New Life at Ground Zero: New York, Homeownership, and the Future of American Cities. by Charles J. Orlebecke. Albany, NY: The Rockefeller Institute Press, 1997. 267 pages. $42.95 (hard cover)
“Public-Private Partnerships” has become a popular buzzword over the past two decades. Whether they are successful, who pays, and who benefits have been the subjects of considerable debate. Professor Charles Orlebecke’s account of the creation and implementation of the New York City Housing Partnership (NYCHP) contributes to this debate. Orlebecke is a member of the faculty of the School of Urban Planning and Public Affairs at the University of Illinois at Chicago and was a HUD official during the Nixon and Ford administrations.
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NYCHP was the brainchild of banker/philanthropist David Rockefeller. It was launched in 1979-80 to address the problem of the lack of new middle-income houses available for ownership in New York City. Given the preponderance of renters and the high costs of low-density housing construction, combined with the then high rates for mortgages in an inflationary period, in the nation’s largest city, the exodus of middle-income families to suburbs in the tri-state region continued. Given New York City’s fiscal crisis at the time, the city was in no position to subsidize this housing sector. Ed Logue, then head of the New York State Urban Development Corporation (created by Logue’s brother and then Governor Nelson Rockefeller), suggested the large-scale construction of new homes for ownership on vacant, city-owned sites. Spurred by this proposal, David Rockefeller launched NYCHP in 1982. With foundation support and hopes of obtaining federal and city assistance, a goal was set to build 30,000 new homes over a 5-year period. This housing was envisioned to be available for purchase by families then earning $29,000-$35,000 annually.
Two important policies emerged which affected NYCHP. First, the Reagan administration ended funding for HUD’s federally-subsidized new housing programs. Second, in 1986, neo-conservative New York Mayor Ed Koch announced an ambitious initiative for his third term – a city capital funding commitment of $4.2 billion over 10 years to build and rehabilitate 252,000 new housing units (30,000 of which could be included in the NYCHP program).
In a city dealing with overwhelming housing problems for low-income renters – and growing homelessness – NYCHP sought to establish homeownership for the middle class, which also requires public subsidies, as a priority.
Orlebecke provides an inside view of how this was achieved. He focuses on the successful efforts of Kathy Wylde, NYCHP President from 1984-96, to persuade New York City’s mayors, city and HUD housing bureaucrats, Reagan’s HUD Secretary (a former New York City corporate attorney), and Governor Mario Cuomo to provide financial assistance to NYCHP. With the political clout assembled by Rockefeller, Wylde succeeded. She also overcame resistance from the New York City housing bureaucracy and obtained vacant, city-owned sites, gained the necessary permit approvals, and secured complex project funding. Through June, 1997, NYCHP could claim 13,521 new homes in 174 projects. This, of course, fell far short of the original goals proclaimed by David Rockefeller 15 years earlier. Over the past 12 years, New York City’s municipal low- and moderate-income housing program has produced 150,000 units.
To make NYCHP houses affordable to middle-class homebuyers, Urban Development Action Grant (UDAG) funding amounted to a subsidy of $15,000 per home (even though housing was not the typical UDAG-funded economic development project). The city originally contributed a $10,000 per unit subsidy, in addition to cheap land. Later, NYCHP was able to use additional subsidy funds from New York City and State and private funds from the New York City Investment Fund.
Orlebecke compares NYCHP’s new homes program favorably with the Nehemiah homeownership program, which also originated in New York City. The Nehemiah program, initiated by a coalition of churches in Brooklyn, was based upon mass-constructed and similarly modest housing built on large vacant city-owned sites. It has produced approximately 3,000 moderate-income units in New York City.
Orlebecke proclaims NYCHP – with 90 per cent minority homebuyers – a success. In a February, 1998 report entitled “America’s Home Ownership Gap,” the U.S. Conference of Mayors cited a homeownership rate of 49 percent for city households, compared to 72 percent in the suburbs. (Overall, the U.S. homeownership rate is about 66 percent.) They pointed to bank redlining and other discriminatory mortgage lending practices as a major reason for this disparity. HUD announced a goal of increasing the homeownership rate, including subsidizing inner city homeownership zones located on formerly vacant sites. Examples now exist in many central city areas, most sponsored by community development corporations (CDCs). Fannie Mae has made a major commitment to provide mortgage financing for homeownership in central cities. Finally, in many cities, lenders have made CRA commitments to increased mortgage lending in low- and moderate-income neighborhoods.
While not a focus of his tale, Orlebecke does acknowledge that subsidizing middle-income homeowners in New York City raises a serious equity issue. Low-income renters’ need for affordable housing far exceeds the housing needs of the middle class, despite the city’s massive public housing and other subsidized rental housing programs, its massive capital spending on housing, and its long- standing rental regulation policies. Recent reports issued by HUD and the Center on Budget and Policy Priorities confirm the heavy rent burden of low-income renter households that are unable to find scarce subsidized rental units.
In the face of this data, central cities nonetheless seek to retain and attract middle-income households to increase their tax base and stabilize residential neighborhoods. Absent gentrification, this often requires public subsidies, including subsidies for ownership (e.g., land, down payments, and mortgage interest). Indeed, in many cities, CDCs are themselves building housing for ownership. Orlebecke concludes that cities, despite limited resources, can help both low-income renters and middle-income homebuyers, as did David Varady and Jeffrey Raffel in “Selling Cities: Attracting Homebuyers Through Schools and Housing Programs.” For an opposite view, Ed Goetz and Mara Sydney’s article “Revenge of the Property Owners: Community Development and the Politics of Property” illustrates the policy dilemma that this conflict caused in Minneapolis.
For more information see Shelterforce #92, and John Davis’s book The Affordable City: Toward a Third Sector Housing Policy.