In New York's Slow-Moving Affordable Housing Market, Patience Is A Virtue

New York City faces a projected housing shortfall of 560,000 units by 2030. And yet, construction has begun on only a fraction of that number, underscoring the difficulty of solving a problem that requires a huge commitment of funding along with bold thinking from multiple stakeholders.

At the ground level, where the new housing is built, success can come down to being flexible, patient and knowledgeable. That is because the process to obtain funding from state and city agencies to create and preserve affordable housing can be complicated and time-consuming.

“The hardest thing that we're dealing with now in New York City and New York state is the queue to get funding,” said Andrea Kretchmer, a co-founder and principal of Xenolith Partners, a developer of affordable housing and mixed-use projects in New York and the Northeast.  

Kretchmer said participants in the affordable space in New York must understand that working with government programs, like those controlled by the NYC Department of Housing Preservation and Development or the state's Department of Homes and Community Renewal, requires an intimate understanding of the process, as well as a time commitment of two to four years while funding applications are reviewed. 

This can be the case whether competing for scarce resources during annual or semiannual funding rounds or participating in as-of-right development. In either case, “you still have to wait your turn,” she said.

Patience might be in short supply when a property owner is weighing whether to sell to a privately financed developer looking to create market-rate housing or a developer of affordable properties that has to navigate a slow-moving bureaucracy. But Xenolith has been navigating this environment since its establishment in 2016, when Kretchmer and fellow principal Terri Belkas-Mitchell co-founded the woman-owned business.

“In our previous work for a developer, we'd always been in situations where we either had little or no control,” Kretchmer said. “Being certified as a Women-Owned Business Enterprise is important to us, and it's very important to certain municipalities like New York City and to many states, including New York, Connecticut and New Jersey, which encourage the participation of M/WBE firms.”

Also important is having an in-depth understanding of how the affordable housing financing process works in New York. A company like Xenolith needs to be “responsive and responsible” to the needs of its partners, who could become frustrated with the slow-moving process without a steady hand to guide them, she said. 

“Those are two things that not every developer is focused on,” she said. “We’re also flexible and creative in the way we go about our work. We don't have a cookie-cutter formula, which allows us to do different housing types serving different populations in different geographic areas.”

Examples of Xenolith’s work include Casa Celina, a 16-story, 205-unit affordable senior housing development in the Bronx. Kretchmer noted that this will be an all-electric building supported by solar power, with a natural gas generator as backup in case of emergencies. Green buildings appeal to the New York City agencies in charge of awarding funding because the city wants to promote sustainability as well as affordability in new construction, Kretchmer said.

In Brooklyn, The Rise will provide 72 housing units as well as extensive space for support resources such as job training and case management for its population of formerly incarcerated individuals and their families.  

Xenolith is acting as developer on both projects, but it can take on other roles, too, as needs and projects change.

“This is where our flexibility comes in, because we can be the developer, working with the architects and engineers and borrowing or using our own money,” Kretchmer said. “Or, we can work as a consultant for another developer, helping them get all their permits and financing and providing guidance all the way through to construction. The flexibility is very much appreciated by our partners, whether they're developers, general contractors or architects.” 

Another role the firm embraces is as a partner to market-rate developers who are interested in pivoting to 100% affordable housing or adding an affordable component to their developments, but don’t have Xenolith’s depth of experience. 

Belkas-Mitchell said some of these amenity-rich sites can command market-rate rentals, but their communities favor providing more affordable housing and are willing to commit to tax abatements and capital subsidies to facilitate mixed-income development, she added.

"There is a little bit more flexibility in mixed-use projects outside the city," Belkas-Mitchell said. "Some equity providers are specifically focused on mixed-income housing, which can be a great way to address the housing needs of the 'missing middle.'"

Belkas-Mitchell said that a firm like hers is uniquely qualified to guide clients through the nuances of building affordable housing in the New York region. Xenolith can also introduce them to other partners, such as architects and attorneys, who also understand affordable housing.

“Picking your team is one of the most important parts of the process,” she said. “If you're stuck with someone who doesn't know what they're doing, they're probably going to bill you a lot of money or they might drop the ball somewhere, and you really can't afford that. It's expensive enough to get through the process.”

In addition to new construction, Kretchmer said Xenolith also is interested in projects that improve and preserve existing affordable housing. But whether the construction is old or new, affordable or mixed-income, success boils down to understanding the process as well as maintaining connections with others who are equally savvy.

“Our pride and joy is our relationships,” she said. “We think those relationships get a lot of great housing developed, and we work really hard to be good partners.”

This article was produced in collaboration between Xenolith Partners and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.