The Case for Amenities in Workforce Housing

Today’s Wall Street Journal (4/15/15) has an interesting article about “luxury workforce housing” being built in Mount Vernon, NY:

…when completed early next year, 203 Gramatan Avenue, in Mount Vernon, N.Y., will include a host of amenities often found in luxury buildings, even though it will house families and individuals who qualify for affordable housing, which in this case is defined as households with incomes no more than 60% of the area’s median income.

Apartments in the $60 million, 159-unit development will have large floor plans, wraparound picture windows, oak floors, stone kitchen countertops and washers and dryers—features often missing from affordable housing. Shared amenities will include a gym, cinema room, children’s playroom and rooftop terrace…

There is a business reason for adding luxury amenities to workforce housing, Mr. Fine said. He said his firm owns an affordable apartment building in upper Westchester that has never had a vacancy in the 2 ½ years that it has been open because demand runs so high.

Still, the city had to provide incentives to Atlantic and Kenwood to consider the “luxury affordable” model. The inducements included a $3 million subsidized loan to pay for upgraded streetscapes and public improvements. The development also was awarded funds from state and federal low-income tax credits.

This Gym is Not for You

A property manager in New York City is making a new gym facility available only to those residents who pay market-rate rent:

A tale of two cities is dividing Stonehenge Village, an Upper West Side apartment complex where management has prohibited the rent-stabilized tenants from using a newly minted gym.

Stonehenge Partners, the company that bought the 417-unit, three building complex on W. 97th St. near Amsterdam Ave. in 2006, told residents at a meeting earlier this month that the 1,000-square-foot gym was only open to its market-rate tenants…

A 2008 city law prohibited discrimination in housing based on tenants’ income, James’ spokeswoman said. The law was written to protect tenants in the Section 8 voucher program, but the spokeswoman noted it may apply to other instances, as well…

Residents said management even shot down tenants’ requests to pay a registration fee to use the facility.

“(The gym) is aimed specifically at new and prospective tenants who expect certain amenities and incentives that are commonly available to market rate renters,” said company spokeswoman Marcia Horowitz, who added that attracting market-rate renters that pay as much as three times the amount paid by rent-subsidized tenants “and to maintain high occupancy is critical to the overall financial health of the building which is in every tenant’s interest.”

This is the second story out of New York recently about management companies treating their residents differently based on their rent rates. The first was a story about “poor doors“:

City housing officials approved of a deal to allow a developer to create a separate entrance for low- and moderate-income tenants at a new rental development on the city’s west side…

The 33-story project at 40 Riverside Boulevard will include 55 units (out of 274 total) of affordable housing for low-income households.

The folks on the Freakonomics podcast have an interesting discussion about both these stories and you can listen to them by clicking on the link below. One of the most interesting comments was economist Steven Levitt’s thoughts on why the property managers would not allow rent-stabilized residents to even pay a fee to use the gym:

..I believe in markets and prices and the usual way to deal with the provision of goods is through prices. But I think that the developers here probably have an ulterior motive…

The way that these contracts are usually written is that these apartments will remain rent-controlled, below-market apartments for as long as the current tenants live there. So in a typical setting, it would never make sense to say the old guard tenants can’t use the gym, you just find the right price, it might be a very high price, that takes into account the negative externality they may have on the new tenants, but you wanna charge that price. And it would just be a mistake to ban them completely. But, I don’t know, if I’m that developer, I just wanna get these old guard out and so maybe really the market isn’t the best tool. It’s actually making life very unpleasant in a way that prices can’t actually make life unpleasant. So the idea that you actually ban them from the gym serves a real purpose here. It tells them, look, we think you’re second-class citizens, we don’t respect you, and as long as you live here we’re going to treat you horribly. Now that’s not a very nice and a very moral way to do it, but if your objective is to make life awful for these folks and get them out, it’s proving to be a pretty effective way of doing that, I bet.