BRONX — A nonprofit committed to fighting homelessness is constructing a complex in the Bedford Park section of The Bronx that includes a focus on health, with a rooftop aquaponics system growing fish and vegetables.
But Bedford Green House, as the $55 million 208-unit project on Crescent Avenue with a mix of affordable units and supportive housing for seniors and homeless families is called, is facing a funding gap of nearly $3 million because it made its budget projections before the presidential election, according to Project Renewal’s president Mitchell Netburn.
Many of the city's affordable housing projects in the early stages of development are grappling with similar budget shortfalls due to the uncertain future of the Low Income Housing Tax Credit (LIHTC) program, experts say.
The tax credit program allows investors, like big banks, to offset corporate income taxes, dollar-for-dollar, in exchange for providing funds to build affordable housing.
President Donald Trump wants to reduce the corporate tax rate from 35 percent down to 15 or 20 percent, which would make the LIHTC worth less to investors, experts said. Already, the threat of the cuts has caused the value of the tax credits to drop since Election Day, which is why many affordable housing projects are now struggling.
When Project Renewal projected the costs for the first phase of the Bedford Green House in October, it estimated the value of the tax credit would be $1.18 for every dollar spent and that it would receive a total of $22.8 million from tax credits, he said.
Recently, the project — which is expected to close on financing in June — went back to the drawing board, assuming the tax credit will be worth roughly 11 percent less, down to $1.05.
That leaves the projects with a $2.7 million gap, Netburn added.
“It’s always difficult to build these projects, but it’s more difficult now than it was six months ago,” Netburn said. “We have to make up that gap.”
The tax credit dip is hurting the industry at a time when affordable housing has been cited as critical in preventing and reducing homelessness, particularly in highly competitive markets like NYC. More than 40 percent of the city’s renters are “burdened,” paying more than 30 percent of their income on rent.
When funds are scarce, developers look to “value engineer” their projects, which means changing designs and finishes to make construction as inexpensive as possible. In the affordable housing industry, however, projects are often designed to keep costs as low as possible from the get-go.
While the rooftop greenhouse — which will include a kitchen classroom for kids to learn about things like micro-greens — might seem like an amenity the building could ditch, Netburn said it’s not negotiable.
“We want to show that you can do this kind of supportive and affordable housing in a green way,” he said. “In the long-term, it gets kids excited about fresh food and cooking and it affects their well being."
Neburn knows the challenge of plugging those funding holes will likely take more time and effort and delay starting future developments elsewhere.
“You always want to move on to the next project and keep the pipeline going,” he said. “But here, we’re still focused, looking at the safety nets for funding.”
The project recently secured $335,000 in grants, one for the greenhouse and one for the senior housing. But that doesn’t solve the problem, so Netburn will likely return to his funders, including the city’s Housing Preservation and Development department, to see if they can put in more money.
“Of course, they don’t have unlimited funds either,” Netburn said.
With expected cuts from Housing and Urban Development to low-income subsidies like Section 8 and other housing operating programs, state and city housing agencies could be further strained making up for other funding gaps under Trump, noted Tony Hannigan, executive director of Center for Urban Community Services.
He's facing gaps with his $65 million project in pre-development on West 127th Street, which was slated to have 117 apartments, 60 percent of which will be for homeless New Yorkers coming from shelters with the rest targeted to very low-income families. The tax credit was slated to cover about 40 percent of the total project’s cost.
“It goes with the territory of development that you have unknowns. Like sometimes when building a building, you hit rock, and it’s going to take longer and be more expensive. This is like hitting rock,” he said.
“Right now, it’s just a very unsettled marketplace because of the corporate tax rate and where it will land,” he added. “Organizations like ours are looking at the contingency plans. If you take several million out of a project, you have to get it from somewhere.”
Developers who build affordable and supportive housing had otherwise been feeling hopeful. Mayor Bill de Blasio, for instance, pledged to add 15,000 units of supportive housing over 15 years, while Gov. Andrew Cuomo promised to add another 20,000 units over 15 years.
City officials remained optimistic.
“Tax reform is by no means certain, as last week’s result on healthcare makes clear,” Juliet Pierre-Antoine, an HPD spokeswoman, said in a statement. “There have been some anticipatory shifts in the LIHTC market, which we are working case by case to address.”
