Affordable Housing Lottery Odds Worst for Those Who Can Afford the Least
By Rachel Holliday Smith, Ann Choi, and Will Welch, originally published in THE CITY.
THE CITY analyzed 18 million applications for apartments and confirmed low-income applicants’ deeply felt sense that the system is stacked against them.
The city’s housing agency this month upgraded its online application system to make seeking an affordable apartment easier — but the odds to get a lease remain worst for those with the least.
A review by THE CITY of more than 18 million applications to the NYC Housing Connect system between January 2014 and March 2019 shows that for every one of the 21,382 new apartments built as part of Mayor Bill de Blasio’s Housing New York plan, 314 eligible applications poured in.
The lower the rent — and the lower the income of the household applying — the more people applied per apartment.
“It’s frustrating,” said Grisel Cardona, a South Bronx mom of three who has applied to the lottery system more times than she can recall over the last decade.
Of the five income categories within the lottery system, households like Cardona’s that are classified as “extremely low-income” — currently defined as earning up to $30,720 for a family of three — faced the most competition for apartments. For them, 650 applications came in for every available apartment from people who qualified based on household size and income.
For the apartments with the highest income limits — between $122,880 and $168,960 a year for a family of three in 2020 — the competition was the least, with 123 eligible applicants for every one apartment. They are six times more likely to have their number come up in a lottery as poor applicants — and many ultimately decide not to rent the apartment offered.
In 14 projects, most of them targeted to even higher income limits under former Mayor Michael Bloomberg’s housing program, buildings went through their entire list of eligible applicants for the highest-priced apartments and found no one to take their affordable units.
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The imbalance is no secret.
To developers building housing, the practice of mixing wealthier and low-income tenants is baked into their ability to finance costly construction, and central to the mayor’s affordable housing plan.
But the future of that system is under stress — and competition for affordable housing could get even fiercer, thanks to budget woes brought on by the coronavirus pandemic.
De Blasio has proposed deep cuts to funding for future development, a move that has already threatened to put the brakes on his affordable housing goal to build or preserve 300,000 units by 2026.
To financially strapped New Yorkers trying to get an apartment, years of fruitless applications have taught them just how low their chances are.
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Nine Apartments, Five Years
Cardona said she gets by on about $18,000, from disability payments for her children — her eldest, 9, and youngest, 2, both have autism — and food stamps.
Income minimums on lottery advertisements hardly ever match what she has.
“The least that shows there is about $30,000 or $49,000, depending on where and what it is. But you don’t see anything less than that, at all.”
THE CITY found that in five years, there were just nine apartments available for her income category and family size through the lottery. Nearly 10,000 eligible applications came in for those units, or 1,107 applications per apartment.
Cardona has worked in the past at Macy’s, but now takes care of her children full time, and volunteers on her local education council. Even when she is working, however, her income almost always falls below the minimum — as is spelled out in each rejection letter she gets from the city’s Department of Housing Preservation and Development.
In her current apartment — paid for in part by a rental voucher valid for up to five years — her eldest two kids switch off sleeping on a bed set up near the kitchen. The rest of the family sleeps in three beds set up in the single bedroom.
Her latest rejection from HPD came just last week. It was for a building in Downtown Brooklyn where the minimum income was set at $105,326, an email from HPD said. Before that, she set her hopes on a building in Upper Manhattan.
But the minimum income for applicants there, she found out in her rejection letter, was $49,770.
“You don’t want people to be lazy, fine, I get that. But at the end of the day … how can one afford an apartment if people are getting $15,000, $12,000 under the amount that they put?” she said. “You would have to work four to five jobs in order to afford an apartment.”
Mixed Deck
The reason it is so difficult for poor New Yorkers to win a spot in the lottery is also why much of New York’s affordable housing gets built at all.
To keep many privately built, publicly subsidized projects in the black and financially viable for the long term, developers collect rent from people of different income levels.
Jessica Katz, executive director of the Citizens Housing and Planning Council, said this “cross-subsidy” is a building block of the city’s housing programs — and a feature, not a bug.
“By using those higher-income units, you subsidize the lower-income ones,” said Katz, a former HPD official. Based on where the greatest unmet need exists, she added, “the demand is always going to be greater at the lower end of the spectrum.”
For affordable units, rents are set at no more than 35% of a tenant’s income, and targeted to different classes based on the area median income.
Owners bring in cash to cover the cost of low-income units by turning to tax-funded subsidies, higher-priced affordable units targeted to middle-income households, or market-rate rentals.
At Reside New York — a company hired by developers to screen, conduct interviews and tour apartments with lottery applicants — staff see the trend clearly: higher-priced “affordable” apartments spur the least demand.
