Critics Blast Subsidies for Luxury Apartments

 by Ronald Drenger

Residents of Battery Park City’s new Solaire building enjoy floor-to-ceiling river views, kitchens with Vermont slate floors, maid and valet services, and a manicured rooftop garden. The developer of this 291-unit apartment building has enjoyed a luxury of his own: $100 million in tax-exempt bonds issued by the state.

Critics of Liberty Bond program silently protest at June LMDC meeting. Photo by Carl Glassman

At 90 Washington St., an office tower is being converted into a 398-unit residence with a 12,500-square-foot glass-walled rec center, a wrap-around roof terrace with golf greens and driving cages, and apartments with granite-floored kitchens. To help make it possible, the city generously kicked in $77.5 million in tax-free bonds.

The apartments at the 287-unit building going up at 10 Liberty St. will have marble bathrooms, and a business center, pool, gym and children’s playroom—all built with the help of $100 million in tax-free bonds.


These are among some dozen Downtown apartment buildings for affluent New Yorkers being planned with generous public subsidies from the city or state.

Others may be in the works. Jack Resnick, for example
is asking for $200 million in tax-free financing for a 35-story tower, vigorously opposed by Downtown community leaders, that he plans for the corner of Chambers and West streets. And Steve Witkoff, owner of the Woolworth building, is requesting the government subsidy for his conversion of the landmark’s upper floors into luxury apartments.

The money is courtesy of the $8 billion Liberty Bond program. The low-cost, tax-exempt bond financing for commercial and residential projects in Lower Manhattan was created by Congress in March, 2002 to help spur development in the wake of Sept. 11.

But the $1.6 billion program has drawn fire from critics who say the bonds should finance more apartments for low- and middle-income tenants, particularly since the city is in the midst of a housing crisis. They say that an unprecedented opportunity to build such housing Downtown is being wasted at the same time that powerful developers are being given large public subsidies.

“What makes it really galling is that if you look at what happened at the World Trade Center, who the heroes were—police, firefighters, the buildings’ maintenance workers, teachers—none of them, given their average salaries, could afford to live in the buildings that are being developed with Liberty Bonds,” said Ron Shiffman, who recently stepped down as head of Pratt Institute’s Center for Community and Environmental Development.

Half of the Liberty Bond residential program is administered by the state’s Housing Finance Agency (HFA), the other half by the city’s Housing Development Corporation (HDC). Usually when these agencies provide tax-free financing, they require developers to set aside 20 percent of a building’s apartments for people making up to 50 percent of an area’s median income.

But HFA is requiring developers who get Liberty Bonds to set aside only 5 percent of apartments, for tenants with incomes up to 150 percent of the median income in New York City, or $94,200 for a family of four. HDC is not requiring any below-market units, but it assesses developers 3 percent of the bond amounts, which will be used to create lower-income housing elsewhere in the city.

In July, Mayor Bloomberg, Gov. Pataki and officials from the Lower Manhattan Development Corporation and the federal government announced that the Liberty Bond program was being supplemented with $50 million from the $21 billion in federal post-9/11 aid to New York, to create about 300 apartments for moderate-income families.

But that’s far too few, and low-income tenants are excluded, complain the critics.

“Three hundred units, when the state has been given an unprecedented amount of money, is a drop in a very large bucket,” said Bettina Damiani, project director at Good Jobs New York, which helped form the Liberty Bond Housing Coalition, a group of advocacy and community organizations. “This 300 should be the very beginning.”

City and state officials take the side of developers who claim that creating more below-market-rate apartments Downtown in the current financial climate won’t work. Developers, the officials say, can’t get the financing they need or earn enough rental income to pay back their loans. “Because of the cost to acquire [Downtown] land, it’s not economically feasible,” said Tracy Paurowski, a spokeswoman for HDC.

Gary Jacob, executive vice-president at Glenwood Management, the developer of 10 Liberty Street, said that after Sept. 11, banks backed out of financing deals for the project, which was supposed to have 20 percent of apartments at subsidized rents.

Such a building, Jacobs said, would have required equity and guarantees far beyond what a “prudent” developer would put into a project. “We weren’t able to get the project off the ground until the Liberty Bond program came up,” he said. “The economics made sense again.”

But critics, citing a strong Downtown residential housing market that has rebounded since Sept. 11, dispute the claim that developers need public subsidies to complete their projects. They also say that developers who receive subsidies can afford to set aside more lower-rent apartments.

“The city and state haven’t conducted any tests to determine that the projects, in fact, could not be completed without the tax-exempt financing,” said Damiani.