Affordable Housing Finance

THE BUZZ

Pop Quiz

AFFORDABLE HOUSING FINANCE • November/December 2009

Rafael Cestero is commissioner of New York City’s Department of Housing Preservation and Development (HPD), the nation’s largest municipal developer of affordable housing.

He took over the post this year from Shaun Donovan, who left to join the Obama administration as secretary of the Department of Housing and Urban Development.

Prior to joining HPD, Cestero was a senior vice president and chief program officer at Enterprise Community Partners. He previously served as HPD’s deputy commissioner from 2004 to 2007.

Q: What's the first job that you ever had?

A: Like a lot of high school kids, I had a job delivering pizza. It was for a joint called Murray’s in Rochester. It feels like a lifetime ago (I’m not going to say how long ago—I’m not that old). When you’re a teenager, it’s just nice to have a job that puts some money in your pocket so you can have a little independence and freedom. It teaches you a bit about responsibility, managing your time, and following through on a commitment. At that age, it’s really the first time you’re responsible for something other than yourself.

Q: What's the first job you had in housing?

A: My first job in housing was with Enterprise Community Partners in 1990 as a project manager. It was a great opportunity and a fantastic organization that does a lot of good work. The work I did there really helped shape my view of what the affordable housing world was and what it could be. That experience is why I have spent my entire career working to make cities more affordable. It’s a truly rewarding experience to know what you’re doing makes a difference on a large scale by helping to stabilize communities and building healthy, diverse neighborhoods. But the most rewarding part is seeing the people and families whose lives are changed, and for some of them, it’s a second chance they thought they’d never get. At the end of the day, it’s about the people.

Q: Share with us an interesting statistic or fact about affordable housing in New York City.

A: In the midst of this housing downturn and a precipitous drop in housing starts across the country, HPD and HDC [New York City Housing Development Corp.] financed 12,500 units of affordable housing for fiscal year 2009 by putting nearly a billion dollars in bonds and $460 million in subsidy to work. Nowhere else in the country is this possible today. I think that speaks volumes about the city’s commitment keeping pace with the ambitious goals of Mayor Bloomberg’s New Housing Marketplace plan (NHMP). There were, and maybe still are, a lot of people out there who think it can’t be done, especially in this economic climate. These 12,500 units show that we’re still on track to create and preserve 165,000 units of affordable housing by 2014 under the NHMP.

Q: What HPD program has you excited this year?

A: We have a lot of great programs at HPD, but I think our Housing Asset Renewal Program (HARP) really shows how we’re looking at all of the opportunities available to take advantage of the current market so we can continue to expand the city’s affordable housing stock. This $20 million pilot program is something that City Council Speaker Christine Quinn proposed and we’ve been working to put into place. We issued the notice of funding availability in July, and I believe it runs through the end of December. What it does is turn unsold condominiums, unrented apartments and stalled construction sites into affordable housing opportunities for moderate- and middle-income families. It gives us an opportunity to stabilize neighborhoods that have been most affected by the economic downturn while giving us fresh opportunities to create affordable housing.

The HARP funding is intended to convert market-rate units to affordable units so the property owner can finish construction and rent or sell the units. This isn’t a bailout—developers that want to apply have to agree to restrict rents or sales prices for a minimum of 50 percent of the dwelling units in return for HARP subsidy and/or permanent financing. In the end, it’s really a win for everybody. Developers get to move forward with projects that might otherwise be stuck in limbo, the city brings new units into the affordable housing fold much faster and for far less than it would cost to build new developments, and, of course, hardworking New Yorkers get great new affordable housing.

Q: What’s a recent move that HPD made that other agencies may be able to learn from?

A: The mayor’s NHMP is an incredibly ambitious plan, so it does require us to think of new ways to keep the momentum moving forward toward our overall goals.

We were the first to use recycled bonds, and we are still the only housing entity in the nation to have put this recycled cap to work. We were also the first to get Tax Credit Assistance Program out on the streets and working for us. The funding packages for these two projects alone topped $300 million, which is something I don’t think you’re seeing done in any other city. In doing this and being successful, it sends a message and gives other agencies and other cities a guide to work from.

Q: How are the challenges of developing affordable housing in the city changing?

A: Even with the new challenges in this market, the NHMP remains a great plan. We are continuing our efforts to finance new construction and focus attention and resources on maintaining our affordable housing stock, but faced with the economy as it is today, we are examining every element of the plan and are looking at every new opportunity that this market offers.

We have to apply a neighborhood lens to everything we do. New York is a city of diverse neighborhoods, and connecting our work to investments in education, transportation, public housing, and health is an essential part of that reality. There are silver linings to be found in this economic cloud. Opportunities now exist to reclaim units that were taken from affordable stock during the height of the market with unsustainable financing, and preserve even more of the existing stock now that owners have less economic incentive to convert to market.

We are also expanding our efforts to help prevent foreclosures before they happen by working with our sister agencies to find ways to expand housing options for families facing the specter of housing dislocation during this crisis.

Q: What is the best business advice that you have received?

A: The best advice by far was to get out and meet the people you work with—see what they are doing, find out what their concerns are, and get to know what’s going on from the ground up. There’s a personal connection that you make when you meet people face to face that you can’t replace with conference calls or memos. That’s what I did when I came back to HPD because I wanted people to know that I’m serious about our mission and the people who make it happen on a daily basis. It’s helped give me a great feel for where we are and in what direction we’re headed. One of the first things I did was tour all nine floors at our headquarters and visited our field offices. In an agency as large as HPD, getting out and meeting people is still a priority and an ongoing process, but one that I think pays huge dividends.

Q: What’s your most treasured possession?

A: I’ve never been one to really treasure or collect things in that sense. My family, my wife and 3 children, are the thing I really treasure most in this life. When you sit down and take stock of what you have as a person and try to put your finger on what enriches your life, what gives you joy, and what you can’t do without—it has to be family. They’re with me unconditionally through good and bad, and that’s something you can’t put a price tag on.

Q: What's on your iPod?

A: Everything from R&B, to rock, pop, and books. What I have on there really depends on what I’m in the mood to listen to.

Q: Favorite spot in the city?

A: Definitely Prospect Park. When I first moved to New York, my wife and I used to go there every Saturday and Sunday morning, relax, read the paper, have a cup of coffee and a muffin from our favorite bakery.  It’s a true treasure of our great city.

Q: If you had an afternoon off, where would we find you?

A: It’s not even a contest here—I’d be with my kids. Riding bikes, playing sports, reading, just hanging out. They grow up so fast, and every minute is precious. One day you’re changing diapers, and the next thing you know they’ve turned into these little people with their own personalities. No matter how much time you have, it never feels like enough, but you do the best you can and try to be there for them as much as possible.

Q: What’s next for you and HPD?

A: With a big shift in the market comes the need to adapt and move forward— the ability to do this and still succeed is the hallmark of a good plan that is rooted in reality. In all, the city of New York, with its partners, is on course to reach the mayor’s goal of preserving or building 165,000 units by 2014.

This is going take a comprehensive effort by HPD, working with our sister agencies like HDC and our partners in development, government, private finance, and the nonprofit world. Similar to the scale and vision of Mayor Koch’s plan in the 1980s, New York City is once again in the midst of the largest municipal housing program in the nation. Together, working toward a common goal, we have the opportunity to show the rest of the country how this can be done in good markets and bad. We can leverage our unprecedented power and the resources to exploit the present market, make it work for us and for the neighborhoods and hardworking people of this city.

The measure of our success will be reflected in strong, stable neighborhoods that help create a more affordable, sustainable and viable city for current residents and for generations of New Yorkers yet to come.