RCA in the commercial property press:

When Could Empty Condos Become Affordable Homes?

City Limits reports: Don't pack your bags yet -- the fact of empty new buildings doesn't mean the city has any new funding streams yet to put toward their 'adaptive reuse.'

As the new spectator sport of watching for condominium developers to go bankrupt continues – just see websites like Curbed and The Real Deal to track luxury developments' struggles for survival – the city is developing a plan to populate those under-subscribed buildings with New Yorkers in need of affordable housing.

Following an announcement by City Council Speaker Christine Quinn this winter that new, vacant apartments "now represent our best asset in the fight for affordable housing,” officials are working to determine exactly how to “turn these unsold apartments into affordable homes,” as Quinn said in her State of the City speech in February. The outlines of how defunct condos might come into the hands of affordable housing developers are beginning to become clear, though a formal announcement of a program is still probably weeks away, according to officials.

The city’s existing affordable housing programs will only have the resources to address some, but not all, of the failed condo projects. Officials say they would choose which bankrupt buildings to convert to affordable housing based on how many subsidy dollars the deals would need for each affordable home produced, and also on how their intervention would help stabilize neighborhoods where the city has recently spent significant resources to build affordable housing communities—neighborhoods like Bushwick, Brooklyn or parts of Harlem.

“We want to make sure the city is getting bang for their bucks,” says Holly Leicht, deputy commissioner for development for the Department of Housing Preservation and Development (HPD).

How many bankrupt condos?

While condo developers struggle to pay their bills, officials and market analysts struggle to understand how many condominium buildings might eventually be seized by their banks. “The universe of troubled properties is not complete yet,” says Leicht.

There are already 23 high-rise or mid-rise new condominium buildings totaling thousands of units in financial trouble. Some have been forced to stop construction because their financing has dried up, while others have been unable to sell units and are falling behind on their construction loan payments. Another six properties totaling more than 2,300 units that converted from rental apartments to condominiums in Manhattan are also on the brink of default, according to research firm Real Capital Analytics.

In addition, dozens of smaller condo projects are now finishing up in gentrifying neighborhoods, just as condo sales slow and prices fall. Real estate website StreetEasy.com counts 700 listings for one-bedroom apartments in Brooklyn at prices ranging from an average of $524,500 in downtown Brooklyn to an average of $337,000 in Bushwick. Condominium properties like these, if sold in foreclosures auctions, could be sold for less than their appraised value, according to Jessica Ruderman, senior analyst for Real Capital.

“You could get a third off,” Ruderman says.