City housing officials mum on whether $3 billion FEMA grant to NYCHA will cease property sales

By LOUIS FLORES

The city’s perpetually broke public housing agency is set to receive over $3 billion in unexpected funding, but city housing officials have refused to say whether the unexpected cash infusion will be enough to offset plans to continue to sell city real property to private real estate developers.

Most of the new-found cash being put into the coffers of the New York City Housing Authority, or NYCHA, is coming from a $3 billion grant from the Federal Emergency Management Agency, or FEMA, for repairs to NYCHA housing developments resulting from damage caused by Hurricane Sandy.  The money is earmarked for 33 public housing developments in Brooklyn, Queens, and Manhattan, and it will be used to pay for repairs, upgrades, or installations of interior and exterior fixtures, including new boiler buildings, flood walls, and standby generators.  New equipment will be elevated for protection from future storm floods.

The large allocation from FEMA means that NYCHA will be able to service many capital improvements across a huge number of its public housing developments.

Shola Olatoye, NYCHA’s chief executive officer, had been recently escalating her complaints about anticipated annual budget deficits and a huge, unfunded capital improvement budget. 

It’s not known whether the $3 billion FEMA grant will be enough to obviate the need to continue to sell city real property in order to fund maintenance of NYCHA’s housing developments, as CEO Olatoye has asserted for the last few months.

NYCHA officials declined to make CEO Olatoye available for an interview with Progress Queens.  In the past few weeks, NYCHA officials have declined other requests made by Progress Queens for an interview.

The relentless campaign to sell NYCHA properties

CEO Olatoye has been campaigning to sell Section 8 buildings and green spaces in order to fund maintenance of its portfolio of aging public housing developments.

At a February 10 City Council hearing, CEO Olatoye testified about the controversial sale of several Section 8 apartment buildings, saying, in part, that the sale “was the only solution to the underfunding issues experienced at our poject-based Section 8 developers for decades.”

In further testimony, NYCHA CEO Olatoye said, in part, that “We don’t know what the future holds. But I think it would be irresponsible for us to not take advantage of tools that, frankly this city has utilized and pioneered to create thousands of affordable housing units,” according to a report written by the journalist Will Bredderman and published by The New York Observer.

At a March 26 City Council hearing, CEO Olatoye said, in part, “we must … rehabilitate and harness NYCHA’s real estate assets,” worrying tenant activists and NYCHA tenants that CEO Olatoye was determined to take a hatchet to NYCHA.

After pleas made by city and state officials, Governor Andrew Cuomo (D-New York) appropriated $100 million to NYCHA on the condition that City Comptroller Scott Stringer (D-New York City) would be authorized to audit NYCHA’s financial records, a move that may not lead to the necessary check on NYCHA officials. 

Potential conflicts of interest

930 HALSEY STREET, A PROJECT-BASED, SECTION 8 BUILDING FORMERLY OWNED BY NYCHA IN BEDFORD-STUYVESANT, BROOKLYN, RECEIVED MAJOR IMPROVEMENTS IN THE TIME BEFORE THE BUILDING WAS SOLD TO A CONSORTIUM OF PRIVATE REAL ESTATE DEVELOPERS.  THE ABOVE PHOTOGRAPH IS DATED SEPTEMBER 2014, THREE MONTHS BEFORE THE STRUCTURED FINANCE TRANSACTION CLOSED, DEMONSTRATING THAT SOME OF THE BUILDINGS SOLD MAY NOT HAVE BEEN AS DILAPIDATED AS NYCHA CLAIMED.  SOURCE :  GOOGLE STREET VIEW

930 HALSEY STREET, A PROJECT-BASED, SECTION 8 BUILDING FORMERLY OWNED BY NYCHA IN BEDFORD-STUYVESANT, BROOKLYN, RECEIVED MAJOR IMPROVEMENTS IN THE TIME BEFORE THE BUILDING WAS SOLD TO A CONSORTIUM OF PRIVATE REAL ESTATE DEVELOPERS.  THE ABOVE PHOTOGRAPH IS DATED SEPTEMBER 2014, THREE MONTHS BEFORE THE STRUCTURED FINANCE TRANSACTION CLOSED, DEMONSTRATING THAT SOME OF THE BUILDINGS SOLD MAY NOT HAVE BEEN AS DILAPIDATED AS NYCHA CLAIMED.  SOURCE :  GOOGLE STREET VIEW

Following a Progress Queens special report, which raised questions over whether a consortium of real estate investors may have improperly benefitted by cherry-picking buildings that had received substantial improvements made by NYCHA, the offices of Comptroller Stringer and Department of Investigation Commissioner Mark Peters refused to comment about whether their offices would investigate the sale.

Ronald Moelis and Donald Capoccia are two of the officers amongst the consortium of real estate developers, who purchased the Section 8 buildings.  Both are politically connected to city housing officials under the de Blasio administration.  Mr. Capoccia and individuals, who may be relatives, have made contributions to the campaign committees of Comptroller Stringer, revealing a potential conflict of interest, a review of state campaign finance records has shown.  When Mr. Stringer was the Manhattan borough president, he approved the $1 billion luxury condo conversion of the former site of St. Vincent’s Hospital in Manhattan after the owners of Rudin Management Company, that project’s developer, had made campaign contributions to Mr. Stringer’s campaign committee.

