Shaping the NYC Skyline

Brenda: Welcome to Shaping the New York City Skyline, the podcast that explores the stories behind the buildings that shape our city. I'm your host, Brenda Slochowsky, and I'm here with my co host,
David: David Shamshovich.
Brenda: Hey guys, welcome back to a bonus episode!
David: This is what we've been working towards for quite some time. You probably know from the title of the episode that we're talking about Universal Affordability Preference and Mandatory Inclusionary Housing. And we're recording on December 11th, six days after the adoption. Brenda Camilla and I have been hauled up in a storage closet trying to understand this thing. And listen, who better to understand this stuff than the dream team at Seiden & Schein. I don't know how many applications we've processed in the last several years, but it's definitely in the hundreds. We appreciate the hard work and dedication, but the zoning resolution is not a piece of masterwork literature. It can be very difficult to digest and understand. The fact that we've done this so many times before. We work in this area, we're one of the premier firms that does it, and this is a new program that's going to be very similar to Voluntary Inclusionary Housing, that's UAP, and so the procedure is not that different, although the rules have changed, and we understand why, so we want to walk everybody through what we think are the most critical points, the things that you should know, and focus just on UAP and MIH in the context of new construction affordable housing, with sprinkles of other things.
Brenda: And if anybody has questions on anything that we do, feel free to reach out. We're always here to answer your questions, whether you're a client, you're a new client, you're looking into a different project. We have an extensive department that is ready and willing and able to help you.
Camila: You get to work with the A team.
David: The affordability team. Are we affordable? We'll see. When you get the bill, you'll find out. I joke. So, we're going to start where I always love to start, at the beginning. The beginning is the application process, and that's where we generally start. The Zoning Resolution, as amended by the City of Yes, provides that it's an affordable housing application, whereas previously it was called an affordable housing plan, which makes sense. We don't know what it's going to look like, but given some of these requirements that we have in the zoning resolution, which could change based on the guidelines that are issued by HPD, we get a sense as to what that paper application will be like.
Brenda: Under VIH, you were just submitting to HPD. Now, your affordable housing application is going to be submitted simultaneously to both HPD and the community board. That's a benefit to developers. It shrinks down your application process because now you don't need to wait 45 days before you can close with HPD. You're now notifying the community board at the outset.
David: It's a real time saver. You submit your application to the community board, and you're finished with that requirement. If the guidelines provide for more requirements, that could change. But we're just talking about what's in the newly adopted City of Yes under section 27-00. Under the old zoning resolution, the community board could provide recommendations to HPD, explicitly.
Brenda: But not require.
David: Exactly. They could submit comments regarding the proposal or inform HPD that they have no comments. It's strange that they didn't put that into the Zoning Resolution, but I gather it means that HPD doesn't necessarily have to wait for the community board to give their say so. It's an as of right program. And so the community board and no one else has the right to stop that project from going forward, with certain exceptions, which we will discuss
Brenda: There are projects that come to our desk where we notify the community board and the community board never even answers.
David: Certain community boards are more active than others and they want to know more about a project, whether it be an MIH project, UAP project, VIH. When we're talking about the affordable housing application, we're talking about both MIH and UAP, uAP and MIH both have to have the affordable units provided in a particular location.
Brenda: You have two options. You can either provide them on site or you can build off site within a half a mile
or
in the same community district.
David: What does it mean to be on site versus offsite? Can you just explain what that means?
Brenda: On site is providing your affordable housing units either in the exact building that you're building, or in a separate building that's on the same zoning lot. That is considered on site.
