Mayor Bill de Blasio administration’s proposed rezoning of East Harlem is expected to move to a final City Council vote at the end of November. With for-profit developers being tapped to build large affordable housing developments in the neighborhood, a popularly heard complaint of community activists here is that the city is ignoring nonprofit developers.

The city, which has been criticized for partnering with for-profit developers, has recently committed to a fund of $275 million to help nonprofits purchase rent-stabilized buildings and maintain their affordability. In spite of this effort, for-profit developers are likely to continue to play a significant role in the city’s affordable housing projects in East Harlem and other neighborhoods.

The role of for-profit developers has certainly grown over the years. A recent report by the Association for Neighborhood Housing and Development (ANHD) showed that 74 percent of new construction deals were taken on by for-profit developers, while nonprofit developers accounted for just 26 percent of the deals. Of 10 projects on city-owned land, nine went to for-profits and only one went to a nonprofit.

Daisy Gonzalez, an organizer affiliated with Movement for Justice in El Barrio, complained that the city was repeating this pattern in its plans to build affordable housing in East Harlem. “It’s a disaster because they are continuing to rely on major private real estate firms, when in fact there are so many nonprofit organizations capable of building affordable housing,” she said.

The East Harlem Housing Plan, prepared by the Housing Preservation and Development department, did not carry any strong recommendations about substantially involving locally-based nonprofits and community development corporations. “Its calls for a few initiatives to help existing landlords in the neighborhood, but it makes no real mention of supporting nonprofit affordable housing providers and CDCs in new affordable housing development or preservation,” said Gonzalez.

A recent example of a huge affordable housing development being constructed by for-profit developers is the project of L+M Development Partners and Jonathan Rose Companies at East 111th Street, on a large city-owned site within the boundaries of the proposed East Harlem rezoning.

The plan approved by the City Planning Commission adds 665 affordable apartments to the site along with a space for public amenities, including a YMCA, a supermarket, a charter school, a restaurant with a job training program and other facilities. The building is also expected to consume 60 to 70 percent less energy than a standard building of the same size. It is required by the city that 20 percent of the 665 apartment units be kept at rents affordable to families making up to 30 percent of the Area Median Income (AMI) with the rest being allocated for 60 and 130 percent of the AMI.

As the site sits over public land, the city could have partnered with a nonprofit developer to ensure all units being constructed were taken up by low-income families. Members of the East Harlem community had hoped that the city would recruit a nonprofit developer. Indeed, a number of nonprofit developers including Hope Community, Operation Fightback, Lott Community Development Corporation, NERVE, Inc. and Ridgewood Bushwick Senior Citizens Council also submitted development proposals but were not selected by HPD.

Roger Hernandez from NERVE, a nonprofit corporation working in East Harlem, complained that their rejected plan for the site would have made greater and permanent affordability possible.

“We had proposed 710 affordable apartments for extremely poor, rent-burdened households and they would have had a much bigger portion of units for them then they have under the current plan,” said Hernandez. “NERVE has also worked in the neighborhood for so long and outsiders do have not have such a close relationship to the community they are serving,” he added.

However, the plan proposed by L+M and Jonathan Rose ranked higher for its superior planning and overall benefit to the community.  Purnima Kapur, the executive director of the Department of City Planning, stood by the city’s recruitment of L+M Development Partners and Jonathan Rose Companies. The DCP head noted that for-profit developers had a greater vision than nonprofits for multipurpose community land use.
“The proposal was selected through a highly competitive, objective process that scored each project on a range of factors including the mix of affordability, the mix of commercial and community space, the quality of the design, the sustainability and financial feasibility of the project, and the extent to which it met the priorities identified by the community, including commitments to local hiring,” said Kapur.

Despite some neighborhood opposition, not everyone was disatisfied. “We have to think about our future and the children. That they are able to benefit, not only from housing, but from education, transportation and all the other things that contribute to the quality of life,” said Diane Colliers, Chair of Community Board 11.

