April 13, 2020

The Struggle to Preserve Affordable Housing through COVID-19


This property is located in the Crotona neighborhood of the Bronx. Like many of the affordable housing projects in UNHP’s portfolio, this property was once vacant and renovated with a mix of funds, including the Low Income Housing Tax Credit. The property provides safe, decent affordable housing for low-income Bronx families. Commercial rent is an important part of the income stream for the property. UNHP forecasts a loss of both residential rents and commercial rents as a result of job losses, business closures and slowdowns due to COVID 19

Among the many health and economic concerns facing New York City during the Covid-19 Pandemic is the ability of affordable housing projects to continue to provide the safe and quality housing that residents deserve. With massive unemployment requests and businesses closing indefinitely, rent collections are projected to drop significantly.

As a Bronx-based provider of both affordable housing and much-needed community resources, UNHP has a unique perspective on the situation through development work, housing research, and understanding the needs of community members through direct services. UNHP is involved in the oversight of 27 affordable housing buildings in our community and works to ensure the properties provide decent affordable housing for the 1,216 low-income households who call these multifamily buildings home. Our research has been tracking trends in NYC multifamily finance and values for over ten years and at the Northwest Bronx Resource Center, we assist over 3,000 people a year with free affordable housing and financial services. There are more questions than answers right now in terms of the economic impacts of COVID 19 on the multifamily housing market. UNHP is taking a look at some of those questions and how they will affect community-based affordable housing in our portfolio and in NYC.

What happens to nonprofit- owned affordable housing during and after COVID-19 crisis?

As thousands of NYC renters have been let go, laid off or seen dramatic reductions in income, many tenant advocates have called for rent forgiveness. There is currently a moratorium on evictions in place through at least June 15, yet many questions remain unanswered in regards to what happens when the moratorium is lifted. Even affordable housing needs to collect rent to operate. Most mission-driven affordable housing owners do not use evictions to increase rent rolls, accept all forms of subsidy and use legal action for a number of reasons, including to force public payments like one-shot deals and to stay in compliance with regulatory agreements on some properties. How will commercial tenants, which can make up a large portion of a project’s rental revenue, continue to pay rent while they are unable to do business? Will commercial and residential tenants be responsible for the balance on the back end of a lease? Will there be a flood of legal actions filed in the days following the lift of the emergency order? Current housing court precedent can limit the amount a landlord can collect in arrears based on when legal action was initially taken. How many landlords will be in a position not to pursue the maximum arrears? Many tenants may not be able to pay the tenant portion of their Section 8 Housing Voucher. How will non-profit buildings, which operate on small margins to begin with, be able to continue to provide quality housing after losing months of rental income? Will Owners and Operators of HUD properties be obligated to start legal action or put their contracts, budget based increases and REAC certifications in jeopardy if a large number of tenants fail to recertify income and family composition for issues related to COVID 19 in a HUD based project?

It is important to note that not all nonprofit affordable housing is alike. For groups that began community development work in the 1980s, many of the properties were occupied and in disrepair. Buildings were renovated piecemeal with tenants in place. Later development occurred in vacant buildings with the Low Income Tax Credit, but even many of those buildings were renovated over 20 years ago. Many of those buildings require upgrades. Some nonprofit developers have been able to build new construction of affordable properties. The affordable housing buildings we are discussing here vary in terms of their rent rolls, and reserves depending on what investment was available at the time of purchase, occupancy, and condition.

Would temporary suspension of debt service have enough of an impact to keep non-profit affordable housing going?


Many private building owners and landlords of de-facto affordable housing – i.e. affordable or rent-stabilized housing without additional regulatory agreements, restrictions, or subsidies – have debt principals based on extremely high building valuations. As sale prices in NYC have increased dramatically over the last decade, so has the willingness of financial institutions to refinance projects based on these increased values. The race for ever-increasing debt principal – used in order to capture the rising value of the building – can in the worst cases lead to undue rent increases or deferred or bare-minimum maintenance that lead to decrepit conditions. Whatever the situation, the result is that principal debt service payments make up a significant portion of the annual rental income for these private projects, and suspension of debt service would provide these landlords with a significant windfall.