David: So, we can do it on site, both mandatory inclusion of housing or UAP. And that's clear and there's no issues with that. But with offsite, it's a little bit different. You can do offsite for Mandatory Inclusionary Housing, and it creates a 5 percent penalty. If you're doing MIH option one, for example, which is 25 percent at an average of 60 percent AMI, then if you're doing it offsite, meaning on a separate zoning lot, which has to be within half a mile of the development for which you're providing the MIH affordable floor area, or within the same community district, you have to provide an additional 5 percent on top of that. We thought that there wouldn't be any offsite UAP whatsoever, and they did provide that in certain UAP Offsite Option Areas. A UAP Offsite Option Area is a former Inclusionary Housing Designated area or R10 residential zoning district or R10 equivalent. Under the prior zoning resolution, you can only get a zoning bonus under Voluntary Inclusionary Housing if you are located in an Inclusionary Housing Designated Area, and if so, you get a zoning bonus ratio of 1.25, for each square foot of affordable floor area built. In R10 or R10 equivalent zoning district that is outside of an Inclusionary Housing Designated Area, you get a 3.5 zoning bonus ratio. And there was a lot of controversy about this because, and you all know this very well, at least before this rule passed that precluded a VIH site from providing more affordable floor area than permitted on site, if you're getting a tax exemption, that used to generate a lot of extra produced in the form of certificates that could then be transferred to other VIH sites, to get a zoning bonus without those sites having to actually build affordable housing. A lot of those are still outstanding. You have not-for-profits to do preservation affordable housing where they're fixing up their buildings in order to get a zoning bonus to generate a certificate which they can then sell and pay down their loan. So there was an uproar because they were going to get rid of, or at least it was going to be a 10 year sunset period for those certificates. They were also not giving a zoning bonus for those certificates. It would all be UAP, it would all be one on one. That's all changed. There is no sunset. Those will stay in place with the zoning bonus ratio, but they are only applicable in UAP Offsite Option Areas, which are areas that were formerly VIH. Additionally, you can construct affordable housing offsite within a half a mile or the same community district and use that to satisfy an MIH development's affordability requirement or a UAP development's requirement in order to obtain the zoning bonus. And reach a max FAR under 23-22, which are the increased FARs. And if you're in this limited offsite option area, then you could actually do offsite.
Camila: You can go to Appendix F on the zoning resolution, and you can find if the property is located on a former IHDA or if it's an MIH area and you will be able to find all the MIH options applicable.
David: Precisely. So we nailed down location. What is the application?
Brenda: The application is going to have your building plans, state the number of affordable housing units, how they're distributed through the building, the income bands of those affordable housing units as well.
Camila: In other words, it would be the stacking charts that we have to provide to HPD.
Speaker 2: So, for those who aren't familiar with it, HPD has a form of stacking charts, which is an Excel spreadsheet that you fill in to demonstrate that you're complying with all the requirements, namely that the affordable housing units are distributed throughout the building as required under that program. It also is going to show the unit mix and the AMIs that are proposed for those units. Previously, it was capped at 80 percent AMI. You have to distribute vertically, meaning on each residential story of your UAP site or MIH site, on at least 65 percent of the stories of that building. So at least 65 percent of the stories have to have an affordable housing unit on it. And that makes sense, right? Because they want to make sure that they're not all placed on one floor.
Camila: And those requirements that David is talking about applies both to MIH and UAP.
David: That's correct. They apply to both programs and they used to apply to VIH, but there are differences. So the 65 percent requirement remains in place with certain exceptions, which I'll get to.
Brenda: Camilla, why don't you tell us about the horizontal distribution?
Camila: Before, the horizontal distribution only applied to the VIH program and the rule was that no more than one third of the units could be affordable in each floor and now they changed to be two thirds.
David: It changed to two thirds, which increased the amount of affordable units that can be on any given floor. Under VIH, you couldn't have more than a third of any units on a floor be affordable. On any given story, they don't want too many affordable units because essentially you're segregating those units. And that's against the general policy and purpose of the statute.
Camila: And it's important to notice that before, we didn't have that requirement for MIH.
David: When MIH first came out, I noticed that there wasn't anything under MIH that required you to limit it to a third affordable unit on any floor. And I was like, that sounds weird. I approached HPD and they agreed with me. I was like, I can't believe I have this information that nobody probably knows because you can very easily miss it.
Brenda: In the event that you don't have enough units to meet 65 percent , you distribute them as much as you can, one unit per floor. Also, if you have a building that's split between homeownership and rental and all of your rental units are affordable, then the distribution rules don't apply. And similarly, If you have a condo building where some of your units are homeownership and the others are mixed income rental, not all of them are affordable, some are market rate, some are affordable, then the distribution rules only apply within that rental portion.
