The New York City Housing Development Corp. could issue bonds to finance the conversion of market-rate housing into affordable housing, New York City officials announced yesterday.

The Housing Asset Renewal Program would provide subsidies to developers of unsold condominiums, unrented apartments, and stalled construction who agreed to provide housing for moderate- and middle-income families. The pilot program would convert up to 400 units of housing and use $20 million of subsidies as well as bond financing.

"Private developments that sit vacant or unfinished could have a destabilizing effect on our neighborhoods, but we're not about to let that happen," Mayor Michael Bloomberg said in a press release.

The New York City Department of Housing Preservation and Development plans to issue a notice of funding availability by the end of the month. The agency will select projects through a competitive process based on several criteria, including their efficient use of public assistance to provide maximum affordability.

"We're talking about buildings that have been built and are mostly unoccupied - they were condos that have not been able to get people to buy at the price they need," said HDC executive vice president for capital markets and general counsel Richard Froehlich. "Potentially you can convert what was going to be a condo into a rental and to the extent that it has affordability, we can either use tax-exempt or taxable proceeds to provide permanent financing."

The HDC could begin selling bonds for projects by the fall, Froehlich said. The agency has a menu of financing options for affordable housing that includes middle-income and all low-income projects as well as using recycled bond volume cap for projects that have 80% market rate and 20% low-income units. HDC financing would be used for rental buildings but the city would also look at using other programs to create affordable housing for ownership.

New York City had long dodged the national real estate slump but the once-white-hot market has seen a slowdown. According to a survey of Manhattan real estate by Prudential Douglas Elliman, sales in the second quarter fell to 1,532 co-ops or condos, a 50.3% drop compared to the 3,081 sold in the second quarter of 2008, while the average price dropped to $1.3 million from $1.8 million.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.