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This article was published on: 05/01/2003

Housing Opportunity: Real-Life Solutions

New York City
Affordable Housing Success Stories
An innovative program in New York City provides housing for nurses, police officers, and other moderate-income workers.

BY JANE ADLER

Affordable housing is often seen as an issue for the poor. But as housing prices soar in some markets, it’s often no longer possible for a family making a median income to afford a median-priced home. In New York City, for example, the sixth most expensive housing market in the nation, the median sale price of a single-family house is $320,300, according to the National Association of REALTORSŪ . The area's median annual household income is $58,600. So using the NAR Affordability Index, the median household has only 80.2 percent of the income needed to purchase the median home. This 20 percent gap between income and home price has made it nearly impossible for teachers, police, and other workers with moderate incomes to live in the communities where they work.

"Ordinary working people don't make enough money to afford a house in New York City. That affects our ability to attract and retain quality employees," says George Armstrong, president of the New York City Housing Partnership.

"It's been hard for me to find an affordable house in New York City," says Margo Fisher-Gouveia, who works as a project manager for a Manhattan-based construction company.

But now an innovative program sponsored by the New York City Housing Partnership links local government and private developers to provide low-cost houses for people like Fisher-Gouveia. Through this program, she was able to purchase a house at Ocean Pointe at Bayswater, a new development in Queens built for workers with a moderate income. "The price of the house was within reach," she says.

New York City was among the first places to recognize the workforce housing crisis. In 1982, the New York City Housing Partnership was established when the city’s business community saw that a housing crisis affected its ability to find quality employees. The Partnership acts as an intermediary between government and developers. New York City provides free land and necessary infrastructure improvements. The Partnership screens private developers before a final selection by the New York City Department of Development, then works with the selected companies to build moderately-priced houses. So far, the program has provided 20,000 new for-sale houses.

One of the program's most recent projects is Ocean Pointe at Bayswater. The development has 79 new one- and two-family houses in Far Rockaway, a section of Queens. The project is designed for families whose annual household income are less than about $79,000, or about 130 percent of the area's median household income. Home prices range from about $196,000 to $285,000. Two of the models—the Ashley and the Bedford include a one-bedroom rental apartment, providing an income source that can further enhance affordability.

"These houses are meant for hospital workers, cops, teachers, and transit workers," says developer R. Randy Lee, president of the Staten Island-based Leewood Real Estate Group, which is overseeing the development. "Our goal is to keep moderate-income working families in the city and make them homeowners in order to create community stability."

Far Rockaway consists of 12 separate neighborhoods on a narrow 11-mile-long peninsula wedged between the Atlantic Ocean and Jamaica Bay. The area is still about a one-hour train ride from Midtown Manhattan where many local residents are employed. But it is part of New York, a critical consideration for city workers, such as police, who are required to live in the city.

Existing housing in Far Rockaway runs the gamut from expensive $1 million homes on the western edge to ramshackle bungalows at the center. The area includes a number of public housing projects, too.

The Ocean Pointe project is the first phase of an 800-home redevelopment in Far Rockaway's Edgemere neighborhood. Originally a beach community, the neighborhood began its decline in the 1960s and was eventually targeted for redevelopment in the 1990s. The new houses are being built on land that has stood vacant since the 1960s.

The new houses at Ocean Pointe are reminiscent of the beach houses once common to the area. The three-bedroom houses have Nantucket-style facades and front porches. House colors of pale yellow, sky blue and sandy brown help create a open, seaside look.

But like many workforce housing projects, Ocean Pointe would probably not have been possible without subsidies from government and private sources. The lots, which were owned by New York City and donated to the development, are valued at about $30,000 each. Contributions from state and local governments provide about $50,000 in additional construction subsidies for each house at Ocean Pointe. These subsidies are repaid by homeowners in the form of a second mortgage. Local lenders provide downpayment assistance for homebuyers, who can put down as little as $9,800.

Purchasers at Ocean Pointe will also benefit from reduced property taxes in the early years of ownership. Taxes for the first year of ownership are calculated as if the property were still a vacant lot. A new homeowner pays a tax of about $30 a month, which gradually increases to market rates over the next 20 years.

To help preserve the community structure around the new homes, current residents of Far Rockaway have priority for 50 percent of the houses. Police officers in New York City, who are required to live in the city, are also given preference in the lotteries used to chose purchasers.