David: And that's a game changer. Previously, you were accepted from the vertical distribution, requirement if all of your affordable units were rental and you had homeownership, meaning condos. And this way you didn't have to place affordable units for VIH purposes on floors where you had for sale market rate condos. But here, they've gone even farther. I'm surprised frankly, that they made it easier for condo, I do agree with it. This creates that exception that allows you to put those condos at the top, not worry about the 65 percent distribution, not worry about violating the horizontal distribution, and it makes it a lot easier to get developments like that going. HPD also has the right to waive that distribution requirement if you're in a development that Is in a thorough lot or interior lot that has less than 50 feet of frontage. From a design perspective, from an architectural perspective, it's hard to meet the distribution requirements in those sorts of developments. And why there wasn't an exception for this previously, I can only assume that HPD had projects like that and they couldn't do anything because statutorily it provided no exception. So for anyone out there who has those types of projects, this will help you. Next, and this is a big one, HPD can actually, even if you follow the distribution rules HPD can disapprove of any building configuration that would frustrate the intent and purpose of this section, meaning 27-00, by segregating affordable housing units, or stigmatizing residents of such affordable housing units, which is extremely broad. Now, even if you follow those rules, that doesn't necessarily mean that your project will be approved.
Brenda: We'll have to see how wide HPD casts this net.
David: We can't know for sure.
Camila: Further than that, if they don't like that you're doing homeownership, HPD now has discretion to say that you have to do rental.
David: That's another very good point. And not just homeownership, if you're doing other types of affordable housing, they can force you and say do rental, which we've not seen previously. I was surprised that made it in there, but I can only imagine that they wanted to give that kind of discretion to HPD because of the purposes of City of Yes, which is, if they're getting so many projects that are not making that dent in rental, because rental is really what they need, then they want to be able to force someone to do it. I'm not saying it's right or wrong, I'm just saying I can understand, based on the problem that they're trying to address. So HPD has more powers and more authority than they had previously under VIH. VIH was as of right, and there was very little that anyone can do to prevent it as long as you're following the requirements. There were certain requirements that could be onerous depending on if you have a lot of issues with other properties. And we're not going to get into that, but it's part of the application process. Could be a part of the application process here, but we don't know. That's going to be guidelines based. But now they have a lot more power, and I think it has to do with the whole purpose driving the City of Yes in the first place. So we went through where the affordable housing units have to be located, how they have to be distributed. Now we also have another requirement, which is the bedroom mix requirement, which really hasn't changed much. And basically you have to follow either proportionality or the two bedroom test.
Brenda: One place where it has changed is in fully affordable buildings. It used to be you were required to do the two bedroom test and now it's per guidelines.
David: This test is included in the stacking charts that you submit to HPD, which I assume we will have some form of when we have the UAP application. We have MIH stacking charts. I assume those are gonna stay the same because those requirements haven't really changed. The proportionality or two bedroom, the unit mix of affordable housing units, meaning the UAP or MIH affordable units, that unit mix has to be proportional to those units that are not affordable under those programs.
Brenda: Under the two bedroom test, you need to provide at least 50 percent of your affordable units as two bedrooms or larger, and at least 75 percent of your affordable units as Need to be one bedrooms or larger, so that effectively turns out to around 25 percent of your affordable units are studios. 25 percent of your affordable units are one bedrooms and 50 percent are two bedrooms.
Speaker 2: Like Brenda said, if it's a fully affordable building, it used to be that you had to comply with the two bedroom test. You couldn't comply with proportionality because you didn't have any non affordable units to compare to.
Brenda: Now it's guideline based, GB. We should make that an acronym for this episode. It's GB, guys.
David: The other thing that's changed in connection with fully affordable buildings is that's the only regulatory agreement you're signing. Previously, under VIH, you would sign a regulatory agreement. That's no longer the case. Now you have a restrictive declaration to be approved by HPD, and that signals your approval under both MIH and UAP. Previously, under VIH, it was the regulatory agreement. So when you sign the regulatory agreement with HPD, which gets recorded against the affected tax lots, that signifies that you've been approved. Now you have an affordable housing regulatory agreement, and that's just for 100 percent affordable buildings. You have a restrictive declaration for UAP and for MIH.
Brenda: Now you have affordable housing regulatory agreements, it's a two party agreement that you're entering into with the City. Restricted declaration does need to be approved by HPD, but HPD is not a party. They have a lot more leverage when it comes to choosing your bedroom mix for a fully affordable building.
David: They still have to approve it. Obviously, you can't file it by yourself. I guess, right. I guess you could, but I'm not sure if anybody would recognize it.
Brenda: You're not getting a permit notice if you're not being approved by HPD.