With financing options limited for nonprofit developers, undertaking large affordable housing construction can also be a daunting task for them. Lisa Gomez at L+M Development Partners said that large affordable housing developments like East 111th Street required finances and planning on part of the bidders “Building a huge scale of  affordable housing at a wide range of affordability is an enormous undertaking, at this point getting bonds or bank loans and heavy amount of government funding is hard. You have to have resources and also the skills of cost-effective planning to be able to do such a project,” said Gomez.

It is also true that Housing and Preservation Department’s criteria for experience in their applications excludes the vast majority of nonprofit developers. For instance, to secure a bid to develop a Dinsmore-Chestnut site in East New York, a developer has to have built a 150-unit building in the last seven years. With for-profit developers disproportionately favored by the city for decades now, there simply aren’t enough nonprofit developers with the required experience to qualify for such contracts.
“You have to have resources to be able to do a project. You have to be able to sign a guarantee and demonstrate your ability to get a bank loan and all of these issues where you need to have some balance sheet,” said HPD’s Molly Parks.

Nonprofit developers also say the HPD vetting process has become much more stringent, requiring the submission of detailed supplemental material that is expensive for all developers to produce, but harder for nonprofits that have less money to spend on their proposals.

“There very well might be nonprofits that can’t do that,” said Roger Hernandez of NERVE. He added that the city had been more reluctant to use tax-exempt bonds to fund smaller projects. “There was a time when the city financed bonds for buildings with 50 to 100 units. Now it is believed that this amount of units is small for a bond deal. Commercial banks have also placed demands that make it harder for nonprofits like us to get loans.”

The city has been taking steps to redress this imbalance between for-profit and nonprofit developers. Mayor Bill de Blasio last month announced that the city would invest in a fund to increase the role of nonprofit developers.

Termed the Neighborhood Pillars, the fund will spend $275 million with the goal of preserving 7500 units over eight years. It will assist nonprofits and their acquisition of buildings, usually with 30 to 50 units, vulnerable to real estate speculation in rapidly gentrifying neighborhoods, including East New York, Crown Heights, and East Harlem.

The timing of the announcement for the fund interestingly coincided with de Blasio’s election to his second term in office. Just weeks before the Mayor’s announcement of the fund, a letter signed by several nonprofit groups demanded that he fire his Deputy Mayor for Housing and Economic Development Alicia Glen on the basis that she heavily favored for-profit developers. The coalition, referred to as Real Affordability for All, alleged that Glen showed preference towards major developers such as Ron Moelis of L+M Development Partners as she embarked on her appointed task to  execute de Blasio’s 10 year plan to create and preserve 200,000 affordable units in the city.

“Glen has been the biggest obstacle to ensuring that your housing policies meet the needs of low-income and moderate-income New Yorkers hit hardest by the affordability crisis,” the letter to de Blasio stated.

As de Blasio has traditionally drawn support from the progressive left and neighborhood organizations for votes, the unveiling of the fund just weeks before his second-term election could be a last-minute gesture of goodwill. “It is interesting that he decided to reorient his position on the exclusion of nonprofits in affordable housing just as his first term was being graded,” said Katie Goldstein of the New York State Tenants and Neighbors group.

Still, Goldstein noted that giving funds to nonprofits to buy buildings at risk of speculation as outlined in the Neighborhood Pillars plan would not radically increase their role in affordable housing construction. “We want that when the city develops, especially over public land, that contracts be offered to nonprofit developers instead of the usual big firms. They are huge sites of vacant land where the city is planning affordable housing and the Mayor’s fund is not addressing the lack of nonprofits in leading roles there,” said Goldstein.

With the majority of affordable housing contracts still going towards for-profit developers, the city’s partnerships with nonprofit developers will need to go beyond helping them purchase and maintain rent-regulated buildings. In East Harlem, where the rezoning will open up many opportunities for development, it remains to be seen whether the city and Mayor Bill de Blasio will actually change course and partner with nonprofits.