-based nonprofit developers, and two or three of your buildings are in need of maintenance or repairs today. You could try for a loan, and get a certain interest rate. But, if you had, say, 10 or 20 buildings that needed maintenance or repairs, you could get a bigger loan — and most likely pay a lower interest rate. By pooling properties in JOE NYC, the nonprofits can start to combine their buildings in that way to get the bigger loan together, instead of trying for a bunch of smaller loans they might not be able to afford. Other buildings in the portfolio that don’t need maintenance serve as collateral or assurance to a lender, which can lower the interest rate even more. In real estate parlance, this musical chairs game of using a portfolio of buildings to get financing for maintenance needs is known as “asset management.”
The group could even go beyond financing for repairs. “JOE NYC as asset manager could renegotiate electricity purchases or one universal property insurance policy to cover all buildings,” says Peter Madden, JOE NYC executive director.
Acquisitions of Low Income Housing Tax Credit properties are another key strategy for JOE NYC.
Working with the city and often using incentives like federal Low-income Housing Tax Credits (LIHTCs), community-based nonprofit developers have been behind more than 120,000 units of affordable housing in NYC over the last 25 years, according to the Association for Neighborhood & Housing Development (ANHD), a citywide network of community development organizations. LIHTCs entice potential investors with the promise of tax write-offs and are a heavily used financing tool across the U.S. when it comes to building more affordable housing. For-profit developers use them too, and overall, LIHTCs have had a role in 152,864 units of housing in NYC since 1988, 75 percent of which designated for low-income use.
But these units — and their tenants — are at risk as the buildings reach the end of their tax-credit compliance periods. Starting in 2020, according to ANHD research, NYC will face a rising wave of buildings falling out of the LIHTC program. These developments, built with public benefits in mind, may get sold to purely profit-motivated investors and flipped into market-rate housing or into luxury condos, says Stephanie Sosa, ANHD senior policy associate. In many cases, that’s already happened. JOE NYC can’t save them all, but it can save some.
On the new construction front, JOE members hope they can partner with community-based nonprofit developers in going after requests for proposals from city agencies for new affordable housing developments — and beat out for-profit developers. For example, MHANY, one of the inaugural JOE NYC members, partnered with two for-profit firms on a winning proposal for the site of the former Spofford Prison in the Bronx. Such partnerships were necessary, according to Sosa, largely because of unfounded concerns from the city about nonprofit developers’ ability to manage projects and properties — never mind all the decades of experience they’ve had building affordable housing.
JOE NYC is still somewhat in pilot mode. For now, each member is transferring only some of the buildings in their portfolios to JOE NYC, not their entire portfolios. One member, Bronx-based Banana Kelly Community Improvement Association, plans to transfer land beneath its buildings into a community land trust first, then transfer ownership of the buildings into JOE NYC. It’s a measure designed to further ensure the buildings will remain permanently affordable to low-income residents.
Over the next year, JOE NYC anticipates it will have at least 3,000 units of affordable housing in its portfolio, combining buildings transferred from its nonprofit developer members and acquired units.
“We feel that the city made this investment in affordable housing all through the ’70s, ’80s, ’90s with nonprofits. We built these neighborhoods,” says Lang. “There seems to be a focus on scale and expediency now, so by combining our resources, we’re able to maintain our individual identities but place these assets into a vehicle for public purpose.”
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.
Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.