Government helps developers make billions

From the Wall Street Journal:

A small boom is under way in the area for housing for New Yorkers who have middle incomes or who are among the working poor—with more than 500 subsidized apartments under construction or on the way.

Developers say that with land costs and construction costs rising, they can't afford to build market-rate rental buildings without deep government subsidies that come with the affordable housing. Those range from tax-exempt bonds to federal tax credits to property tax exemptions and zoning bonuses.

But many housing advocates say some of the subsidies would be better spent backing many more affordable apartments—at a lower cost—in humbler neighborhoods. They want the benefits to luxury developers sharply pared back.

The subsidies come from a state-run program known as 80-20. Developers set aside 20% of the apartments in a building for affordable rentals, with the rest rented at market rates. Tenants are selected through lotteries and are screened to make sure they meet strict income requirements. "Low-income tenants think they've won the lottery when they're selected, but the real lottery winners are the developers," said one builder of low-income housing outside of Manhattan, who didn't want to be identified due to the risk of jeopardizing future projects.

Advocates are critical of the tax-exemption program available in affluent neighborhoods triggered by participation in the affordable housing program. Because of the high tax rates on new market-rate developments, the exemptions translates into large subsidies for developers.