(Bloomberg) -- Mayor-elect Bill de Blasio’s plan to pump $1 billion of New York’s $144 billion in pension assets into apartments for poor and working-class residents faces constraints including competition from banks and declining federal aid.
Trustees of New York’s five retirement plans have a fiduciary responsibility to maximize returns for beneficiaries. That means they can’t provide below-market financing to help de Blasio achieve his goal of creating or preserving 200,000 affordable units in 10 years, said advocates such as Moses Gates of the Association for Neighborhood and Housing Development.
A state mortgage agency’s cap on the insurance it provides for loans funded by city pensions may also limit the potential benefits of new capital commitments.
“There’s a big difference between adding more market capital funding sources and adding more subsidy,” said Gates, a director at the Manhattan-based nonprofit. “In order for it to generate affordable units, you’re also going to have to add some kind of subsidy.”
De Blasio, a 52-year-old Democrat, won election in November vowing to close the growing gap between wealthy New Yorkers who “enjoy a life of luxury” and the poor and middle class. One- third of the city’s rental households pay at least half of their income on rent, according to the Rent Guidelines Board. In November, the median rental price for an apartment was $3,100 in Manhattan and $2,800 in Brooklyn, according to brokerage Douglas Elliman Real Estate.
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