The Community Service Society of New York
09/19/2024 | Press release | Distributed by Public on 09/19/2024 10:14
Testimony: Boost Homeownership Through Social Housing
September 19th, 2024
Testimony: Boost Homeownership Through Social Housing
Samuel Stein
Thank you, Council Member Salamanca and the Committee on Land Use for holding this important hearing on affordable homeownership programs. Our names are Samuel Stein, Oksana Mironova, and Iziah Thompson, and we are senior policy analysts at the Community Service Society of New York (CSS). For over 175 years, the Community Service Society has directly aided and advocated for low-income New Yorkers. Throughout that time, we have maintained a focus on housing affordability, housing quality, and housing stability.
We submit this testimony in support of the Council's efforts to increase funding for city-financed affordable homeownership development. While we strongly support additional funding for affordable rentals and agree with the administration that the city needs far more of them, we also believe that more emphasis can and should be placed on permanently affordable homeownership production. Simply put, 3 percent of HPD spending on homeownership is not enough.
Homeownership in New York City by the Numbers
While the spectrum of New York City homeownership is quite diverse, on the whole homeowners remain a privileged minority. According to the 2023 Housing and Vacancy Survey, just 30 percent of New York City residents were homeowners. White New Yorkers make up 31 percent of the population and 41 percent of homeowners, reflecting historic and ongoing racial exclusion in the homeownership market. Renters were more than twice as likely than homeowners to carry student debt and were 11 percentage points more likely to be food insecure.
In our recent report AMI in NYC, we translated household income data on various groups of New Yorkers into Area Median Income (AMI) levels in order to better understand the dynamics of inequality in our city and the meaning of affordability levels in income-targeted housing. The median New York City household earns just 71 percent of AMI. Looking at renters versus homeowners, we found that the median New York City renter earns 59 percent of AMI, while the median New York City homeowner earns 109 percent of AMI. In the following chart, we demonstrate this differential by showing the AMI levels for renters and homeowners in the middle of the income distribution, as well as in the 25th, 75th and 99th percentiles. The findings clearly demonstrate the deep and persistent inequalities between homeowners and renters.
Figure 1. AMI levels for NYC renters and homeowners: 25th percentile, Median, 75th percentile, and 99th percentile​
One reason why homeownership skews higher income is that homes on the market are fetching exorbitant prices. According to the latest data from StreetEasy, median home sales in Manhattan and Brooklyn neared $1 million, while median sales prices in The Bronx, Queens and Staten Island ranged from roughly $500,000 to $750,000. These are prices that most New Yorkers simply cannot afford. Given the city's limited commitment to new affordable homeownership opportunities, and the exorbitant cost of market-rate homes for sale, there are few chances for lower income New Yorkers to find a way into homeownership.
A Social Housing Approach to Homeownership
Homeownership in New York City can take many different forms. According to the most recent Housing and vacancy survey, the city's owner-occupied housing stock is comprised of roughly 378,400 single family homes, 310,500 cooperative units, 216,400 homes in 2-unit buildings, 126,900 condominium units, 60,260 homes in 3-5 unit buildings, and 16,470 homes in 6-or-more-unit buildings, for a total of 1,109,000 homeownership units. Most of these homeownership units are "fee simple," meaning they can be bought and sold at whatever price the market will bear, while others belong to shared-equity or limited-equity homeownership models, wherein the resale price of units and the income levels of buyers are restricted by law. The latter are a core part of New York City's social housing stock, a term that describes housing that is socially equitable, resident controlled, and shielded from speculation by being held separate from the private market.
There are many advantages to social homeownership models over fee-simple models. Social housing can and should be permanently affordable, thus ensuring homeownership opportunities are available for the next generation of low- and moderate-income renters. They are often offered via waiting lists, which remove coop boards' the ability to discriminate against perspective buyers - a practice that is pervasive, despite being illegal. (We also support Intro 407, the Fair Residential Cooperative Disclosure Law, and encourage the council to pass that bill.) Permanent affordability also maximizes the efficiency and longevity of public subsidy, ensuring that many generations of homebuyers benefit from the city's spending, and not just those who buy at a subsidize rate before selling at market rate. At the same time as it maximizes efficiency, social housing also minimizes risk to owners if the market tumbles, and protects them from debt scams that prey on low-income homeowners. Most of all, social housing models of homeownership emphasize the value of housing as a social good, rather than an asset class.