David: This application process. Once you've gone through this entire iteration, at the end of the day, you close with HPD and they either approve a restrictive dec, and that's how UAP is going to work, you report it against the property, and then, in return, what HPD gives you is a piece of paper, which is a letter to the Department of Buildings, it's called a permit notice, and it states how much affordable floor area you're providing. Without it, you cannot get your new building permit to start construction.
Brenda: You can get your foundation permit, you just can't get your new building permit.
David: Exactly, yeah. So you can't go vertical. But yes, you can do foundation and other work.
So just to reiterate, we went through the distribution requirement, we went through the bedroom mix requirement, now we have also bedroom size requirement.
Brenda: Under Voluntary Inclusionary Housing, your net square footage of each unit needed to meet a minimum size, depending on the bedroom type, so you needed to meet 400 net square feet for studios, 575 for one bedrooms, 775 for two bedrooms, and 950 for three bedrooms.
David: Net square feet, what is that?
Brenda: That is the measurement within perimeter walls. It's basically your carpet area.
David: Living space. They want to make sure that it's actually 400 square feet usable.
Brenda: Under UAP you comply where the average size of all of your affordable units of a particular bedroom type needed to be greater than or equal to the average size of the market rate units or the non affordable units of that same bedroom type.
David: And you can either meet that average requirement or you can meet an average that is equal to or greater than the minimum provided under the statute. They got rid of the minimums completely. Then they created the average test. And now they should reintroduce the minimums, but only pursuant to an average test. So your affordable units of a particular bedroom type have to be the average of either A or B, A being the average of market rate for the same bedroom type or B the minimum required under the statute.
Brenda: And it applies to both, whether you're under UAP or MIH, you have the option to comply
with either one, the average of market rate as compared to the average of affordable, or the average of affordable is greater than your minimum size.
David: We know what prevents our clients from closing. The construction loan, right? And in order to close with HPD, whether it be getting a restrictive declaration approved or a regulatory agreement executed, you have to have a construction lender on board. And it has to be not only any construction lender, it has to be an institutional lender, meaning like a real bank. It can't just be a debt fund, except for certain circumstances.
Brenda: If you had a non institutional lender, they imposed additional requirements that made the process even harder.
David: Or if you didn't want a construction lender at all, and you wanted to close on cash, which is very difficult. For smaller projects, maybe larger projects, nearly impossible to show all cash on hand.
Camila: The list of requirements increase.
David: They've completely gotten rid of it. any reference to a lender or to get a subordination non disturbance agreement.
Brenda: There's no reference to debt at all encumbering the affordable units.
David: Perhaps they change this in the guidelines, perhaps they give some more information.
Brenda: It might be GB, guys.
David: It might be GB, but the main thing is that this is what the City of Yes is about. It's trying to streamline the process. It's trying to make things faster. Obviously, somebody's been paying attention. This is one of the pain points that prevents us from closing. This could shave off half a year, three months, depending on a project, to get a construction loan and get a term sheet, and then to coordinate the closing and make sure that you're getting an SNDA. Not only that, but when you finish constructing the building or when you're close to it, and you want to refi
Brenda: You need another SNDA.
David: Exactly. So every time you get a new mortgage on the property, if it's mezz debt, you won't need an SNDA.
Brenda: Right.
David: And apparently under UAP, and I guess MIH, you won't need an SNDA, and you won't need a construction lender to close. At least according to the language of the new statute.
Brenda: It might be GB guys. Another way they streamlined the process is by removing the requirement for a not for profit administering agent. The VIH program requires you to retain a not for profit entity that will conduct the marketing and leasing for your affordable units. HPD has done away with that requirement. Every reference to an administering agent in 27-00 has been removed. And any requirements that the administering agent was required to do has now fallen to the owner.
David: So now the owner has to submit affidavits to HPD that the initial occupancy of an affordable unit was in accordance with the income bans and the restrictive declaration and any other items that an administering agent, which had to be not for profits to market and lease up the affordable units to run the lottery process to review for income eligibility and to submit approved applicants for further approval by HPD before those units could be leased. So this is another game changer, right? There's a lot of time that has to go in to retain someone, find someone.
Brenda: This reduces reduces the amendments where you want to switch. Because the application is attached to your regulatory agreement under VIH, as an exhibit, which lists your administering agent, if you're changing you need to amend your regulatory agreement. And HPD won't let the new administering agent proceed until the amendment is finalized.
