HONDA law could increase public-private partnerships for affordable housing – Business Observer

Legislation passed by New York lawmakers that allows the conversion of distressed commercial properties into permanent affordable housing could trigger more partnerships between private real estate investors and the state, real estate finance experts say.

State legislature approved the Housing Act for Our Neighbors with Dignity (HONDA) June 9 and The law project now waits for Gov. Andrew Cuomothe signing of before it becomes law. The measure would create tools allowing the state to acquire hotels or offices to be operated by non-profit organizations selected by the government. Housing and Community Renewal Division.

Hameer Vaid, a senior director with Alvarez and Marsal‘s private equity performance improvement group, said HONDA would help spur the acquisition of distressed business assets from “strategic partnerships” between state and real estate investors from the issuance of municipal bonds via a public-private partnership model. He noted that owners of struggling office buildings in New York City, in particular, would benefit as they seek a way forward amid uncertainty over future trends in remote working.

“Office space owners see themselves in the midst of recapitalization events, restructuring events and adoption of collaborative workspace designs, resulting from the tenant’s demand to continue with cancellation programs. rent or early termination requests, ”Vaid said. “[HONDA] will solicit interest not only from financial institutions, but also from the buying side, either from the city itself or from a joint venture environment between the city and private investors, who already have business models. ‘operating established in affordable housing.

At least 50 percent of housing would be allocated to homeless people, with the other half containing a median income cap of 80 percent. The current FY2022 budget adopted in April provided for $ 100 million in funding for the HONDA program.

Vaid said calculations showing offices in New York City at 17% vacancy and a rental rate of $ 80 per square foot across all building categories created a potential of $ 7.1 billion in commercial inventory. He pointed out that mortgage lenders are particularly pushing for HONDA as a way to rid their balance sheets of distressed assets.

HONDA legislation was introduced in March by the Deputy Senate Majority Leader Michel Gianaris (D-Queens) in opposition to a similar proposal by Cuomo in January to convert commercial buildings into affordable housing that was supported by the New York Real Estate Council. The trade association had previously criticized HONDA for leaving private developers out of the process.

Evan blau, president of Cassin & Cassin‘s agency the practice of loans and affordable housing in Manhattan, noted that the bill sets itself apart from other affordable housing programs, such as Mitchell-Lama, which often lead to a change of units at the market rate. He said HONDA ticks several boxes for lenders – in terms of meeting federal goals for affordable housing as well as environmental, social and governance investments – that can help them position themselves for more future deals.

“The best affordable housing programs always marry government agencies, nonprofit developers, and private investment through Wall Street,” Blau said. “Aside from profit motivation, if you’re at a big bank, I think you’re participating, with open arms, in the right kind of deal with this program, because it’s a socially responsible investment from the point of view of the loan. “

Governor Cuomo’s press office did not immediately respond to a request for comment on whether or not he intends to sign the bill.