For the 2019 lottery for apartments in a new luxury building in Greenpoint, Reside received 63,235 applicants in a randomized list from HPD, staff told THE CITY. But only 2,587 applicants even fit in the income brackets designated for the building’s 60 affordable units — between $42,206 and $83,440, depending on household and apartment size for 40 of them, and $81,840 and $135,590 for the remainder.
The rest were automatically rejected.
Hitting ‘Reply All’
That was due to what Margy Brown, the HPD associate commissioner who oversees the lottery, calls “the reply-all phenomenon” — where apartment hunters would “go through and just click apply, apply, apply to every lottery,” even if they didn’t fit the criteria.
The application data between 2014 and 2019 reflects that. Overall, the majority of applications in that time period were rejected. Only 37% of the total were eligible based on family size and income — 6,714,209 of 18,298,168.
HPD’s new lottery system redesign, named Housing Connect 2.0, is intended to address that problem. It streamlines the application system so that it will accept only those whose household and income sizes match the development where they seek an apartment.
Still, the underlying odds for eligible households to win an apartment will not change. Even within a single building, different applicants can have wildly different chances of success — and not only because nearly half of developments must set aside half of their affordable apartments for residents of the local community district.
Within 524 E. 14th St., on top of a Target store in the East Village, apartments fell into two income-targeted groups in its 2018 lottery.
Apartments for households making up to about $60,130 for a family of three each got 501 applications — while only 65 applied per apartment exclusive to those with incomes up to $111,670.
Chasing Tenants
Agents screening tenants find that lower-income apartments tend to fill up easier — while they have to chase after approved higher-income tenants to convince them to sign leases. Across the board, filling apartments through lotteries takes a long time: a year and two months is the median, the HPD data shows
At Reside, affordable marketing specialist Susan Moskovits said for lower-income lottery buildings, she only needs to reach out to only a small chunk of eligible applicants because so many are in the pool. Those contacted almost always take the apartment if they are approved.
But for higher-income apartments, she reaches out to everyone on the list. For one soon-to-open Bushwick building for households making between $75,429 and $149,890 a year, she “reached out to all 737 applicants” for just three apartments that cost $2,200 a month for a one-bedroom and $2,450 for a two-bedroom.
“A lot of them don’t respond at all, other than to say, ‘Oh, we’re no longer interested,’” she said.
“People at that level have more choice,” said Bernell Grier, executive director at IMPACCT Brooklyn, a 56-year-old community development nonprofit that builds affordable housing and runs lotteries.
Grier has often seen higher-income prospective tenants go through the process of applying and being approved to rent the apartment — only to turn it down.
The trend pops up most at the highest end of the Housing New York income scale, 130% of the New York City area median income of $102,400 — or $133,120 for a family of three. At those properties, there’s “a high level of rejection” from applicants, she said.
‘Too Good to Be True’
Bob Rentz and his wife found themselves in that scenario.
The Astoria residents had applied to a handful of affordable lotteries and got a match for one in 2017.
It was for a Manhattan one-bedroom, in Kips Bay, Rentz said. They were excited at the chance, and gathered voluminous paperwork: pay stubs, tax records, even Venmo receipts, he said.
“We thought it was going to be like a luxury apartment, great deal — like your rent will never go up, you’re locked in for life,” he said. “Too good to be true.”
The price of the so-called affordable apartment, at $2,233 a month, was much steeper rent than the $1,650 they paid for their Astoria place. And when they finally saw the new apartment, they instantly knew it wasn’t going to work for them. The couple wanted to start a family, but qualified only for a small one-bedroom.
“When we walked in, we pretty much knew what it would take to say yes,” he said.
The apartment didn’t cut it.
They turned the offer down. A short time later, the building managers offered them a lower price: $2,000 a month. But they still said no.
In some cases, buildings ran through their entire list of eligible applicants from the lottery — and
found no one to take the unit.
Between 2014 and 2019, 461 units over 14 projects went unfilled, HPD data shows. Most of those were in developments with apartments set aside for households earning above 165% of area median income, or $168,960 for a family of three in 2020.
De Blasio’s 2014 housing plan scrapped that preexisting upper-middle income category. And as of February, developers who’ve exhausted all lottery applicants must deliver unclaimed units to homeless New Yorkers, with financial aid from the city.
Developers have placed homeless people into 300 apartments since then, HPD said, a number boosted by cash incentives to devote even more units to them during the height of the COVID-19 outbreak.
Undone by GoFundMe
Needy New Yorkers try and fail for years to find affordable housing through a system overwhelmed by demand.
For every one apartment set for the city’s lowest income group, about 13 New York City households at that level pay more than 30% of their income on housing — the standard definition of being “rent-burdened” — according to a 2018 report from city Comptroller Scott Stringer.
