THE AFFORDABLE HOUSING SHOW COMES TO HUNTERS POINT

“This is the best apartment deal in NYC” 

“We hired a top-notch design team, they designed the Barclays Center.”

“These are the same buildings we build for people right across the river, for which we receive ridiculous rents” 

Frank Monterisi, SVP of Related Companies and Head of HPS Phase I

I have a saying, “The lottery is for losers.” Think of it, in a typical lottery it goes like this, two million people each pay $1, for a total of $2,000,000, so that one of them wins $1,000,000.  In other words, you put down a dollar with the expected probability of getting back 50 cents.  Hmm, not sure how Warren Buffett would feel about those returns, but I personally find the whole concept despicable, and quite frankly, un-American.

Then there is the Hunters Point South Lottery. In this game of chance they are giving away between $128,000 and $1,275,000 in cash prizes to 925 people, and the cost to play is uhh -zero, …if you qualify.  Furthermore, the odds of winning are better than 20 to 1 if you live in the Community Board 2 district, as opposed to 2,000,000 to 1.

How did we arrive at the “prize” math?1  The first thing we did was take the average rents in LIC from Modern Spaces 2Q 2014 report (see link below).  Then we compared it to the midpoint rent range for each apartment type in HPS, as provided by Related Cos.  The discounts for Moderate Income apartments ranged from 29% – 39% as compared to those paying current market rates.  The discounts for Low Income apartments were an eye-popping 78% to 85%.

Those discounts are where most reporters stop, and readers sit or stand agape.  Not LICtalk, we recognize the importance of a very valuable option embedded in getting an HPS apartment: that of not having your rent go up dramatically.  

The power of compounding is the most powerful force in the universe according to Albert Einstein, and the monetary effect of it might only be eclipsed by the psychological one.  Whether it be in your favor or not.  Thus, we took the percentage discounts cited above, and applied them to the average LIC condo sale prices also found in the Modern Spaces report2, in order to realize what that option is worth.

That is how we arrived at the cash prize values, and based on the throngs that showed up for the affordable housing powwow last night in Hunters Point, I think many others have similarly calculated this bonanza.  Trying to squeeze the SRO crowd into the auditorium was like trying to board a ten-seat-per-row plane with a single aisle.  Thus the meeting started half an hour late, and people were still turned away due to overcapacity.  I did not stay until the bitter end of the Q&A, for which the local pols and Related representatives very generously gave their due time, but most of the details of the presentation are available at the link below.

My job is to tell you what is most important, and in my opinion that comes down to one thing: do you qualify?  The first hurdle is do you currently have an address in LIC?  All you need to have been here for is one day (really). Thus I have invited my whole extended family up from Arkansas to live in my studio with me before the deadline to apply is over.

Of greater significance are the economic hurdles.  Fear not, because they are extraordinarily wide and in the Moderate Income segment, which contains the bulk (738) of the apartments to be given away, the limits go up to $225,000 in annual income!

So let’s say you are a 25-year old associate at Goldman Stanley earning $150,000 a year and you want an Affordable 1-bedroom.  You qualify!

Or a 35-year old ad exec earning $200,000 a year whose spouse is a stay-at-home parent with a second (or third) child on the way who really wants a third bedroom, but doesn’t want to pay the going rate, or have their spouse return to work?  You qualify!

Best of all, were your career to take off and your salary double over the next 2-10 years you would not have to move, ever!  Affordable housing, it’s not just for the poor anymore, ain’t it grand?

Hmm maybe, but it’s got to be a bit of an insult to those people in the neighborhood who worked hard to save up a down payment, then made the decision to risk it all with a mortgage to buy a home.  I’m not just referring to old-timers who laid it all on the line ten, twenty, thirty years ago. Even say those of greater means, who took a huge risk when the market nosedived in 2008-09.  That was not an easy call then.  Or even those who have bought more recently, at considerably higher prices, in order to lock in a home.  Unlike Manhattan, where paying all cash for a $10, 20, or 50 million apartment is no sweat, everyone I know in Long Island City is making a huge, leveraged obligation, that may or may not turn out very well.  And unlike a renter, they can’t just walk away if they don’t like the terms.

Economically, these buyers are very much like those applying for the moderate income slots.  They may or may not be slightly wealthier, but no one is in the 10/20/50 Manhattan group, or even close by my reckoning.  In a previous post, I even brought up the topic of whether the HPS lottery is akin to middle-class warfare?

As for the low income slots, first let me state that I am all for a) providing shelter to the poor, and b) cognizant of the desire and need to mainstream the poor by not isolating them in housing projects.  Therefore, the question becomes, how much should we expropriate, I mean appropriate, to each lower income individual? At the extreme the government just spent $1.275 million on a family of 3-63.  Could not this money have been more evenly spread amongst the poor? Does this not instill a fatalistic lottery culture in poor neighborhoods?

Oh, and who pays for all this generosity to both the lower and moderate income winners?  If we learned anything from the 2012 election, we know it is not Mitt Romney and his micro-economic strata, whose sub-14% federal income tax rate is unreplicable to those between the 84th percentile4 and 99.99th percentile.

Sadly, I think we know the answers to all these questions, and they are both despicable, and quite frankly, un-American.  Nevertheless, let there be no doubt: if you qualify for Hunters Point South, you should enter the lottery.  You’d be a fool not to!

nyc.gov/housingconnect – this is where you enter the lottery on Oct. 15.  You can input your profile now though

Presentation Slides – thanks to Queens Buzz

Modern Spaces 2Q 2014 LIC Report

$2 Million Powerball Winner from NJ Claims Her Prize – from yesterday’s Star Ledger

1. for a detailed version of the math, were you so inclined, email me at editor@lictalk.com, and I’d be happy to oblige [↩]
2. the one exception being 3-bdrm sales, where we used a figure of $1.5 million based on the very recent sale of a new 3-bdrm in a walk-up in Hunters Point, off the water, and w/ no view or amenities.  My guess is that were a 3-bdrm condo hypothetically be available at HPS, it would go for between 1.5 and 2.5 million depending on the view.  What do you think? [↩]
3. the low end is a $328,000 discount for a studio [↩]
4. the federal income tax rate is 15% or lower for income below $73,800 for joint filers, which is the 84th percentile [↩]