Amidst record-high rental rates and limited affordable housing opportunities, some New York City residents are finding hope in the Affordable Neighborhood Co-op Program (ANCP). LISC New York helped the nonprofit Asian Americans for Equality (AAFE) secure $9.6 million in construction financing to renovate three downtown Manhattan buildings and convert them to affordable for-sale housing. Following two years of renovation, existing tenants at East 12th Street are preparing to purchase shares in their future cooperative building.
(Image Above: Members of the Lower East Side Project development team including Asian Americans for Equality (AAFE) and A.A.D. Construction Corp. were joined by Councilmember Carlina Rivera, HPD Commissioner Adolfo Carrion Jr., LISC and residents of the completed building at 656 East 12th Street for a ribbon cutting ceremony on Monday, March 4th.)
Robert Galinsky has lived in downtown Manhattan since 1988 when he moved to the Lower East Side (LES), then a sea of rubble from blown out buildings and abandoned storefronts with a plethora of studio spaces. These days, his fellow artists and activists are less visible in the fabric of the gentrified neighborhood, which he described as overrun by college kids and brunch spots. But he’s managed to weather the changes in the same rental apartment on East 12th Street.
“I never really thought about owning, and I always thought it was kind of a pipe dream,” he said.
Working in theater and education with gigs teaching at New York City’s largest jail on Rikers Island and other prisons, Galinsky left his aspirations for home ownership in the Connecticut suburbs where he grew up. That was until LISC New York helped the nonprofit Asian Americans for Equality (AAFE), a grassroots community development organization, secure $9.6 million in construction financing to renovate three buildings in the area and convert them to affordable for-sale housing.
The project is part of the New York City Department of Housing Preservation and Development’s Affordable Neighborhood Co-op Program (ANCP), which selects developers to rehabilitate occupied city-owned multi-family properties and create affordable cooperatives for low- and moderate-income households. The properties are part of the Tenant Interim Lease Program (TIL), which works with tenants to purchase their apartments.
Galisnky had heard of TIL when he first moved to East 12 Street. Rumor had it that the building owner had turned the property over to the city because of an unpaid water bill. Housing activist Carmen Rubio knocked on his door notifying him that he and the other tenants were eligible to buy their apartments at a reasonable rate if they enrolled in city-sponsored classes and training.
“Every two or three years we [would] get the call, hey, you guys are next. We [would] brace for the move. Nothing [happened],” he said. “Finally, two years ago when we got that call, we were all kind of like, yeah, okay, we're always next, no problem. We like where we are. The apartment's cool as it is. But this time it was real.”
From renovation to homeownership
AAFE launched a $20 million project to create 44 new affordable units in a trio of buildings on the LES, including Galinsky’s, with prices affordable to people earning 95 percent of the Area Median Income. As part of the project, AAFE worked with long-standing tenants to purchase their units—a significant opportunity in a neighborhood where affordable housing options are in short supply. The unoccupied units would be offered for sale through the NYC Housing Connect 2.0 Lottery.
AAFE helped relocate Galinsky and other tenants during renovations, and residents just returned to East 12th Street this month. They are welcoming energy efficient updates to the building.
“We went from [a] very cute old tenement building with tin ceilings and crooked floors and cracked walls. [There was a] leaky roof [and], the basement floor was mud and actually had a small stream in it, literally a bubbling stream of fresh water,” Galinsky said. “Now it's absolutely immaculate. Before you'd have to listen to the steam rattle and clang. We're going to save a lot of money and resources because of how economical the HVAC is.”
While the vacant units at East 12th Street are being marketed, existing tenants will be preparing to purchase their shares in the future cooperative building. Proceeds from the sale of units will be used to pay down the construction loan to the permanent loan amount, which will be repaid over a 30-year period. A new limited equity cooperative will be the owner of the building and responsible for the repayment of the permanent loan over time.
Despite the complexity of the project, LISC was eager to support AAFE after completing a number of transactions over the years with the organization.
“LISC recognizes AAFE as a strong and diligent partner that has the expertise and investment to initiate and complete this kind of work,” Christine R O’Connell, director of community development investments at LISC New York said.
Financing homeownership opportunities
Founded in the late 1970s in Chinatown, in lower Manhattan, AAFE is rooted in advocating for immigrant and labor rights in the community. The organization's mission has evolved to include affordable housing development alongside the area’s rapid gentrification. Starting in the late 1980s, AAFE started to acquire older buildings to preserve affordable housing, and it led the first pilot ANCP with a building on Elizabeth Street.
The ANCP process is a lengthy one that includes paperwork approvals from the attorney general's office and finding qualified purchasers within income limits that also still qualify for a mortgage. Traditional banks are often not familiar with such tight parameters, making it difficult for them to gain comfort with these loans that require technical assistance for riskier tenants and renovations. Moreover, the small loan sizes and the limited equity structure which allows residents to purchase shares in development and commit to resell their share at a set price presents financing challenges for home ownership development projects like this. That’s where CDFIs come in to fill in the gaps.
LISC New York supports local partners whose services and programs aim to create a more equitable, inclusive, and sustainable city. Since 1980, LISC has invested over $3.1 billion and leveraged an additional $7.6 billion in support of underinvested communities. Our investment strategy is guided by a belief that the time has come to forge a future for New York City that eradicates the racial wealth gap for good, protects affordable housing, and builds pathways of meaningful economic opportunity for all New Yorkers.
“CDFIs like LISC are the bulk of the financial institutions working with mission-based developers on these smaller development projects,” O’Connell said. “Multiple parties, including the City of New York, the State of New York, the assigned developer, and interim owner (Restoring Communities Housing Development Fund Corporation), their respective counsel as well as the existing tenants living in these formerly city-owned properties, have to come together to agree on the development and financing strategy for the individual properties to be redeveloped and converted to co-op.”
Right before financing closed on AAFE’s LES project, LISC stepped up and provided a pre-development loan to cover soft costs, which included everything from construction interest to high relocation costs for 23 households, some in three-bedroom apartments in a city with skyrocketing rents. The Nonprofit Finance Fund joined LISC in originating the $9.6 million construction loan to support with the $21.8 development effort.
“It's helpful to have a partner like LISC that understands the benefits of this kind of project and has faith that the parties involved will make it work,” Andrea Alexopoulos, AAFE senior project manager said. “Ultimately, it might cost a little bit more as everyone is figuring out how to get across the finish line, and that patience is why you have CDFI partners.”
With the success of the LES project, Alexopoulos said other partners are eager to invest in similar upcoming projects, “I think LISC did a lot by diving into the deep end with this program. It gave some of the other CDFIs that we work with a little bit more comfort and confidence that they could also get involved with this program.”
During the past 40 years, AAFE has evolved into a nationally recognized affordable housing developer and an experienced social service provider. The organization has developed and preserved 93 multi-family buildings, generating over 1,030 units of affordable housing through the investment of more than $225 million into low-income communities.
Galinsky believes initiatives like AAFE’s are imperative to maintaining New York’s integrity and culture.
“It would be a much more beautiful city if people weren't hustling so hard for their accommodations,” he said, citing his reasonable rent as the reason he can continue to contribute to his community.
“[Affordable housing] has allowed me to do what I do, which is volunteer a lot and work in not such high-paying jobs. It's allowed me to give back because I have been afforded this opportunity. I wake up and just feel so blessed.”