Real estate investors buy $1.2B worth of NYC market-rate rentals with plan to make them affordable
The River Crossing building in Harlem; Photo by CTC Creative
A group of real estate investors is buying 2,800 New York City rental apartments for $1.2 billion. But instead of keeping with the industry’s custom of converting affordable units into market-rate homes, L+M Development Partners and its partner Invesco Real Estate plan on returning a chunk of those units to long-term regulation. The venture involves the purchase of five former Mitchell-Lama buildings in Manhattan, with four in Harlem and one on Roosevelt Island.
Roosevelt Landings; Photo by CTC Creative
The properties, which include River Crossing, the Heritage, the Miles, the Parker, and Roosevelt Landings, exited the Mitchell-Lama program in 2005 and have not followed rent regulations since.
In 2017, Mayor Bill de Blasio unveiled a program to protect Mitchell-Lama apartments from deregulation by offering low-cost financing and property tax exemptions. According to the Wall Street Journal, the L+M Development deal implements a tax-exemption program known as Article XI, which lets the city to negotiate deals with owners. The city estimated the cost of lost tax revenue over the next 40 years to be $235 million.
The deal aims to add to the city’s affordable housing stock, which has been a major tenet of de Blasio’s administration. The mayor’s Housing New York 2.0 initiative pledges to bring 300,000 affordable homes to the city by 2026.
All of the 2,800 units purchased by the investors will be subject to some regulation, with about 1,800 of them restricted to lower- and middle-income rents, in exchange for property-tax breaks. The remaining third will remain market-rate apartments.
“This deal sends a strong message about how government and committed private sector partners can make a real impact in addressing the need for high-quality workforce housing in New York City,” Eben Ellertson, the managing director for L+M Development, said in a statement.
L+M and Invesco, and any future owner, must commit to long-term rent regulation for the units. Plus, any new development in the future must be 100 percent affordable housing.
“This landmark transaction will reclaim a large portfolio of once-affordable housing and provide thousands of New Yorkers the security of knowing that they can afford to stay in their communities for years to come,” Louise Carroll, the HPD Commissioner, said in a statement.
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