Shared-equity homeownership models or shared-equity programs (SEP) have proven to be more stable in times of financial crisis and are often structured to empower people who have been excluded by redlining or preyed upon by racist mortgage lending practices. At the peak of the foreclosure crisis, a smaller percentage of shared equity homes were foreclosed upon or delinquent than those owned through conventional homeownership. And since then, research has shown that 74% of shared equity owners are able to maintain ownership for at least 6 years, despite serving populations kept out of traditional homeownership. Black and Hispanic New Yorkers make up 36 percent each of subsidized homeowners, while accounting for 21 percent and 29 percent of the city's population. SEPs have been shown to have significant impacts on the number of low income and minority households that can buy homes. If New York City wants to close its racial homeownership gap and general affordability gap, this is the right direction. As of 2021, 78 percent of shared-equity homeowners reported that they were first-time buyers, 18 percentage points higher than the rate for private cooperatives. These programs create opportunity, as purchasers within the SEP models compared to others with similar credit scores and debt, education and other characteristics have been found to have significantly less mortgage debt and lower monthly payments than other similar purchasers. Traditional homeowners pay $735 more on average in monthly payments than SEP owners. Furthermore, the average SEP owner's mortgage is $103,378 less than that of a traditional homeowner.
The city's current flagship homeownership programs Home Fix and Home First are great examples of using subsidy to make affordable "financing" a reality for homeowners as a useful way to bridge the affordability gap. However, the financing of homeownership isn't the same as using resources to subsidize permanent affordable housing. This distinction is important.
Pathways to Social Homeownership
This year, the New York City Council joined housing advocates to push for greater investment in limited-equity homeownership development. Through the Homes Now, Homes for Generations campaign, CSS fought for $2.5 billion to be invested in two HPD programs over the next five years: Open Door, which supports the construction of new limited-equity cooperatives, and Neighborhood Pillars, which helps tenant- and community-based organizations acquire distressed rental housing, sometimes with the goal of converting them into tenant-owned affordable cooperatives.
At the end of the Council's negotiations with the administration, the budget funded Neighborhood Pillars for the first time in five years, and roughly doubled the funding for Open Door. This is an excellent start, but in order to produce a significant number of new limited-equity homeownership units, the city will need to do more to prioritize funding for this crucial form of social housing.
Table 1: Capital Funding for Social Housing Development and Conversions ($ in millions)
| FY25 | FY26 | Total FY25-FY26 | |
| Neighborhood Pillars | $15 | $15 | $30 |
| Open Door | $55 | $55 | $110 |
| Total | $70 | $70 | $140 |
Source: New York City Council
Building on Our History
Looking at the limited availability of affordable homeownership options in our city today, many New Yorkers may be surprised to learn that for over 100 years, our city has been developing new models of shared-equity housing.
As the Harvard Business Review recently noted, "Indeed, it was not employers but New York City garment unions who in the 1920s pushed for legislation to enable them to build-with pooled worker funds and loans-the large-scale cooperative housing complexes for the industry's labor force. These profit-capped co-operatives became the model for limited-equity housing co-ops that are a current staple of dense, stable, and vibrant New York City neighborhoods." In total, unions sponsored 21 cooperative social housing projects in The Bronx, Manhattan, Brooklyn and Queens, containing 41,453 well-built homes for working class households.
In a separate but overlapping history, New York State created the Mitchell Lama housing program, which developed both cooperative and rental social housing across the state. In New York City, the program was responsible for the creation of 69,000 limited-equity cooperatives. As these units' long waiting lists and low asking prices for this housing attest, Mitchell Lama remains a popular and affordable homeownership option for New Yorkers of all ages and backgrounds.
In the 1980s and 1990s, during a time of crisis for the city and its real estate industry, New York City embarked on a program of large-scale conversion of landlord-abandoned rental properties into tenant-controlled affordable cooperatives known as Housing Development Fund Corporations (HDFCs). More than 1,000 HDFC developments exist throughout the city, including in some of the city's most expensive neighborhoods.
Through programs like these, New York City has developed an international reputation for creative approaches to social housing and homeownership. Available units, however, are in short supply. This is the case for two reasons: on the plus side, residents who live in such units tend to stay a long time-often a lifetime-because they are satisfied with their homes and know that the private market is inaccessible; on the negative side, the city has largely stopped producing them. For reasons relating to both the market and the law, the city has massively reduced its practice of in rem foreclosure and HDFC conversion, and HPD's capital funding has shifted overwhelmingly away from shared-equity homeownership.
The City Council is absolutely right to demand that HPD re-emphasize homeownership as a core element of our affordable housing production. We strongly encourage the Council and HPD to emphasize social housing specifically as the core approach to housing production. This has been New York City's past, and it can be its future.