State steps in to fill funding gaps for affordable-housing projects

Elizabeth Ganga
The Journal News

Several affordable-housing development proposals that might have faltered due to the poor economy and tight financing have received extra help from the state to allow them to move ahead.

Two of the projects are in Peekskill: River Pointe at Drum Hill, a new 43-unit building targeted to low-income seniors and the frail elderly, and the Wesley Apartments on South Street, a rehabilitation of an existing 118-unit building for low-income elderly tenants.

The third project in Westchester is in Yonkers, where a 153-unit apartment building on Riverdale Avenue is planned for low-income families.

All three projects ran into trouble as the developers put together their financing. As the economy went downhill, gaps developed in their funding, which the state Division of Housing and Community Renewal stepped in to fill. DHCR funds affordable housing along with the state Housing Finance Agency and Westchester County.

"We said to developers of affordable-housing projects: 'This is a partnership,' " said DHCR Commissioner Deborah VanAmerongen.

The economic problems have hurt housing development in many ways, not least because there are fewer banks than there were a year ago and those that are left have tightened up lending, VanAmerongen said. But one of the main problems for the developers of low-income housing is the reduction in the value of housing tax credits, which are sold to investors to raise money and are often a major part of the financing. Because the large banks and Fannie Mae and Freddie Mac have pulled out of the market, tax credits that were worth 92 cents last year have fallen as low as 71 cents to the dollar, DHCR said.

"You need to have profits in order to need the tax credits," VanAmerongen said.

The state began putting together a program to bridge the gap for faltering projects in the spring, but since then the value of tax credits has continued to slide and the problem has gotten much worse, VanAmerongen said. DHCR was able to come up with the money to rescue projects because of a large increase in state housing funding in fiscal 2008-09 and by recycling some tax credits from projects that didn't come together into those that could. Statewide, additional DHCR funding has helped 15 developments totaling more than 1,100 units the agency said were threatened. Many of the projects had to close by the end of 2008 or lose approved bond financing.

The Riverdale Avenue project in Yonkers was one in that predicament. In the past it could have had enough financing from Housing Finance Agency bonds, said VanAmerongen. But this time its developers, L&M Equity Participants of Larchmont, needed $4.7 million in additional financing from the Home for Working Families program to make the $56 million project work.

River Pointe at Drum Hill got an award of tax credits in August 2007, but with their value falling in the meantime, they asked the state to step in and fill the gap. Construction on the almost $13 million building, next to an existing assisted-living building in the old Drum Hill School, is expected to start this month, said Allen Handelman, the project manager for the developer, Conifer LLC in Rochester. Conifer is partnering with The Preservation Company, a Peekskill nonprofit, to build the housing on Ringgold Street.

Jeannette Phillips, the executive director of The Preservation Company, said she is glad DHCR understood the nonprofit's financial plight, especially in light of some delays in getting the project together.

"Unfortunately, in the middle of all this, the economy turned down," she said.

For The Preservation Company, which grew out of Hudson River Health Care, this is a new venture into housing development. The more than 20-year-old organization owns three buildings with seven units, manages another and provides a raft of tenant services.

"We really see the people on Main Street," she said.

At the Wesley Apartments on South Street, financing for the more than $15 million to buy and rehabilitate the building comes with the requirement that the apartments remain affordable for 40 more years. The 118 apartments are rented to seniors with incomes at 30 percent to 60 percent of the area's median income, with 10 set aside for people with disabilities. A financing gap could have delayed closing, resulting in the loss of $4 million in bonds. DHCR stepped in with a $3 million, low-interest loan, allowing the project to close at the end of December.

"It was an at-risk project that could have left affordability," said Eugene Schneur, the managing director of Omni New York, the developer, which is based in New York City.

The company, founded in 2004, has bought 18 properties to keep them affordable.

"It's tougher now to make deals work," Schneur said.