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The Island in the Press
by Bendix Anderson One of the country’s first and largest mixed-income communities is starting to go upscale, as thousands of luxury condos begin to sprout in the underdeveloped patches of Roosevelt Island. At the same time, more than a thousand low- and moderate-income apartments are poised to leave the programs that were designed to make them affordable. The result could be a transformation of an area that was originally envisioned as a mixed-income utopia three decades ago. Three of the oldest and most affordable housing developments on the Island are now eligible to leave their affordable-housing programs. A fourth project has already opted out of its program. For most of the last 200 years, the Island has been famous for its prisons, hospitals and sanitariums. But in the 1970s, while the rest of the City was wracked by fires and crime, City and State officials created a utopian vision for the Island based on a master plan by architect Philip Johnson. The Island was designed to be an oasis where families earning a mix of incomes would live together in buildings designed by the best architects in the world, chosen by an international competition. Locals call the angular, concrete buildings the WIRE buildings after the names of four projects: Westview, Island House, Rivercross and Eastwood. All four were built in the 1970s under the Mitchell-Lama program, which reduced property taxes in exchange for affordability restrictions that reserved the housing for moderate- or low-income tenants. Eastwood has left the program and the other three projects are on the brink of leaving. Built in 1976 with Section 236 financing, Eastwood is the largest of the WIRE buildings and it houses the poorest residents of the four developments. When the owner of the 1,003-apartment project prepaid the mortgage in 2006, rents surged. At the same time, all tenants whose incomes were less than 95% of the area median income (AMI) – about 85% of the tenants – began to receive enhanced Sec. 8 vouchers from the Department of Housing and Urban Development (HUD) that helped pay for their rent. The owner, in turn, has agreed to invest $8 million in improving the buildings. "It’s a perfect deal," said Herbert Berman, president and chief operating officer of Roosevelt Island Operating Corp. (RIOC). Berman expects less than 1% annual turnover at the property. "This will allow us to stay in our apartments as long as we want to," agreed David Kraut, a tenant at Eastwood and a member of the Board of Directors for RIOC. A plan for the WIRE buildings The future of Island House and Westview is unclear after a deal to purchase the properties collapsed in December. Last year, the Sheldrake Organization, a developer based in New York City, had planned to buy the two rental-housing buildings and convert them to condominiums. Financial and legal complications scuttled the deal, which would have allowed the existing tenants to buy their units at reduced prices, according to Sheldrake officials. Rivercross, which is now a Mitchell-Lama limited-equity co-op with restrictions on the price that its homeowners can charge to sell their units, has also considered converting itself into a conventional condominium building. But even though the WIRE buildings may all leave the Mitchell-Lama program, it now appears that the buildings won’t lose their affordability restrictions. The land under all of the buildings on Roosevelt Island is still owned by New York City. When the Island was planned, the City agreed to give the land to the State until 2068 in exchange for the conditions laid out in the area’s General Development Plan (GDP). This plan requires that the WIRE buildings reserve 20% of their units for tenants who are eligible for public housing, another 20% for tenants eligible to live in Sec. 236 projects, and 35% for Mitchell-Lama housing. The remaining 25% of the housing can rent or sell at market rates. Sheldrake entered into negotiations to buy Island House, which has 400 apartments, and Westview, which has 361, believing that these income targets were linked to the programs that were originally used to develop the WIRE buildings and would vanish once the buildings left the Mitchell-Lama program. But some renters at Westview disagreed. The affordability restrictions of the Mitchell-Lama program, which end when the mortgage on the building is repaid, don’t overrule the affordability guidelines written in the development plan, which has no time limit except the end of the ground lease in 2068, according to Chad Marlow, a lawyer and principal with the Public Advocacy Group, who represents the Westview Task Force. For now, State officials appear to agree with Marlow. "The ground-lease restrictions are really more stringent than the Mitchell-Lama program restrictions," said Judy Calogero, commissioner of the state Department of Housing and Community Renewal (DHCR). Calogero is also the president of the RIOC board. In December, the deal to sell Island House and Westview fell apart and the buyer and seller are now in litigation. Cash needs causing concern The trouble is that Island House and Westview are starved for cash. Each building needs at least $8 million in work to make up for years of deferred maintenance, according to Sheldrake. That comes out to roughly $20,000 per unit. But it’s now unclear how the two buildings will pay for even this modest amount of work. Eastwood is in an even more tenuous position. The enhanced Section 8 vouchers that allow Eastwood’s tenants to remain in their apartments could suddenly vanish if Congress fails to provide funding for the enhanced voucher program. If that happens, the rental income from Eastwood’s current tenants will no longer be enough to support the building. But the owners of Eastwood have committed to meet the affordability requirements of the general development plan, Calogero said. Also, as time passes, some Section 8 voucher tenants will likely leave Eastwood, taking those tenant-based, enhanced vouchers with them. The new tenants that replace them will be subject to Eastwood’s affordability requirements, but they won’t be guaranteed to have any subsidy. Trapped with an unfunded mandate to provide affordable housing, Island officials might work to loosen the strictures of the development plan. "The General Development Plan may no longer serve our needs," Calogero said. "I want to go back through and expand it." In particular, she hopes to come up with a clearer path to homeownership. Another option is that some of New York State’s highly competitive affordable housing funds could be used to recapitalize the WIRE buildings and fund their mandate to provide affordable housing. Luxury housing comes to Island While the WIRE buildings and their tenants struggle with an uncertain future, 2,000 new apartments and condominiums are opening in phases at Riverwalk, only a few hundred feet away. The development plan for this part of the Island demands that just 10% of these housing units be affordable to households earning up to 80% of AMI. Another 30% are priced to be affordable to households earning up to 148% of AMI. The remaining 60% can rent or sell at market prices. This spring, the third of nine planned buildings at Riverwalk opened with 230 condominiums. The $65 million building rapidly sold out at prices as high as $450,000 for a studio to $1.2 million for a three-bedroom unit. At the same time, north of the WIRE buildings, workers are finishing up another 500 apartments at the Octagon, including 100 units that are reserved for tenants earning up to 150% of AMI, and 400 units that will rent at market prices. The affordability restrictions are completely voluntary and the building has received no government subsidy. At the same time, the income targets aren’t very deep and, combined with the large number of market-rate units, are expected to make the project financially feasible. Built around the carefully restored last remnant of the old New York Lunatic Asylum, the apartments at the Octagon rent for an average $40.50 per square foot. These projects could be seen as fulfilling the original vision on Roosevelt Island, by adding the higher-income part of the mixed-income project. Luxury projects could also pay higher ground leases, providing more income for the RIOC, which now receives no State money. But some tenants fear that if the WIRE buildings don’t stay affordable in the long term, the Island will slowly become unaffordable to anyone earning an average income, much less to low-income households. |
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