For households in the highest eligible income category, the trend is the reverse: Nearly five times as many affordable apartments are being built than the number of rent-burdened people in the middle-income category.
Alex Fennell, a housing and racial justice advocate and former political director at Churches United For Fair Housing, saw the disconnect firsthand while staffers helped applicants get through the “really onerous” lottery process.
“People apply for years and to hundreds of apartments before they even get a call back,” she said. It was so rare for someone to land a unit that when it happened, every person on staff “would know that person’s name,” she said.
Efe Osaren never got a winning ticket.
This past December, the nursing student, doula and assistant midwife got a call about a $947-per-month studio in a new building in Bushwick, nearly two years after she applied there.
Osaren has been apartment-hunting through Housing Connect since 2016 and was contacted twice before about a possible match. The first time, in 2017, a credit check stopped the process, she said. The second time, in early 2019, she ended up on a waitlist, but never heard back.
She currently pays $1,250 for a room in Bedford-Stuyvesant, and after six years in New York sharing space, is ready to have her own place.
“I’ve never been able to have anything permanent,” Osaren said. “I’ve been moving every six months, or moving every year, that I’ve been living here.”
To land the apartment, she gathered together “an excessive amount of paperwork” to show she was eligible for the unit, available for people making between $34,355 and $43,860 a year.
But about a month later, the dream ended. Osaren heard from a lottery administrator that money she had received through a GoFundMe campaign to help pay for her professional education put her over the apartment’s income limit — by $700.
At first, she felt a lot of anger, “then just exhaustion,” she said.
Now, after the outbreak of the virus, she feels she can’t stay in the city. She has lost clients, and her lease in Bed-Stuy is up at the end of the month. In July, she’ll return to her family in Houston.
Exceeding Goals
In the world after COVID-19, the new supply of affordable housing is set to slow. The de Blasio administration has proposed slashing about 40% of this and next years’ HPD capital budget.
Rafael Cestero, former HPD commissioner under Mayor Bloomberg and now president and CEO of the Community Preservation Corporation, said the budget cuts combined with construction shutdowns have stopped as many as 10 development deals his group had been working on.
“Anything that we were going to close between, say, March 1 through the end of June isn’t happening,” he said. “I’ve never seen anything like it in my 30 years doing this.”
HPD Commissioner Louise Carroll acknowledged that budget cuts have slowed down housing production this year. But she said she’s proud of what the administration has done so far.
Before the pandemic hit New York, the agency had funded the construction or refinancing of 28,000 units by the end of the fiscal year’s third quarter on March 31, she said — surpassing its own 25,000 full-year target. As of the end of March, the agency has funded 164,204 units toward the 300,000 goal — the bulk of them to preserve existing apartments as affordable in the future.
“We had exceeded what our target was for the year and it felt prudent to do less — not do nothing — but do less for a few months while money was being targeted for the COVID crisis,” Carroll said.
The agency has increased its share of funding dedicated to low- and extremely low-income renters, the commissioner added. Earlier this year, the mayor committed to finance half of all newly built homes for families making less than $50,000 a year. The change, he said in January, will create 2,000 more apartments for that group of New Yorkers than previously planned.
Carroll also pointed out that the cuts are being made to a budget that had been historically high under de Blasio.
“I won’t tell you it’s enough until every single person has an affordable place to live,” she said. “But it’s a lot, and it’s more than anyone has ever done.”
Rethinking the System
Some advocates seeking to reform de Blasio’s housing plan see the city’s current economic challenges, including question marks about the real estate market, as a chance to reexamine its uneven foundations.
Among the ideas in play are community land trusts, in which a nonprofit organization would take ownership of property for future development, land banking, investing in public housing again and converting hotels into SRO residences.
Said Fennell, “We need to be giving people in communities the power to control what happens in their neighborhoods, and to have ownership over that.”
To Aaron Carr, executive director of Housing Rights Initiative, the current moment is an opportunity to move beyond what he described as the “failed system” of the housing lottery.
“At the end of the day, housing shouldn’t be a lottery,” he said. “It should be a right.”
His group has pushed for requirements to include affordable housing in new developments in Manhattan’s pricey SoHo and NoHo, areas where the hot market makes government subsidies less necessary.
“Building in high-income communities is an absolute no-brainer, not just from a moral perspective, but also an economic one,” Carr said.
To Cestero, at the heart of the matter are costs that still vastly exceed many people’s ability to pay. According to the Rent Guidelines Board, simply operating and maintaining an already-built apartment costs an average of $1,034 a month — much higher than many New Yorkers can afford.
“We can’t build our way out of that crisis for the lowest income people,” Cestero said. “It’s about having enough income to be able to afford even the most affordable rent.”
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