The problem may be of crisis proportions now but finding affordable housing for low-income New Yorkers has been a problem for more than 30 years.
At least that’s how long Moujan Vahdat, CEO of Elmo Realty Co., one of the largest landowners in New York, has been working on alleviating the city’s homeless crisis. Last year, the company celebrated the 30-year milestone of its corporate mandate to help an ongoing problem in an always expensive city. But it wasn’t exactly Vahdat’s original plan as a traditional multifamily owner and manager. The firm has bought and sold over 75 properties and currently owns and manages over a dozen properties throughout New York City’s five boroughs.
“I fell into it,” Vahdat recalled. “I owned a building in the 1980s at 301 West 108th St., which at the time had some vacant units. A gentleman walked into my building and said, ‘I would like to rent your units for homeless people.’ That was the start of a 40-year relationship as that gentleman was a founder of The Bridge Inc.”
The Bridge Inc. provides housing and behavioral health services to those in need through 40 programs in the Bronx, Brooklyn, and Manhattan to provide subsidized apartments in East and West Harlem. Over the years, the organization net-leased some buildings from Vahdat for the homeless.“We gave them many units to be supportive of the homeless,” he recalled. “That was the start.” Over time, Vahdat began construction of other buildings and net-leasing them to other organizations. These include the Promesa Housing Development Fund Corporation, which has housed 46 former homeless adults and 60 children in the Bronx for nearly 10 years. It works with partners with compatible missions who then work with the Department of Homeless Services. It is not customary for for-profit landlords to provide homeless services, Vahdat explained.
“It really is a compassionate, very hardworking and smart organization, but they have their hands tied behind their back,” he said. “But their intentions have always been good for the past 30 years. They really want to help the homeless.”
All have their hands full. In recent years homelessness in New York City has reached the highest levels since the Great Depression of the 1930s, Vahdat observed. The Coalition for the Homeless reported that in August 2022 there were 55,036 homeless people sleeping each night in New York City’s main municipal shelter system, which is 15% higher than it was 10 years ago. It also reported that the number of homeless single adults is now 89% higher than it was a decade ago.
Nationally, the numbers aren’t much better and, in some areas, are even worse. According to the National Low Income Housing Coalition (NLIHC), New York ranks fourth (behind Hawaii, California and Massachusetts) nationally for the highest housing wage necessary to afford a two-bedroom rental apartment, at $37.72 an hour. No state has an adequate supply of affordable rental housing for the lowest income renters. Nationally, nearly three in 10 (28%) of renter households are extremely low income, and the Coalition estimates that there is a 615,025-unit shortage of rental homes that are affordable and available for extremely low-income renters.
Why is the situation so bad? Several factors come into play. The primary cause of homelessness, particularly among families, is lack of affordable housing as apartment prices have soared in recent years. The average annual household income needed to afford a two-bedroom rental home at HUD’s Fair Market rent is $78,465, according to NLIHC.
Surveys of homeless families have identified more immediate, triggering causes of homelessness: eviction, doubled-up or severely overcrowded housing, domestic violence, job loss and hazardous housing conditions.
Vahdat offers another cause.
“It’s become a mental health crisis,” he observed. “Until the dollars for mental health are diverted to the correct avenues, this unfortunate situation will continue. It has also become more difficult due to COVID-19, with red tape at the hospitals and the organizations. People who are really mentally ill have a difficult time getting help.”
People with the knowledge of how to work the systems that are in place can receive help, Vahdat continued. Those on the streets without that wherewithal continue to suffer.
And more trouble could be on the way, Vahdat warns: an unprecedented eviction crisis looms for hundreds of thousands of New Yorkers following the expiration of the state’s eviction moratorium, in the absence of additional emergency rental assistance or expansion of needed rent subsidies.
Financing these projects is an even greater challenge.
“In New York, it’s more expensive to build affordable housing because of land prices. And they put a cap on land prices. That cap kills 80% percent of deals,” Vahdat noted.
Several misconceptions also contribute to the problems.
“It is actually difficult to finance homeless shelters because the leases that the city of New York gives the not-for-profits contain a clause that the city can cancel the lease for any time, by giving 30 days or 90 days maximum notice,” Vahdat explained. “So, the banks are afraid — what happens when the city decides they don’t want to renew for political reasons?”
Meanwhile, Vahdat notes, that has never happened except in the event of gross mismanagement by the non-profit or fraud. Fortunately, some banks are more lenient regarding financing, even as others are walking away.
“That’s one of the problems involved with homeless services, the financing,” he continued.
That’s why Vahdat and his family built the projects with their own money. Once the property has a track record, they refinance it with a bank.
“That’s the way I understand most of the people who are involved in providing a lot of units are doing it,” he said.
Vahdat also continues to combat the forces of NIMBY (not in my backyard), though he reports that objects have “softened a little bit.” Both current Mayor Eric Adams and his predecessor have mandated the opening of shelters, so opposition has declined except in very affluent neighborhoods.
And the government must play a financial role, Vahdat added. “Homelessness is a function of not having enough affordable or low-income housing. That’s a different ball game I’m involved in. I feel strongly that our government has not acted like a government when it comes to affordable housing,” he said. “The rules are antiquated. It should not be more profitable to build at-market housing than affordable housing. For the developer, it should be that I can build affordable housing and maybe make a little less money, but not 1% of what I used to make.”
Nor should affordable housing builders be forced to “jump through hoops in the financing aspect. There is financing available, but it’s very difficult.”
He noted there are a handful of developers working in the sector. And New York poses its own challenges.
“We have been doing this for 40 years — for 10 years as a broker, 30 years as a principal myself. This is a function of our state, local and federal government allocating more funds. It costs a lot more to house a homeless person at $300 a night in a hotel than to allocate $1.5 billion to $2 billion for affordable housing,” he said.
Vahdat on occasion gets discouraged, he acknowledged. A recent project was pulled from him after a year of work because the financing didn’t work.
“It would work if I built condos,” he said.
Yet he remains hopeful for the most part that he can end the homeless crisis.
“We are dedicated to that,” Vahdat concluded. “It really is my hope that I can help in that.”