Currently, in New York, New York Community Bank and Freddie Mac/Fannie Mae/FHA backed loans have consistent guidelines for mortgage forbearance. Individual landlords have to apply to the lender and other financial institutions are working with landlords on a case by case basis. NYCB, FannieMae and FreddieMac portfolios make up a significant portion of NYC multifamily buildings. However, in many UNHP and affiliate sponsored affordable housing projects here in the Bronx, debt service payments make up just a small fraction of the monthly and annual expenses. On the whole, this reflects commitments to keep rents affordable and buildings well-maintained by controlling expenses and debt service. This also means that, while suspending these mortgage payments may help bridge the gap on maintaining these projects throughout the COVID-19, it does not do enough to move the needle or keep these projects with little debt from falling deeply into debt and disrepair.

Prior to the current crisis, owners of private, rent-stabilized housing generally maximized Net Operating Income in order to maximize the mortgage amount that their income can cover. Non-profit affordable housing, on the other hand, generally has less NOI, as they are interested in reinvesting rental income back into the building and only taking on debt when necessary.

Assuming rent collections go down across the board during the COVID-19 crisis, mortgage relief would disproportionately benefit those with larger debt service to begin with. For non-profits with less net income to start with, thinner margins and the lack of substantial relief through mortgage payment deferral, proposed solutions to the crisis do not go far enough.

What will it take to keep affordable housing projects run by nonprofits operating and able to continue to provide the standard of living NYC tenants deserve?

To think through this issue, any City, State, or Federal level relief package for community-based affordable housing must look at the entirety of affordable housing operations, and specifically some of the largest expense items in the current landscape. Those include Water, Insurance, Real Estate Tax, and Compliance with NY Local Laws. Many of these expenses like Water, Taxes and Insurance are often paid out of escrow accounts, which will need to continue to be funded under the current mortgage relief package.

Water, an issue UNHP has been wrestling with for decades, has become one of the largest annual expenses a building has. With the implementation of the Multifamily Water Assistance Program (MWAP) buildings currently entered into a Regulatory Agreement with HPD, that are enrolled in the Multifamily Conservation Program (MCP), can see relief in the form of a credit of $250 per unit which reduces the per-unit cost to about $1,000. While a helpful start in normal times, more relief on water expenses is needed and given the breadth of the crisis, necessary to ensure that affordable buildings can make it through the next couple of years.

Water and Sewer charges, which tripled between 2000 and 2016, are a significant portion of a multifamily building’s expenses. Income and expense data for multi-family buildings from the New York City Rent Guidelines Board and a set of community-controlled, affordable housing properties in the Bronx show the disproportionate impact of the cost of water in affordable housing buildings. The discounted rate created in 2018, has helped, but more will need to be done to preserve affordable buildings as a result of the COVID 19 economic fallout

Insurance has also become a significant annual multifamily expense. As many projects reach 2020 renewals, we are seeing rate increases anywhere from 15% to 65%. Many brokers attribute these increases to larger average losses over the last few years, and as per unit prices often surpass $1,000 and mandatory minimum coverage amounts set by LIHTC investors increase, many nonprofits owners and developers are forced to seek out policies with lesser rated policyholders. These tend to be non-admitted carriers that do not have the protection of the NY State guaranty fund or in other cases self-insure leaving community groups vulnerable to significant risk. While there is currently no mechanism in place for the city to provide relief on this, we think this will need to be addressed in order to keep affordable multifamily projects above water through the end of this crisis and thereafter.

