A Deal to Help Make New York Affordable for Renters
Jan 11, 2016
Susan Steinberg moved into a one-bedroom apartment in New York City’s Stuyvesant Town-Peter Cooper Village residential development 35 years ago. She’s been there ever since.
“It’s a special place,” she says, calling life in the landscaped 80-acre, 11,241-unit residential community at the edge of Manhattan’s East Village like “suburban living in the city.”
“I hear birds. I see squirrels. We actually had a resident hawk for a while,” she says. “Living in Manhattan, unless I won the lottery and had my own building, this is really the place to be. It’s just a wonderful experience.”
That wonderful experience has had its fair share of upheavals in recent years, adds Steinberg, who is president of the Stuyvesant Town-Peter Cooper Village Tenants Association. Built in 1947 by insurance company Metropolitan Life to provide New Yorkers with middle-class housing, Stuyvesant Town, or ST-PCV, has in recent years passed through a series of sales and defaults that have at times threatened to undermine its bucolic, affordable nature.
Enter the Blackstone Group and Ivanhoe Cambridge, a private equity firm and global real estate company, respectively, which agreed this fall to purchase the development for $5.3 billion. As part of that deal, Wells Fargo Multifamily Capital, one of Fannie Mae’s 25 Delegated Underwriting and Servicing (DUS®) program lenders, originated a $2.7 billion acquisition loan to the new ownership group. Fannie Mae’s involvement will help ST-PCV maintain at least 5,000 of the more than 11,000 ST-PCV apartments as affordable units for the next 20 years.
“Fannie Mae understood the complexity of the transaction and provided long-term financing, which will ensure that the community will serve as a home for working- and middle-class families in New York City for years to come,” says Jonathan Gray, global head of real estate at Blackstone, in a statement.
Perhaps most importantly to Steinberg: This new deal means ST-PCV will retain a sizable chunk of middle-class housing for years to come.
A Growing Demand for Affordable Housing
In a city like New York, one of the most expensive in the world, affordable housing is hard to come by. Half of New York City’s households—a number totaling 1.5 million—cannot afford basic housing using 30 percent of their income, according to a recent report by the McKinsey Global Institute. The U.S. Department of Housing and Urban Development consider families who pay more than 30 percent of their income for housing to be “cost burdened.”
Long an advocate for affordable housing in New York, Mayor Bill de Blasio hailed the deal for ST-PCV as “an achievement that helps us ensure we can keep this a city for everyone.”
Questions around the development’s affordable status came to the fore in 2006 when real estate firms Tishman Speyer and BlackRock Realty purchased ST-PCV from MetLife for $5.4 billion. Their plan for the property involved removing a number of units from the city’s rent regulation program and bumping them up to market rates. And, indeed, Steinberg says, in the years following the sale, the landlords deregulated thousands of the complex’s 11,250 apartments.
This deregulation was ruled illegal in 2009, as the companies were participating in the city’s J-51 tax abatement program, under which the apartments were required to remain rent-stabilized, The New York Times reported. With that decision, all of the development’s units were returned to rent stabilization. However, the apartments are due to exit rent regulation in 2020 when the development’s J-51 tax abatement ends.
The terms of the recent sale limit the rate at which those rents can rise to 5 percent a year, Steinberg says. And that, along with the aforementioned 5,000 units that will be kept affordable for the next two decades, means ST-PCV will retain a sizable chunk of middle-class housing for some time to come.
This was a primary goal of the tenants’ organization, Steinberg notes, and, she says, the backing of Fannie Mae was key to realizing this aim.
In 2014, Fannie Mae issued a letter stating that to receive the organization’s backing, any potential buyer of the development would have to agree to maintain a portion of its units as affordable housing.
“That was a pretty big deal,” Steinberg says, calling the letter a “major coup” for the tenants association and its allies.
The final deal was also a win for Fannie Mae. “Preserving rental housing for moderate-income residents in New York City is a significant challenge,” says Jeffery Hayward, executive vice president for multifamily at Fannie Mae. “We are pleased to partner with Wells Fargo and play a critical role in this transaction to help maintain affordability for this historic property and the people of New York.”
But the biggest winners of all may be longtime residents like Steinberg who are grateful for the reprieve and plan to stay as long as possible. “I’m here for the duration,” she says.
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