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NEW YORK STATE ASSOCIATION FOR AFFORDABLE HOUSING

5925 Broadway • Bronx, New York 10463

Phone: 718-432-6940 • Fax: 718-432-2400 • info@ •

MEMORANDUM

TO: Priscilla Almodovar

FROM: Bernie Carr

SUBJECT: IDA’s & Affordable Housing

DATE: January 17, 2008

IDA financing is an important resource for affordable housing development.

• At least 4,000 units of affordable housing have been built in recent years with IDA financing. Almost all of these projects are located in either upstate New York or in the downstate suburban counties where affordable housing is especially difficult to develop.

• Private activity bond financing from IDA’s automatically leverages federal 4% low income housing tax credits which would otherwise be left on the table in Washington.

Courts have determined that affordable housing is not a public work and should not be subject to prevailing wages.

• In the Vulcan case, the court determined that while an affordable housing project was financed by the state and generally served a public function (“the rehabilitation of neighborhoods”), the project was not a public work because there was “no public use of the structure, no public ownership, no public access, and no public enjoyment.” Vulcan Affordable Housing Corporation v. Hartnett, 545 N.Y.S.2d 952, 954 (3d Dep’t 1989).

While the exact amount varies from county to county, prevailing wages can increase the cost of affordable housing development by 30% or more. This will result in fewer units of housing and substantially greater amounts of subsidy for units that are built. These increased costs cannot be passed along to the tenants, since higher rents can make projects ineligible to receive subsidies through existing federal and state programs.

• South End Revitalization is a 52-unit affordable family project under construction in Albany’s South End with total hard costs of $7 million. Carpenters on this project are currently being paid an hourly market rate of $19.65 and electricians $25.00. The prevailing wage rates for these trades are $36.22 and $43.55, respectively. A prevailing wage requirement would increase total labor costs 75%, which would result in a 32% increase in construction costs. An additional $43,000 per unit of subsidy would be required to keep these units affordable to the same families.

• Jefferson Terrace, Stuhr Gardens, and Davies South Terrace are three preservation projects currently being redeveloped with IDA financing in Westchester and Dutchess counties at a construction cost of about $70 per square foot. The same projects with prevailing wages would have cost approximately $91 per square foot, an increase of 30%.

• Plymouth Manor/Carlson Commons is an awarding-winning, 144-unit project that has transformed the Kennedy-Olean neighborhood in downtown Rochester. An analysis performed when construction began in 2004 demonstrated that prevailing wages would have increased construction costs for this project by 25%, a total increase of $4.35 million. This increase would have made the project infeasible.

A prevailing wage requirement will make it impossible for small and minority-owned subcontractors to compete for contracts for affordable housing projects.

• Many of the subcontractors who work on affordable housing projects are small, locally based businesses, often owned by minorities. While paying their workers a fair wage, they are unable to pay prevailing wages on their other jobs and will be reluctant to undertake projects that will require them to pay some of their workers substantially more than others.

In Approval memo No. 53 for Chapter 678 of the Laws of 2007, Governor Spitzer rejected the idea that the definition of public work—and, by extension, a prevailing wage requirement—be extended to affordable housing.

• “Finally, I note that the courts have rejected efforts to bring various private affordable housing projects within the definition of public work, even where public funding was involved, and the language of the bill - and the statements of the sponsors - make clear that the legislation does not in any way overturn those decisions.”

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