NYCHA Federalization

Of NYCHA’s 334 housing developments, 21 of them, accounting for 20,139 housing units, were built by the City and State—with no Federal funding—after World War II. Unlike NYCHA’s other developments, the 21 City/State buildings received no federal funds, although they were operated and maintained as public housing. Their City and State subsidies gradually were eliminated beginning in 1995. As a result, NYCHA has had to maintain them by sharing the federal funds it receives for the other 313 public housing developments, decreasing NYCHA’s capacity to repair, renovate, and maintain all its public housing units.

The sale of the 21 developments to NYCHA-controlled entities took advantage of a one-time opportunity in the American Recovery and Reinvestment Act of 2009 (ARRA)—the “Stimulus Bill”—to qualify NYCHA’s unfunded units for federal funds. ARRA allowed for a one-time opportunity—expiring March 17, 2010—for public housing authorities to bring additional money in from the federal government to fund public housing if a mix of public and private sector money was used to finance the transaction.

All 21 developments would remain public housing and residents would retain all of their rights and protections as public housing residents. NYCHA’s existing federal developments would also benefit as less of its federal public housing subsidy would have to be diverted to support units that receive no federal money, or other funds.

On March 15, 2010, Mayor Michael R. Bloomberg was joined by former HPD Commissioner and current Secretary of the Department of Housing and Urban Development (HUD) Shaun Donovan to announce HUD’s approval of the transaction. As a result, NYCHA stood to receive more than $400 million in public and private funding, the majority of which was immediately applied to capital improvements. The federalization also enabled HUD to include the buildings in a federal subsidy program that will deliver $65–$75 million every year for ongoing maintenance. Citi Community Capital played a pivotal role in what would become known as the largest tax credit transaction ever completed, buying $366 million of the $477 million in bonds issued and raising over $200 million in equity for NYCHA in one fell swoop.

Secretary Donovan remarked: “HUD is proud to join with the State, the City and NYCHA to safeguard affordable housing for thousands of families well into the future. HUD’s approval of this agreement and the funding the Obama administration is providing through the Recovery Act will not only help the families who live in these apartments, but will create hundreds of jobs and ensure necessary repairs can take place. This is a great day for the future of New York City’s public housing.”

HDC entered into a loan and oversight agreement with NYCHA, agreeing to advance the proceeds from the sale of $300 million in tax-exempt and taxable bonds. HDC and NYCHA worked together to ensure the long-term preservation of these buildings by funding brick work rehabilitation, caulking, and roofing for its buildings and addressing critical interior improvements, including the computerization of heating systems, boiler repairs, and replacements of windows and kitchen appliances.

Mayor Bloomberg said: “This transaction will generate hundreds of millions of dollars for shovel-ready work to upgrade our public housing stock and create hundreds of jobs, and—as importantly—at least $65 million in annual federal funding, which will help secure NYCHA’s long-term fiscal health. It’s a tremendous example of different levels of government and the private sector working together to get something important done.”