Real Estate Tax, another of the BIG 4 annual expenses, which is due in June and December, is an area where NYC Department of Finance and Housing Preservation and Development do have relief mechanisms in place that could be expanded upon during this time. While many projects have tax abatements in place like 420C and 421A, commercial space is ineligible for relief, and often these commercial portions are passed on to commercial tenants. However, as these small businesses are forced to close or see dramatically reduced income, they often cannot afford to pay rent, much less the additional property tax payments built into their leases. In other cases, many affordable housing projects are currently paying significant real estate taxes as abatements expire and the project sponsors assess the needs going forward prior to refinancing. We must figure out how the City can offer property tax relief without its revenue base bottoming out. In addition to the programs outlined above, it may be time to overhaul and expand HPD’s Article XI program, which provides complete or substantial tax abatement for affordable housing projects in exchange for rent restrictions and implementation of a homeless requirement. A large Article XI program could address the immediate crisis in affordable housing and also lock-in affordable rents subject to regulatory agreements for the long term. In addition, would private owners who find themselves over-leveraged and unable to meet debt obligations consider a program like Article XI? What is clear is that an immediate mechanism for real estate tax relief is paramount to avoid having to choose between paying New York City and maintaining building standards.

NYC Local Law compliance has been increasingly burdensome to both owners and managers over the past 5-7 years. While the Laws themselves were written and implemented with the best of intentions, affordable housing projects developed and underwritten between the late 90’s and 2015 did not account for the major capital expenses that come with these requirements, which include:

  • Local Law 11, which addresses Façade Maintenance on buildings over 6 stories, can drag on for months or even years with even the best contractor, engineering firm, and owner’s rep. As the requirements for inspection have become more stringent in the last year, there has been no consideration given to the fact that Engineering Firms make up an enormous portion of the six-figure price tag.
  • Local Law 87, which addresses Energy Performance in buildings over 50,000 square ft. also comes with a large engineering fee, filing fee, and almost always requires repairs and improvements to be made.
  • Local Law 152, which addresses gas line inspections in buildings with more than 2 units, will need to be completed in the Bronx for the first time by December 2020. This Local Law carries a $10,000 price tag for failure to file by the end of the year and as the Law is being implemented for the first time, it is hard for building operators to know how to prepare for potential deficiencies.
  • Elevator Door Monitoring System ComplianceAs per ASME A17.3 of 2002, as modified by Chapter K3 of Appendix K Section 3.10.12 of the New York City Building Code, comes with a varying price tag. Implementation of the Door Lock Monitoring System ranges from $10,000 to $30,000 dollars depending on the age of the elevator, in addition to permits and Filing Fees. All multifamily buildings are required to comply with the new DOB standards by December 2019, though with limited elevator contractors available, many jobs were pushed back to 2020 and have not yet been completed. Violations will be issued to building owners throughout the year for non-compliance as CAT1 inspections are performed throughout the year.

While we do agree that these Local Laws above should be complied with for the safety of residents and staff alike, timeline extensions and waived filing fees for regulated affordable housing projects could be a start so that buildings can triage the most critical needs while rent collections are down.


We strongly believe that no single measure described will yield the relief that the majority of affordable housing projects will require, but that a multi-faceted approach could provide a way for community-based owners and developers to make it through this difficult period and keep people in their homes where they belong.

UNHP is a community-based affordable housing developer involved in the oversight of 27 affordable housing buildings in our community and works to ensure the properties provide decent affordable housing for the 1,216 low-income households who call these multifamily buildings home. 19 of these properties are managed by private management companies. 8 of these buildings are co-owned by Fordham Bedford Housing Corporation, which provides their own management and social services to their large portfolio of over 100 Bronx affordable housing projects.
Thank you to Citi for supporting our work to preserve affordable housing through research and action.This post is part of a three-part series looking at Bronx housing and demographic issues as Covid-19 hit in 2020. Here are the other two posts in this series, Trends in Multifamily Finance during Covid-19 and Bronx Reality before Covid is Manifesting Devastating and Deadly Consequences