David: Meaning proceed with trying to find eligible applicants and rent out units which are required in order for you to complete the project and then. Getting rid of this requirement doesn't mean that the admin agents will go away. People could still and will still be hiring admin agents, but they won't have to get approval, they won't have to have them on board before you close. I think this is a great move. I was surprised to see it in there.
Brenda: That doesn't negate the fact that under 485X, you're still going to have a marketing monitor.
David: You mentioned 485X, so I might as well throw this in here, which is an important piece. All these new programs, previously 421A, currently 485X, and also 467M, which is for conversions from non residential to residential, and UAP, MIH, are designed to work together. So the majority, if not all, of the affordable units that are either MIH, UAP, previously VIH, will also be affordable units for purposes of a tax exemption. 421-a and 485-x require you to provide a certain percentage of the units as affordable under that program to get an exemption. VIH, in order to get a zoning bonus, generally you would have to provide in an Inclusionary Housing Designated Area, you would have to provide 20 percent of the residential floor area minus any non residential ground floor floor area. So, 421A is determined based on unit count vIH was determined based on floor area. UAP doesn't have a specific requirement. MIH does. It has 20, 25%, 30%, depending if you're doing off site, it'll be 30, 35%. And that's floor area versus unit count, which is the reason, and the requirements are different. Generally, we work with our clients to do a full overlap. But sometimes you can't make it work.
Brenda: It was intended to work that way.
David: Without the double dipping, this doesn't work, it was intended for that purpose. One other thing I wanted to mention in the approval process is insurance. Previously and currently still in order to get your application approved, move on to getting your RD or declaration approved or signing affordable housing regulatory agreement, you have to have insurance, which is the replacement value of the building. They want to make sure that you have enough insurance that it burns down, you have the money to rebuild it. Previously, they had required that you rebuild the building, or if there's a lender on the property, they may permit it to be done per the construction loan documents. Now it's silent on that point. So I think that provides a lot more leeway. As we know, with the subordination agreements, we had a lot of pushback. We generally tell lenders what it is.
Brenda: It's a form from HPD. And they're barely going to accept comments.
David: Well, why is it taking so long to get? Because we have to get an attorney. How do you get an attorney? You have to request one. How long does that take? At least 30 days. All that back and forth to get that SNDA in motion and all the questions from the lender about how it worked, which is, you can't comment. The only thing that they'll move on is factual things, like the amount of the loan. Just going back to the insurance question, A lot of lenders were just not happy with it. They said, well, our construction documents say that if it meets a certain threshold, that money should come back to us. We should be able to decide. Why should HPD decide? HPD has not put any money into it. Yes, they've approved a restrictive dec, they've signed a regulatory agreement, but they don't have an actual financial stake in it. So, I think this was a good thing to let this go. In VIH, you had to be low income, meaning it's capped at 80 percent AMI. The general provisions in the prior zoning resolution said that the Voluntary Inclusion Housing Program was established to promote the creation and preservation of affordable housing for residents with varied incomes in redeveloping neighborhoods. Now, it's saying that the purpose of this statute, 27-00, for UAP and MIH is to promote the creation and preservation of affordable housing for residents and varied incomes citywide. Why is it saying citywide? That language change doesn't affect any of the requirements, but it clues you into the intention here. VIH is limited to what we know as Inclusionary Housing Designated areas and R10s or R10 equivalents, which means that you can only get a zoning bonus for providing affordable housing in specific designated areas in New York City. But UAP has increased that and basically provided it to all or nearly all middle and large density districts. In other words, it's not just promoting redeveloped neighborhoods. It's citywide.
Brenda: It sounds like the city council and HPD are trying to
All: shape the New York City skyline.
David: Just to go back, was capped at 80 percent AMI, UAP units actually are going to go through an average test. It's going to be an average of 60 percent AMI, which means that you can have AMIs in different income bands, but you can't have more than three income bands, and nothing can be greater than 100% AMI. UAP sites that have at least 10,000 square feet of affordable floor area, 20 percent has to be limited at 40 percent AMI, but it's also 20% of 20%,
Brenda: Also, your average needs to be 60% and they're just requiring you to add some at 40%. And you get to compensate that with some at 100 percent or 80 percent because, again, you're aiming for that average of 60.