So far, 62 homes there have been sold at Ocean Pointe. One of these new homeowners is Carolyn Bogle. A single mother with two children, Bogle works in the human resource department at J.P. Morgan Chase & Co. in Manhattan. She looked for a house she could afford for seven months without success. "Many of the houses were close to $400,000," she says. "At one point, I thought I would never be able to buy a house."

Bogle looks forward to the relative quiet of her duplex near the beach, a big contrast to the small apartment she currently rents in a busy section of Queens. "We'll have a front yard and a back yard. It's almost like the suburbs," she says.

REALTOR Adrienne Setbon, president Staten Island-based Own-A-Home Realty Corp., markets the houses at Ocean Pointe to buyers like Bogle. Last year, Setbon’s company, which specializes in selling affordable homes, worked with developers to sell about 300 homes at several different affordable projects.

“Selling affordable houses is a wonderful niche," she says. "The homebuyers are so grateful for your help." A former teacher herself, Setbon recognizes the value of what she does. Still, she admits that a real estate sale associates could sell one expensive, custom home and make more than she makes on the sale 50 affordable ones.

Even so, Setbon prefers the dependability of the affordable market. Her customers tend to have steady jobs. They may not make $300,000 a year, but they are less likely to get fired when times get tough, she says. "This segment weathers the economic downs," she says.

To further service her niche, Setbon recently opened Own-A-Home Mortgage Corp. to finance the houses she sells. She also handles the resale of affordable homes, a process that can be tricky. Homeowners who sell a house purchased with assistance from the New York City Housing Partnership must go through a settlement process, which determines whether they have to repay some of the original subsidy they received. Every development is different. But generally, since the subsidy is gradually repaid as part of a monthly mortgage payment, the longer a homeowners live in a house, the less subsidy they'll have to repay. At Ocean Pointe, for instance, the subsidy period lasts 20 years. After that, the homeowner can sell the property without any subsidy repayments. Affordable housing programs are often designed this way to encourage homeowners to stay put, although homeowners at Ocean Pointe can sell their homes to anyone, not just those who would initially qualify for the program.

The complexity of the resale transaction makes the work challenging, says Setbon, but it's a plus for her because there's less competition from other salespeople to list and sell these homes.

Like others who work in the affordable segment, Setbon is encouraged about the future of workforce housing in New York City. She believes the program works; the best evidence is the fact that she now sells houses to the children of her original customers. She says: "It's wonderful to help people in ordinary circumstances who would not otherwise be able to buy a home."


The New Look of Affordable Housing

These new workforce housing homes at Ocean Pointe are reminiscent of the beach houses once common to the area. The three-bedroom houses have Nantucket-style facades and front porches. House colors of pale yellow, sky blue and sandy brown help create a open, seaside look





Workforce Housing: A National Problem

The inadequate supply of workforce housing isn't limited to New York City, experts note. Other cities such as Boston and San Francisco don't have enough affordable housing for workers. And exclusive resort towns such as Aspen, Colo., and Jackson Hole, Wyo., often lack adequate housing for local service workers who staff hotels and restaurants that cater to wealthy residents and visitors.

"This has only been recognized as a problem in the last three years," says Richard M. Haughey, director of multifamily development at the Urban Land Institute in Washington, D.C. "But the numbers of people who face this problem have risen dramatically."

Working families that spend more than half their income on housing have risen by 30 percent, according to a recent study by the Center for Housing Policy in Washington, D.C. In 1997, roughly 3 million low-to-moderate income working families had critical housing needs. By 2001 this number had risen to 4.8 million. The problem isn't confined to those who rent, the study found. In fact, working families with a housing problem were more likely to be homeowners than renters at 53 percent vs. 47 percent.

The shortage of affordable housing for workers has a far-reaching impact on the overall quality of life, experts say. To make housing more affordable, it's often built on cheap land, usually farther out from a city center. While this lowers costs, it leads to problems such as traffic congestion, crowding of mass transit, and the need to spend money on roads in outlying areas.

"Land always comes up as the deal breaker," says Haughey. He explains that developers don't build moderately-priced projects in places where land is expensive because they can't make a profit. "They have no choice."

Given the realities of the marketplace, housing experts don’t expect the problem of insufficient workplace housing to go away any time soon. And as long as housing costs exceed median income, there will be the need for innovative programs such as the one at Ocean Point that create affordable housing opportunities for more Americans.




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Series Introduction

Case Study #1:
Asheville, NC

Case Study #2:
Chicago's Edgewater

Case Study #3:
New York City

Case Study #4:
Wabash, Indiana

Case Study #5:
Dallas, Texas