(January 2, 2014) — Bill de Blasio, the newly inaugurated mayor of New York City, is moving forward with his plan to allocate $1 billion of pension assets to affordable housing—a massive increase to the funds’ prior investments to this space.
His plan calls for creating 11,000 units over eight years with the additional $1 billion input from the city’s $144 billion pension funds. It also includes contraction of 50,000 new units through “inclusionary zoning”—a requirement that developers build affordable homes for low- and middle-income families.
De Blasio campaigned heavily on closing the gap between the wealthy and the poor—ending the so-called “Tale of Two Cities”—and won the November election by a landslide. He is New York City’s first Democratic mayor in 20 years.
“We see what binds all New Yorkers together: an understanding that big dreams are not a luxury reserved for the privileged few, but the animating force behind every community, in every borough,” de Blasio said in his inaugural speech.
The new mayor reiterated his agenda for affordable housing “so that New Yorkers see our city not as the exclusive domain of the One Percent, but a place where everyday people can afford to live, work, and raise a family.”
Under former Mayor Michael Bloomberg’s “New Housing Marketplace Plan,” New York was able to finance almost 160,000 affordable homes since 2003, according to the city’s Department of Housing Preservation and Development.
However, the idea to invest pension capital into housing projects isn’t new.
New York City’s five pension funds have been investing in affordable housing under the Economically Targeted Investment (ETI) program since 1981, according to the Office of the New York City Comptroller, allocating 2% of assets.
The office also explained that “the ETI program’s historical investments have been targeted towards affordable or workforce housing in low-to moderate-to middle-income neighborhoods and populations in the five boroughs of NYC,” having invested close to $2 billion in the last 30 years.
De Blasio remained confident in the ETI program’s success: “Those investments have earned a solid return, put New Yorkers to work, and helped refurbish thousands of affordable homes across the city.”
According to the Office of the Comptroller, the ETI program’s investment portfolio has consistently outperformed its benchmark since its inception. As of June 30, 2012, its one-year return was 7.09% compared to the benchmark of 6.41%. The five-year return was 7.31%, higher than its 6.47% benchmark return, and the 10-year return was 6.31%, also better than the benchmark return of 5.48%.
New York City’s pensions currently partake in three different ETI investments: the Access Capital Strategies Separate Account, the AFL-CIO Housing Investment Trust, and the Public Private Apartment Rehabilitation Program.
The de Blasio campaign revealed that it calculated potential annual units preserved through pension fund investments by “dividing the total annual funding the city expects to secure from pension funds by the average cost per affordable unit created by ETIs directed to Community Preservation Corporation Revolving Credit Agreement in 2003-2011.”
To implement the allocation, the mayor needs the support of five pension plans’ boards of trustees as well as Scott Stringer, the newly elected comptroller.
A trustee of the New York City Employees’ Retirement System and former Manhattan Borough President, Stringer had pushed for comprehensive pension risk assessments and an overhaul of the New York City Housing Authority.
“I believe that pursuing a progressive agenda and being fiscally responsible is not mutually exclusive. We can and we must do both,” Stringer said in his inaugural speech yesterday.
He also emphasized city’s need for cheaper homes: “We can shelter every family in safe, affordable homes, not squalid shelters where 22,000 of our children will go to sleep tonight. As the City’s chief fiscal officer, it is my duty—my promise—that I will do everything in my power to maintain our fiscal health.”
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