David: You're getting free floor area, to put in your tax exemption units. Previously you had to be an Inclusionary Housing Designated Area to get a zoning bonus. Now you have many more sites that can get a zoning bonus.
Camila: How do current projects vest under VIH?
David: If you have a signed regulatory agreement, don't worry. That's still going to be under the Voluntary Inclusionary Housing Program Sections 23-90, 23-154 of the prior zoning resolution before it was amended by this citywide text amendment, and there's not really much more to say about that. It's going to function just the way it did previously. Now, for pending projects that might want to opt into Voluntary Inclusionary Housing, instead of doing a UAP project and getting a zoning bonus under there, . In order to vest, there's three things that you have to make sure to do. One, you've submitted a construction affordable housing application to Department of Buildings within a year of when the City of Yes was adopted, DOB must have approved a foundation, new building, or alteration application based on a complete zoning analysis showing zoning compliance with such new construction affordable housing. So essentially, you have to show that your plans were approved. Yeah, showing the zoning analysis. And the third is within two years, you have to sign a regulatory agreement with HPD. I believe UAP is going to be very big. Maybe not right away, but when developers and others get a grasp on it, I think it's going to be huge.
Brenda: Under UAP you have different FARs.
David: I created a chart just for this occasion.
Brenda: Yes, I have it ready. Of course, I come prepared.
Speaker 2: 23-22 provided standard residences FAR, the as of right FAR, which you can produce whether or not you're providing any affordable housing under UAP. Then you have the qualifying affordable housing FAR, which is The highest FAR or floor area ratio to which you can build, assuming you're providing affordable housing. Doesn't mean you have to go to that max, but
Brenda: that is the max.
David: MIH is only applicable in MIH areas, areas that have been up-zoned or re-zoned for residential.
Brenda: Check your Appendix F.
David: And the MIH areas are likewise going to be able to benefit from the higher FARs that are provided for on this chart over here. This chart is basically the chart that appears in the City of Yes 23-22 that applies to UAP and MIH. And you see the base FAR and max FAR, which we were referring to. Everybody was talking about under UAP that it's a 20 percent bonus . And yes, it's overwhelmingly 20%, but, I see a 25%, 46%. You have some significant increases. So saying 20 percent is not exactly right. It depends on which district you're in.
Brenda: Anyone who's just listening, you can watch us on youtube, but you can find the floor area charts in 23-22 of the City of Yes.
David: This is another chart. It gives you the scope of how many more projects will now be able to get a zoning bonus. Now that we've gone through UAP, we're going to go through MIH. Now, MIH has not changed nearly as much. Remember, we're not giving you every single detail, we're just giving you the ones that are important. MIH requires you to provide a certain amount of affordable housing. In order to comply with the MIH requirements that go along with that rezoning or the upzoning for residential, you could either comply with one of those options or you can pay into an affordable housing fund, but the Affordable Housing Fund option is only available for projects of 25 units or less and that are less than 25,000 square feet of residential floor. That Affordable Housing Fund option, the pricing, which is in the guidelines, very expensive. Or you could have certain modifications or exceptions by special permit. A Mandatory Inclusion Housing Development, is the development that's being built on a zoning lot that is in an MIH area. An MIH site, on the other hand, which, as we said, could be either on the same zoning lot as the MIH development or on a different zoning lot within a half a mile or same community district, that's what's providing the affordable housing to fulfill the requirements of MIH. Certain options are applicable and developer gets to choose depending on what's available. There are four options.
Camila: Option one, at least 25 percent of the residential floor area has to be affordable, within the MIH development, the average AMI has to be no more than 60 percent you can't have more than three income bands, and at least 10% of the residential floor area has to be at 40% AMI, and you can't have any unit with 130%.
David: Shows their dislike of the 130% AMI, which is why 421a, the prior iteration, was not received so well. Like we said before, with UAP if you're constructing at least 10,000 square feet of affordable floor area, you have to meet a 40 percent AMI requirement. So it's right here in MIH, and in fact, it's requiring you to do 10 percent of the RFA, which is nearly 50 percent of what you're providing. What's the next option?
