This paper was presented at the conference "Policies to Promote Affordable Housing," cosponsored by the Federal Reserve Bank of New York and New York University's Furman Center for Real Estate and Urban Policy, February 7, 2002. It was part of Session 5: Remarks on the Future of Housing Policy.Housing - New York (N.Y.) ; Housing policy ; Housing - Finance

Ronay Menschel

English

Research Papers in Economics

FRBNY Economic Policy Review / June 2003 195
Preservation First
would like to begin by thanking Christine Cumming and 
Michael Schill and their staffs for organizing this conference. 
It certainly has enhanced our understanding of the issues, and 
hopefully will lead to a more informed and therefore more 
effective policy to address the affordable housing needs of this 
city and the region.
A central theme of the presentations today is the need
to learn from past mistakes as well as past successes. As 
Commissioner Perine observed, there have been many 
mistakes made in the past. She clearly is someone who is 
carefully learning from the past as she shapes how we move 
forward.
The key issue for New York City and the region is 
preservation of the existing affordable housing stock. 
Commissioner Perine mentioned how much of that stock 
has been lost in past years—how far behind we have gotten 
because we allowed so much of the old affordable housing 
stock to slip through our fingers in the 1970s and 1980s.
Of course, new housing construction rates also have been
far short of demand.
Housing advocates had hoped that the region’s economic 
growth of the 1990s would continue, with associated rapid 
growth in tax revenues. In addition, we were all looking at 
excess revenues from the sale of the World Trade Center and 
from Battery Park City to provide additional resources to 
address affordable housing issues. Instead, we are now 
confronted with a very constrained economic environment.
My sense is that Mayor Bloomberg understands the impor-
tance of affordable housing in any economic development 
strategy, and that is significant. And it is noteworthy that 
Commissioner Perine reports to Daniel Doctoroff, Deputy 
Mayor for Economic Development. Affordable housing will 
therefore be well represented in the entire policy mix. 
Regrettably, we will not have as many resources as we once 
thought we would. As Assistant Secretary Bernardi noted, the 
federal budget is holding up reasonably well, and that is 
helpful—although affordable housing for some years has not 
been the funding priority at the federal level that it should be.
As we consider what needs to be preserved, we have to look 
at housing created with public-sector dollars and private 
dollars. And we have to be mindful that capital has to be 
available to property owners—capital that they can access even 
in more difficult times—so that their properties do not 
deteriorate further. We also have to look at the incentives given 
to those owners to maintain their buildings.
On the federal front, we have a large portfolio of what are 
called “older-assisted” properties. This is one of my favorite 
topics. Phipps Houses has two older-assisted properties, more 
than twenty-five years old, in need of capital renewal. These 
buildings receive very hard use, as do all older-assisted 
buildings, at least in New York. And they have been under-
capitalized by HUD through the years. The question is how to 
put capital into those buildings.
Ronay Menschel
Ronay Menschel is chairman of Phipps Houses. The views expressed are those of the author and do not necessarily reflect the 
position of the Federal Reserve Bank of New York or the Federal Reserve 
System.
I196 Preservation First
HUD’s Mark-to-Market program does not offer a solution 
for many of the older-assisted properties because it is directed 
at newer, federally assisted properties with rents that exceed 
120 percent of an area’s fair market rent. Ironically, older-
assisted properties generally have a lower rent scale, and while 
in greater need of capital repair, they do not qualify for the 
program. Mark-to-Market is directed more at reducing the 
federal government’s Section 8 burden than putting up capital 
for renewal. Mark-up-to-Budget holds greater promise, in that 
properties with lower rents can qualify, but they must pursue a 
tortuous process to gain HUD’s approval of increased subsidies 
to service increased debt. I listened with some envy when 
Assistant Secretary Bernardi said that some rules and 
regulations were put aside for a $700 million community 
development block grant to the city. Whatever the refinancing 
program, HUD’s lending and grant-making process needs to 
be accelerated.
I know that the Millennial Commission is looking at 
revisions to the exit tax. That may provide some opportunities 
and incentives to investors of twenty-five years ago to transfer 
their properties to not-for-profits without suffering negative 
tax consequences. The recipient not-for-profits can protect the 
properties and bring to bear new financial resources. In 
addition, not-for-profits are usually vested in the community 
for the long term and have a broad, comprehensive agenda that 
includes community preservation.
During John Goering’s presentation on the Moving to 
