NYCHA inks $1.5B deal to privatize management of 5,900 units
Firms including L+M and Hudson Companies will repair and run properties
The New York City Housing Authority has reached a deal to bring thousands of Manhattan and Brooklyn apartments under private management and do $1.5 billion worth of work.
Five development teams including L+M Development Partners, Hudson Companies and Settlement Housing Fund will take charge of management and repairs at seven housing complexes totaling 5,908 units, the Housing Authority announced Thursday after Crain’s reported the deal.
The projects are East New York’s Linden Houses and Boulevard Houses, East Williamsburg’s Williamsburg Houses, Washington Heights’ Bethune Gardens and Marshall Plaza, and Harlem’s Audubon Houses and Harlem River Houses 1 and 2.
NYCHA hopes to bring about 62,000 of its 174,000 units of public housing under private management by the end of 2028, mostly through the federal Rental Assistance Demonstration program, or RAD. The agency has only converted about 7,700 housing units since embracing the program roughly three years ago.
Jonathan Gouveia, head of the real estate development team at NYCHA, told Crain’s he thinks the agency can still make its goal.
“I do believe it’s possible to hit that target, and my goal is to accelerate our pace of conversions,” he said. “I have been impressed because these are complicated deals, and we have found private partners willing to go through the steep learning curve.”
NYCHA developments need about $40 billion in capital work; the deal announced Thursday amounts to less than 4 percent of that. Other developers in the deal include Dantes Partners, Apex Builders, and Webb & Brooker.
“We are excited to announce the development teams that will partner with us in meeting the capital need of more than $1.5 billion associated with these NYCHA campuses,” said NYCHA chairman and CEO Greg Russ in a statement. He added that the five development teams — which include more than a dozen developers, property managers and nonprofits — “will be instrumental in completing the renovations our residents need and deserve.”
Under RAD, private interests repair and manage the properties and are essentially paid by the federal Section 8 program that helps tenants pay rent. The private parties view it as low-risk because Section 8 is consistently funded, unlike the revenue streams that support the majority of Housing Authority units.
RAD has been criticized by some advocates and tenants, in part because private managers are seen as more likely to evict tenants who fall behind on rent or do not sign on to the leases of the units they occupy, as doing so would cause their rent to increase.
The de Blasio administration resolved to employ RAD as much as possible at NYCHA complexes after deeming an early use of the program with L+M to be a success. But the limits of Section 8 mean not all NYCHA units can be roped into RAD.
Not all of the projects announced Thursday involve RAD. The development teams will also use other methods to convert operating subsidy to Section 8, including Section 18 and the Part 200 disposition processes, according to NYCHA. [Crain’s] – Eddie Small