Camila: Option two is very similar, but here we have to provide 30 percent of the residential floor area instead of 25. And the average of the median income is 80%, you can't have more than three income bands, the max AMI is one 130%. For the third option, used to be the deep affordability option. Now it's just called option three, the residential floor area actually is less then the other two options here, we have 20 percent of residential floor area. The more residential floor you provide, the higher the average median income will be. So for option 3, we only have to provide 20 percent of residential floor area. And those 20 percent have to be on a max average of 40 percent AMI. And the other requirements continue to be the same. No more than three incumbents at no more than 130 percent. And the fourth option used to be the workforce option, 30 percent of the residential floor area has to be on an average of 115 AMI, no more than 4 income bands, no income band can be greater than 135 percent and 5 percent have to be at 70 percent AMI and another 5 percent of the residential floor area has to be at 90 percent AMI.
Brenda: These are the same options that we had previously. There are exceptions to MIH. If you have a single development with not more than 10 units and not more than 12,500 square feet of residential floor area, then you are exempt from MIH
David: The other exception is affordable independent residences for seniors. Now remember, these are complete exceptions. If you fall within them, you don't have to comply with the MIH requirements that we're talking about. The Affordable Housing Fund is not an exception. It's you complying with the requirements by paying into that fund, and you're still going to get a permit notice that's going to tell you how much your payment was in affordable floor area terms so that you can then get your permit to start construction from the Department of Buildings. The Zoning Resolution, the way that it was amended by the City of Yes, has given HPD more power. One thing we talked about is for 100 percent affordable buildings HPD is setting the standards. It'll be interesting to see how that plays out. The prior iteration of the Zoning Resolution had this requirement for MIH sites that contains no dwelling units other than affordable housing units, meaning a 100 percent affordable MIH site, has to be a building that either, one, shares a common street entrance with another building on the zoning lot that contains dwelling units other than affordable housing units. In other words, there has to be a common street entrance to that building and a building that doesn't have all affordable units in it, or it has to be independent from grade at the street wall line to the sky, meaning they can't really touch or seem to be the same building, to any other building on the zoning lot containing dwelling units other than affordable housing units, meaning either mixed income or a market rate building, such building shall have its primary entrance on a street frontage that has primary entrances for other residential buildings, meaning, since you're not sharing a common entrance with the MIH development that you're providing affordable housing for, you at the very least have to have the same entrance or primary entrance on the same street as other residential buildings. And the exception is where HPD determines that the primary entrance is located in a manner that does not stigmatize occupants of affordable housing units. So again, we hear the word stigma and this was unique to MIH. And as everybody sitting here knows, we had a project just like that. That development wasn't 100 percent affordable technically. If you're affordable under 421 A, you're essentially treated as non affordable under MIH. So, they had, say, 10 units that were affordable under 421-a, but those 10 units were not MIH units. So it wasn't fully affordable, quote unquote. It didn't fall within this requirement, and I can only assume that's why they revised this provision to make it two thirds affordable, meaning if you just shove in a couple of affordable units under 421A or 485X, it's not going to work. And they changed the statute a little bit. It still has to either, A, share a common street entrance with another building on the zoning lot, which has less than a third of the units as affordable and be independent from street wall line to the sky, or have its primary entrance on a street frontage that has primary entrances for other residential buildings. And now HPD has the ability to waive both of those requirements. Here they can waive either one or two if it determines that the buildings on the zoning lots are otherwise located in a manner that does not stigmatize occupants of affordable housing units. In other words, They don't have to just look at where the entrance is, they could look at other things. We all know it's a big no for you to create a MIH or VIH project that has separate entrances. Now they actually put it in the statute, and it says that in a mixed income building the affordable housing unit shall share a common primary entrance with the other dwelling units or rooming units. And HPD has the right now in its sole discretion to deny any affordable housing application that proposes preservation, that includes homeownership affordable housing, qualifying senior housing, or supportive housing, and instead they could require you to do rental. That's a very big change. These are growing powers. So we'll see how those things shake out. We started with the application and I want to end where it makes sense to end, which is you have to complete
Brenda: From A to C..
David: Yeah. So don't forget when you leave us, you have to come back. We get them on the way in and on the way out, which is you have to apply, get approved, build your building and then come back to us and HPD to
Brenda: prove you built the building.
David: You can't get your TCO without completing with HPD.