Opportunity Demonstration, I was interested to hear that some 
significant results were obtained. Of course, they were realized 
in very extreme situations in the Chicago Housing Authority, 
where you had people living in terrible conditions. My 
response to this strategy is that it can be exercised only on a 
relatively small scale—this is a point Lance Freeman also made. 
We cannot move everybody out. We have to make our low-
income communities work. That is how leadership by not-for-
profits has demonstrated positive results.
This is especially true of the affordable housing program in 
New York, where you have the involvement of not-for-profit 
community-development organizations. Investments by 
community-based organizations are comprehensive: the 
organizations are concerned about education, local health care, 
youth development, and public safety. Their leadership brings 
community residents together to advocate for themselves and 
for individuals to be mutually supportive. We have seen that 
homeownership, interspersed within these communities, has 
proved effective again in stabilizing neighborhoods and in 
improving both their physical condition and their social fabric.
An earlier presentation described the positive effects that 
investment in a property or in new construction has had—a 
certain “halo” effect. Likewise, studies presented today 
illustrated the impact of neighborhood conditions on public 
safety and on children. Children’s development is affected by 
neighborhood conditions. And as Lance said, families need 
social support. That support has to accompany physical 
changes.
The City of New York, of course, has its own housing stock 
in need of preservation. First, the city-managed stock needs to 
be brought up to standards and fully utilized. We know that 
many city-owned and -managed buildings are only partially 
occupied. A priority is to make those buildings not only more 
habitable, but fully occupied.
I found Glynis Daniels’ description of areas with high 
concentrations of HPD violations—which obviously mirror 
the high delinquency rates—to be very interesting. To me, it 
suggested where the city’s priorities might lie in terms of future 
investment: low-interest loans to private owners for repairs, 
third-party transfers, and the use of tax credits to help finance 
improvements to buildings. In addition, these are communities 
for which city social service investments should be designed to 
complement brick-and-mortar investments so as to maximize 
the benefits of each. The current administration realizes that it 
has to coordinate the work of all agencies that affect housing. 
So you have Deputy Mayor Doctoroff, City Planning, the 
Department of Buildings, the Department of Finance, the 
Department of Housing Preservation and Development, and 
even the Human Resources Administration all concerned with 
housing. Recently, the Human Resources Administrator called 
together the leaders of each agency that has an impact on the 
homeless and on people who receive Temporary Assistance for 
Needy Families to discuss this particular population’s housing 
needs. That is the type of coordinated approach that is required 
and is being pursued.
Finally, I would like to comment on the issue of vouchers 
and their effect on production, a topic that was addressed in 
some of the presentations. Vouchers have very limited, if any, 
effect on housing production in New York City, where it is hard 
to find an apartment to rent using a voucher. The voucher is 
given to the individual, not a developer. While there is a steady 
flow of voucher funding by HUD, this revenue stream cannot 
be used to finance new housing—a lost opportunity. We need 
to be able to obligate vouchers to rental properties in develop-
ment, just as vouchers can now be used for first-time 
homeownership. Hopefully, this is something that can be 
examined in greater detail.
In short, in times of limited resources, we have to be more 
ingenious and learn from the past. It is paramount to preserve 
what we have and to achieve higher utilization from it. In 
today’s world, we have to look to a mix of funding sources, 
blending subsidies, low-interest loans, and tax credits with 
market rate financing. Important too is identifying early trends FRBNY Economic Policy Review / June 2003 197
of tax delinquencies and multiple building code violations, and 
providing assistance (often modest dollars) before such 
deterioration overwhelms a community. Ultimately, New York 
City will have to devote a greater share of public resources to 
increase the inventory of affordable housing available to low- 
and middle-income people and families if it is to continue to be 
a city of growth and opportunity.
The views expressed are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York 
or the Federal Reserve System. The Federal Reserve Bank of New York provides no warranty, express or implied, as to the 
accuracy, timeliness, completeness, merchantability, or fitness for any particular purpose of any information contained in 
documents produced and provided by the Federal Reserve Bank of New York in any form or manner whatsoever.

Preservation first

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Preservation first

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