Mayor Bill de Blasio announced a partnership Wednesday with some of the city's major financial institutions to create a $350 million fund to construct and preserve affordable housing.
The fund will be administered by the Community Preservation Corp., a nonprofit construction financier, to fund the creation, rehabilitation and preservation of approximately 7,500 units of affordable housing. An initial "spark plug" investment from the city's Housing Development Corp. of $20 million will start off the fund, along with $40 million from the city's pension funds, Mr. de Blasio said Wednesday at an event in the Bronx.
On the private side, Citigroup's $75 million contribution is the fund's largest, followed by $50 million from Wells Fargo, and lesser amounts from Deutsche Bank ($35 million), Morgan Stanley ($50 million) and Bank of America Corp ($25 million). Some smaller banks will also contribute to the fund, including Valley National, RBS Citizens, M&T, Orange County Trust and others.
"This is many, many players coming together in common cause here," Mr. de Blasio said.
Citigroup CEO Michael Corbat said affordable housing is "critical to the future of all our cities across the country."
Mr. de Blasio first announced his 10-year, 200,000-unit affordable-housing plan in May, which he said would require at least $41 billion in public and private investment. Department of Housing Preservation and Development Commissioner Vicki Been said that the city had closed on 8,700 affordable units toward that goal as of June. (Some of those units had also been counted by the Bloomberg administration towards its goal of 165,000 units created or preserved.)
The new $350 million fund represents 0.8% of the $41 billion price tag.
Mr. de Blasio also defended his administration's relationship with the business community, after having ruffled corporate feathers during the mayoral campaign by calling for a tax hike on high earners to fund universal prekindergarten. (Albany did not grant him the tax increase, but did provide pre-K funding.)
"I think we've had a very productive relationship with the financial community," he said. "We have a lot of work to do together."
The use of city pension funds toward the mayor's affordable-housing plan could invite criticism for mixing a social mission with the funds' primary goal of delivering high returns. The less the funds earn, the more city taxpayers must contribute to the funds. However, both the city and state pension funds have for years invested modest amounts of money in local endeavors without any uproar.
Affordable-housing projects can deliver steady if unspectacular returns for investors, and can be more attractive to them in a low-interest-rate environment, which has prevailed for a while.
"This continues our strategy in investing in varied assets," said Comptroller Scott Stringer, when asked what sort of return the city's pension fund could expect from this investment. "This particular rate of return we project will yield 2.75%, but that's part of an asset allocation that, as you can see, clearly is working."
Mr. Stringer noted that the pension fund has $2.4 billion in housing development. "It's not going to be the highest yield," he admitted. "And it's not supposed to, but it's supposed to be part of our overall strategy."