Brenda: When you sign your regulatory agreement or your restrictive declaration, you're promising to build certain affordable housing. And you've gotten permits showing that you're going to build this affordable housing. You now need to go on the back end and come back to HPD and say, I have built the affordable housing that I promised you that I would build. So the completion process begins with you getting your first TCO. In an MIH site, you can only TCO floors that have an MIH unit on it, prior to receiving the completion notice from HPD. The City of Yes has now expanded that to say the same thing for UAP. In a UAP site, you can only TCO floors that have a UAP unit on it or your as of right FAR.
David: The drafters avoided using terms like floor area compensation, which means zoning bonus. There is no reference to floor area compensation. It doesn't refer to it anywhere. It just talks about being able to get an increased FAR for the provision on a one to one basis of affordable housing under UAP. I think they did that on purpose. But similar to VIH, it really is floor area compensation in exchange for providing affordable housing. You can't get that zoning bonus or be entitled to a TCO and occupy a zoning bonus when you haven't yet proven that you've actually fulfilled the requirements under whatever program you apply for. If you have a UAP development, you can TCO, even before completion notice, the as-of-right portion, which is the residential standard under 23-22. At the same time, now under UAP as well as MIH, if you have an affordable unit on a floor, you can TCO that entire floor. What that does is encourage people to put affordable units on higher floors. You do that and you'll get your compensation before you have shown that you've done the work.
Brenda: And showing that you've done that work is a very arduous process that takes six to eight months. You will not be able to complete with HPD if you have any violations on the site. It used to say entirely free of violations. And now it just says free of violations, giving you a little bit of leeway in terms of how you prove that you're free of violations, not your report is completely clear and nothing shows up on it, but you had violations and you've done the work to clear it and here's proof.
David: I posted on LinkedIn a while back the three things that bog you down most for completion. And one of those things is violations. It's probably the number one thing. And the reason is because it's a moving target. So if you have, for example, an FDNY violation, that FDNY violation could take a year to clear, because you have to have FDNY inspect, you have to pay for fees or penalties, you may have to redraw plans and they have to come back to inspect and there can be back and forth with objections. We've seen this process hurting our client. You have to pull full municipal searches to be dated within three weeks of completion. That's what they consider to be upon completion. Municipal searches take a while to pull. This would prevent us from completing projects. The prior zoning resolution said you have to clear it entirely. Now, the word entirely was erased. They had a very minor exception that allowed you not to have all your violations cleared before you complete, but that had to do with non hazardous violations, and only in occupied, affordable housing units, and only preservation affordable housing and substantial rehab. They took out all of that language and then said, except as may otherwise be provided in the guidelines.
Brenda: It's going to be GB
David: It's going to be GB. The policy behind the City of Yes is to make this thing faster, easier, better. How much time have we spent circling this violations loop, and not completing. So they're giving room. Beforehand, HPD was saying, it's statutory, my hands are tied, can't do anything.
Brenda: Entirely free.
David: Now they're entirely free to give us an exception to the violations.
Camila: They made this change to incorporate a little bit of the policy they have been changing over the last few months. Over the last few months, they have been accepting proof of cure or dismissal without being officially cleared of record after a year of going back and forth.
David: You'll get a violation you can't clear because there's a tenant in the unit who's made complaints.
Brenda: They won't let you in the unit to fix it.
Camila: And then you fix all that. You get new search and then there's another violation
David: And then you get into that cycle that we're talking about. I'm very interested to see how the application process proceeds. UAP is just another iteration of VIH, the requirements are a little bit different, but we know how HPD works, we know the procedure, and we know exactly how things are meant to be done. And frankly, I'm curious to see how the application and the completion process works here, if we can get through it faster. They've definitely paved the road for that. Let's see if it happens.
Brenda: I'm excited to see it.
David: Brenda, Camila and I have a significant grasp on this. Give us a call, and we're happy to help with your new project, getting you a zoning bonus or fulfilling your MIH requirement. Thank you all for listening and please subscribe and comment. We love to hear from you guys and we appreciate it. Thanks.
Camila: Thank you.
Brenda: Well, everyone, that's our show. Thanks so much for listening.
David: And of course, don't forget to subscribe. Also, don't forget to leave comments. Could we love to hear from our audience, right, Brenda?
Brenda: Yeah. Feel free to reach out at [email protected] or visit our website at seidenschein.com. We really look forward to hearing from you
David: You could also reach out to David and Brenda at [email protected] and [email protected].
Brenda: Those are lengthy last names. You can just find us on our website.