Real Estate Expert Leonard Grunstein Proposes a Solution to New York’s Affordable Housing Crisis

Leonard Grunstein has released a plan to resolve New York’s affordable housing crisis. Recently published in the spring 2014 edition of the Real Estate Finance Journal, the plan proposes a new mixed-income, mixed-use model of affordable housing that enables the free-market to fund the development.

The proposed plan would let the market play a larger role in New York’s housing policy, urging reforms to lower the cost of land in order to attract free-market financing and equity through the capital markets. This would enable development of unused city land and encourage developers to lease the ground where new projects are built, generating rents from the luxury component of the mixed-use complex.

Grunstein also encourages using the additional funds from these rents for the creation of self-funded “sticky” rent vouchers that would empower struggling families by letting them rent an apartment. He believes the answer to low-income affordability is more income, not more structurally flawed low-income projects.

To put these ideas into action, Grunstein is urging the city to create an Affordable Housing Authority, which can resolve issues using a public-private partnership model.

 

Leonard Grunstein Proposes A Free-Market Solution To the Affordable Housing Crisis

Leonard Grunstein, Managing Member at Hanlen Real Estate Development & Funding, has published an op-ed piece in the Gotham Gazette, contributing his thoughts on the newly proposed affordable housing plan for New York City.

While Grunstein believes the plan to be a very detailed and progressive means of solving the city’s housing problems, he also suggests a more cost-effective solution – the current plan costing an estimated $41 billion with $8 billion coming from city funds.

Grunstein’s suggestions are outlined in a five-point plan, meant to solve a growing housing crisis and save New York City money in the process. The first two steps proposed in the plan involve the creation of a partnership between the public and private spheres to provide for low-income and mixed-income housing, and taking full advantage of profitable tracts of land in the NYC area – enabling development to reduce the land’s overall costs.

A third point would require developers to lease the ground on which new projects are built, generating ground rents through the luxury component of development. Funding generating by these ground-leases could then be used to assist struggling households, providing them with a transferable voucher to be used for apartment rental. Finally, the plan calls for the creation of an independent affordable housing authority with the power to solve city housing woes using a public-private model.

Success has been had in smaller segments of the city, where agencies of the proposed nature have repaired struggling neighborhoods. With the proper resources in place, this proven plan can bring aid to New York City as a whole.

Leonard Grunstein’s full article can be found at gothamgazette.com.

The Worldwide Plaza

The Worldwide Plaza is a collection of office and residential buildings occupying a city block in West Midtown. First constructed in 1989, the complex has gone through a multitude of owners in its 24-year history, inspiring one reporter to write, “[I]ts long list of suitors has made it the Elizabeth Taylor of the New York office building world.”

The office condominium portion of the building, first sold to Blackstone and then subsequently to Sam Zell’s Equity Office REIT, in 1998. Leonard Grunstein helped conceive and negotiate the financeable and tax-advantaged structure that enabled the sale, while retaining the retail condominium portion of the building under a financed net lease structure.

The original building was developed by William Zeckendorf Jr. and designed by David Childs, the architect who would go on to design One World Trade Center in Lower Manhattan. The space had formerly housed the third Madison Square Garden, site of Marilyn Monroe’s infamous birthday serenade to President John Kennedy. After the Garden moved south to its present location, the area fell into disrepair. Zeckendorf, predicting the neighborhood was due for a rebirth, took a gamble and purchased the site. His bet paid off, and the building soon attracted prominent tenants such as white-shoe law firm Cravath Swaine & Moore, and Ogilvy Mather, an international advertising agency.

An economic downturn in the early 1990s took a toll on the building and forced a sell-off to the Blackstone Group in 1996. Throughout the next decade, the complex went through several different owners, including Sam Zell’s Equity Office Properties Trust and Deutsche Bank. The property’s price ultimately reached a high of $1.74 billion in a 2007 sale. The most recent economic recession once again took a toll on the plaza, and in 2009, George Comfort & Sons scooped up the complex for a bargain rate of $600 million. The property has since regained value and is now hotly contested by two major investors, Nicholas Schorsch and Scott Rechler.

The buildings in the complex encircle a public plaza, whose focal point is the “Four Seasons” fountain designed by famed sculptor Sidney Simon. The plaza also contains a café and an Off-Broadway theater space below ground.

The New York Theological Seminary: Grunstein Negotiates Lease

The New York Theological Seminary, a center for theological study in Morningside Heights, has educated generations of church leaders since its founding in 1900.

Real Estate Law Expert Leonard Grunstein handled the sale of the New York Theological Seminary building to a well-known developer skilled in the adaptive reuse of existing buildings. The seminary building was gut-rehabbed and recreated as a residential apartment complex. Mr. Grunstein also negotiated the lease that allowed the seminary to relocate to the Marble Collegiate Church.

The school was set up by Wilbert Webster White, an educator and scholar who envisioned a curriculum that emphasized practical ministry training and study of the Bible in the students’ own languages. From the beginning, White aimed to create a school that would incorporate a Bible school-type education into a university system. The school was distinguished by its acceptance of both men and women, as well as for its diversity, with a wide range of races, cultures and religious denominations represented among the student body.

As the demographics of New York City began to change in the 1970s and 1980s, the school adapted in response, under the direction of another acclaimed educator, George Webber. Instruction in Spanish and Korean was incorporated into the curriculum, and new programs on nights and weekends were added for the benefit of working urban ministers who sought more formal training. Under Webber, the school became a hub for black, Hispanic, and female students, and enrollment doubled.

The school also launched a Master’s program inside the Sing Sing Correctional Facility to train inmates in the New York State Correctional System for ministry. The program has since earned acclaim, with graduates seeing far lower recidivism rates than the overall prison population.

The seminary has been located in a number of sites around the city during its history. It was previously located in a building that housed the school as well as a dormitory. As its mission evolved, it no longer needed so large a structure. The building was sold and the school relocated, first to the office tower within the Marble Collegiate Church in Midtown and subsequently to its present location on Riverside Drive in 2002.

Letter to the Editor: De Blasio And Affordable Housing

In a letter to the editor of Gotham Gazette article, “De Blasio Pins Affordable Housing Hopes On Mandatory Inclusionary”, Leonard Grunstein advises Mayor-elect Bill de Blasio, that mandating the construction of middle-income housing only to city-owned land, could be an alternative.

He notes the article correctly highlights the challenges of requiring affordable housing. The highlights include: a possible domino effect that would create less affordable housing, due to slowing of new development of market-rate housing; tenants facing extra construction costs so that owners can make up for loss incurred by the affordable units; and lastly building to accommodate more people puts more strain on public service, who would need to plan for more schools and better infrastructure.

The policy would require developers to have a percentage of their building’s units as permanent affordable apartments. Developers who participated, would receive increased building heights and tax breaks.  Currently there is similar version that is optional.  Many developers have chosen to opt out of this policy; does this foreshadow what is to come if the policy became mandatory?

In his alternative solution, Grunstein suggests:

“One alternative de Blasio should consider is to mandate the construction of middle-income housing only in the development of city-owned land.  The city successfully took this tact with Seward Park, a strip of city-owned land on the Lower East Side, by obligating RFP respondents to make at least half of the housing units there affordable. Refining the requirements to be more capital market friendly may have enabled an even greater amount of middle-income units.”

If de Blasio followed through, it would strengthen New York’s middle class.  It would create a need to work together with the real estate industry.

Read Leonard Grunstein’s full letter here.