The sale was lobbied for, in part, by the firm Mercury Public Affairs, from which Mayor Bill de Blasio (D-New York) selected a real estate lobbyist to serve on the city’s Commission for Human Rights.  Amongst the cases the real estate lobbyist, Jonathan Greenspun, will now oversee include housing discrimination by landlords.

Tenant activists have expressed concern that NYCHA has been sidestepping a provision in the City Charter that requires the disposition of city real property to be subjected to the Uniform Land Use Review Procedure, or ULURP process.  That, the fact that many of the Section 8 buildings that were sold to private real estate developers had received substantial repairs (in contradiction to NYCHA’s claims that the buildings were too dilapidated to maintain), and the appearances of conflict of interest, have either merited stronger oversight or an outright probe, some tenant activists have privately told Progress Queens.

Probes into the real estate industry

The questions about real estate interests having their way with the de Blasio administration come against a backdrop of probes into how real estate interests walk all over state officials to get exactly what they want.  Before it was shuttered, the corruption-fighting panel known as the Moreland Commission was investigating how wealthy real estate developers had secured 421-a tax abatement approvals for luxury development projects.  The tax abatement is generally provided for development projects that provide affordable housing.  However, one such developer, Extell Development Company, made $300,000 in campaign contributions to a campaign committee controlled by Governor Cuomo leading up to when Governor Cuomo signed into law a measure that granted Extell tax abatements worth $35 million spread out over a decade for one project, which was not going to provide affordable housing, according in formation provided in a report published by The Real Deal and another report published by The New York Post.

After the Moreland Commission was prematurely closed by Governor Cuomo, federal authorities reportedly launched their own probe of the Extell tax break.

According to information obtained by Progress Queens, federal authorities had to review whether Mayor de Blasio may have had any role in the Extell tax break, as well.

In the 2013 mayoral race, for example, the de Blasio campaign committee received in excess of $40,000 in contributions from firms, including Extell, that had been being investigated by the Moreland Commission, according to one estimate.

The 421-a tax abatements are so lucrative to real estate developers that a real estate industry lobbying group, the Real Estate Board of New York, or REBNY, has indicated that if the abatement law is not renewed, then the industry is at risk of possibly losing the economic incentive to build over 5,000 affordable housing units, according to a REBNY white paper, a move one Brooklyn activist told Progress Queens may be perceived as a political threat to Mayor de Blasio, who has made the construction of affordable housing a central focus of his administration.

Nearly four weeks after Progress Queens published its special report, documenting that NYCHA included parking lots and open spaces in its sale of project-based, Section 8 buildings to private real estate developers, journalists at The New York Daily News reported that NYCHA has been secretly selling 54 plots that included parking lots, green spaces, and playgrounds to real estate developers since 2013.

NYCHA has plans to sell or has sold plots at or near the Millbrook Houses, The Bronx ; the Ocean Bay Houses, Queens ; and the Van Dyke Houses, the Linden Houses, the Howard Houses, and the Prospect Hill development, each in Brooklyn. 

No transparency and mixed messaging by city housing officials

Under plans made by the administration of former Mayor Michael Bloomberg (R-New York City), NYCHA had planned to lease empty spaces owned by NYCHA to real estate development companies, which, in turn, would construct apartments, 80 per cent. of which would be made available at market-rate rents and only 20 per cent. of which would be reserved as affordable housing.  NYCHA has not been transparent about their intentions for new construction on the the sale of empty plots.

As shown by the special report by Progress Queens, NYCHA CEO Olatoye has kept taxpayers in the dark about the details of the de Blasio administration's sales of the Section 8 buildings until after the transaction agreements had been signed.

In addition to the lack of transparency, some tenant activists claim that city housing officials are deliberately further creating confusion over the need to sell NYCHA’s buildings and plots to real estate developers.  Some say that the influence that the real estate may be able to exert over the de Blasio administration explains the real estate industry's rush to purchase NYCHA's properties at distressed values.

At the February 10 City Council hearing, Councilmember Ritchie Torres (D-Bronx), chair of the City Council's public housing committee, said, in part, that there was “nothing NYCHA residents fear more than privatization.”  However, Councilmember Torres has not demanded that NYCHA cease its sales of buildings or plots.  As reported by Progress Queens, Councilmember Torres may owe his election to the City Council to independent campaign expenditures made by real estate interests valued at over $370,000.

A request for an interview made by Progress Queens to Councilmember Torres’s chief of staff was not answered.

Various de Blasio administration officials in housing positions hail from the real estate industry.  The deputy mayor for housing, Alicia Glen, was previously employed at Goldman Sachs, where she oversaw real estate transactions with New York City.  A request made by Progress Queens to interview Ms. Glen for this article was not answered.

As City Council and City Hall officials remain mum on the sales, NYCHA CEO Olatoye has told public housing tenants that proper maintenance of buildings are contingent on future sales of properties and plots.  The constant refrain is now being repeated by some of NYCHA’s senor citizen tenants, who, in turn, have become indoctrinated into believing that the senior citizen tenants will be allowed to move into new senior housing to be built by real estate developers in plots adjacent to their existing apartments, but if and only if the sales of plots continue.

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