June 13, 2024

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A plan to finance homes for city workers

3 min read

It’s official: New York City has its tightest housing market in 50 years, and the affordability crisis facing middle-class New Yorkers has reached historic proportions. A quarter of the city’s tenants spend more than half of their income on rent. And with significant increases in both interest rates and home prices, a family now needs to earn more than $250,000 annually to afford to buy a typical home.

The reality is that it will take years — and enormous political will — to build the amount of housing our city needs. But this squeeze has some very real, very immediate consequences. Chief among them is a hiring crisis in the public sector. The job vacancy rate for city agencies is more than twice what it was pre-COVID.

As New York becomes an increasingly unaffordable place for the middle class, it’s no surprise that current and future New York City teachers, social workers, police officers and other civil servants are harder and harder to find, or that those who can choose to live outside city limits. 

It’s a double-whammy: an erosion of middle-class neighborhoods and the public sector workforce. It threatens our future as a socioeconomically diverse city, and also as a city that provides excellent public services to its residents. This, in turn, will only make it harder to hold on to our middle class core. 

We propose an innovative way to tackle both problems at the same time. 

The City of New York should create a new program, Homes for City Workers, to help municipal employees purchase homes in the five boroughs. Borrowing an approach used by some academic institutions to help faculty and staff live near campus, city pension dollars would be used to pay half of the purchase price of a home bought by a city employee.

The city pension funds, in turn, would have a 50% ownership stake in the property, and receive half of the sales price when the home is sold. (The program would cover the purchase of apartments under a maximum price, and require homebuyers to have spent a certain number of years in city service).

The effect would be dramatic for city workers — cutting housing costs in half and doubling their purchasing power. For a home at the city’s median sales price of $785,000, monthly mortgage payments would drop roughly from $4,400 to $2,200 per month. It would be a strong incentive for people to enter the municipal workforce, and for those public servants to live and raise their families in New York City neighborhoods.

At the same time, city pension funds would be making good, long-term investments in New York City real estate, partnering with solidly employed homeowners whose financial incentives would be aligned. These investments would be consistent with the pension funds’ long and well-established history of making investments in housing for low-, moderate- and middle-income New Yorkers.

Since the city’s Economically Targeted Investment program began in the 1980s, $4.5 billion has been invested in housing, generating risk-adjusted, market-rate returns for New York City’s retirees. Homes for City Workers would build on this success.

This would be a win-win-win-win. With no impact on the city budget, Homes for City Workers would provide thousands of working- and middle-class New Yorkers with affordable homeownership opportunities across the five boroughs. It would help preserve the socioeconomic diversity of our neighborhoods — and the cultural and economic vibrancy that comes with it.

It would help attract and retain talent to the city workforce, and enable those workers to live closer to their jobs. And it would generate a healthy return on investment for city pensioners.

New York has a long history of innovation when it comes to housing finance. A coalition of labor unions founded the United Housing Foundation, which gave rise to places like Co-Op City and Penn South to house union workers. The Mitchell-Lama program, enacted in 1955, created more than 100,000 units of housing for the middle-class.

When the abandonment crisis hit, New York City pioneered a new model of investing in communities to renovate vacant and dilapidated buildings. Today, however, it is often housing built three or four generations ago that enables our public employees to live and work in New York City.

Homes for City Workers would be a lifeline for a new generation of New Yorkers — and for the public sector itself.

Lander is New York City comptroller. Lasher served as director of policy for Gov. Hochul and is a candidate for state Assembly.

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