Albany to the Rescue?
To address pandemic shocks to New York's real estate market, the state's legislature hopes to spend $100 million to turn vacant commercial real estate into affordable housing. Governor Cuomo has yet to sign the bill that both state houses passed. But the bill is similar to the governor’s own plan announced in his state of the state speech early this year. Expect the plan's enactment or passage of a compromise plan very much like it.
Under the bill, New York's Housing Trust Fund Corporation would finance the nonprofit redevelopment of empty hotels to rent as apartments for the low-income and homeless. Qualifying renters must earn 80% or less of local median income. The state legislature heralds the bill as the Housing Our Neighbors with Dignity Act. New York is not alone in trying to turn a pandemic commercial real estate crisis into an affordable housing crisis solution. California plans to spend $600 million, or six times as much, on a similar plan.
What It Really Means
As New York turns from pandemic to recovery, a real estate rescue still sounds attractive. But are the details of the bill a rescue? That residents must earn no more than 80% of local median income restricts the apartments' market to the low end. The bill includes a further restriction of rent to just 30% of that income, further depressing income streams. Developers must carefully examine the margins on such projects.
One further restriction, though, makes the property owner's and developer's opportunities even more limited. The bill expressly provides, “These properties shall be owned, operated, and managed by appropriate nonprofit organizations through the use of government agency funding to acquire the properties.” The legislation anticipates the fire sale of distressed properties for state, nonprofit, and public benefit. Unless the governor exacts compromises before signing a modified bill, profit-making by property owners and developers is not likely in the cards.
Retain Expert Help for Your Property Workout
If you need help developing and implementing a plan for your real estate property, consult New York/New Jersey real-estate lawyer Melvin Monachan. Melvin Monachan helps residential and commercial clients adopt sound foreclosure defense, eviction, and related strategies to achieve legitimate personal, financial, and business goals. Melvin Monachan also assists with closings on New York and New Jersey real property. Call (347) 389-1682 or go online for an appointment with the industry-focused, relationship-driven Law Offices of Melvin Monachan, PLLC.