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Affordable-Housing Efforts in NYC Could Spread Nationwide

"He figured out how to align those forces in a way that created stability and opportunities for low-income communities," said Gary Hattem, president of the Deutsche Bank Americas Foundation, the bank's philanthropic arm, and managing director of the Community Development Finance Group, the bank's lending and investing section. "He entered New York at the height of the real estate frenzy here with a lot of competing interests, and I think he navigated that exceptionally well during a difficult time."

New York's acquisition fund won an innovation award from Harvard and has been replicated in Los Angeles, as similar programs appeared in Atlanta and Louisiana, as part of the effort to rebuild the Gulf Coast after Hurricane Katrina.

Still, Donovan was challenged to keep up the city's levels of affordable housing. While a fellow at the Furman Center for Real Estate and Urban Policy at New York University, he had researched the problem of "expiring uses," which are subsidies for affordable housing that go away with time, leaving a vacuum of low-cost housing.

Though he succeeded in saving thousands of state- and federally subsidized apartments, Donovan could not stanch the hemorrhage of low-cost housing. The state Mitchell-Lama subsidy program went from 53,016 apartments in 2004 to 36,961 in 2008, according to the Community Service Society. Federal subsidy programs, including Section 8, covered 48,036 apartments in 2004 and 46,297 by 2008.

At the same time, rent controls had been loosened in the 1990s to bring vacant apartments out of regulation and into the market. As a result, from 2002 to 2008, the number of New York City apartments renting for less than $1,000 per month fell by an estimated 194,000, shrinking from 64 percent of the city's housing to 53 percent, according to Lander, the community development advocate.

The city was going through its largest and most aggressive plan in perhaps 75 years to rezone underutilized land for housing, said Rafael Cestero, who served as Donovan's deputy until 2007 and who will succeed him as housing commissioner. "There was enormous push to ensure that the rezoning didn't all become luxury high-rise condos," Cestero said.

Donovan revived an old idea, inclusionary zoning, which grants developers the maximum height for their market-rate residences if they agree to build low-cost housing, too.

"The concept was highly controversial when Shaun came in, but over a year Shaun led the team to understand the economy, and build the incentives, and explain to the City Council that it had to approve the rezoning," Doctoroff said. "He built the policy financially and politically."

In Donovan's view, the program, which has created 1,833 units of affordable housing to date, built neighborhoods with long-term prospects for income diversity. "We've learned very clearly from the history of housing policy from the last half-century that building 100 percent very low-income development is not a sustainable model," said Donovan in a phone interview. "A lot of the preservation issues today have to deal with failures 20 to 30 years ago about what would happen 20 to 30 years later. With those units permanently available, you wouldn't have this kind of cycle happening again."

Donovan also pursued other projects. For years, affordable-housing advocates had been urging the repeal of a tax break for developers to build market-rate housing. Donovan convened a commission to study the issue, and spearheaded changes, requiring developers to include affordable housing to get the break.

In 2007, before bad mortgages had become a crisis in New York, Donovan helped conceive the Center for New York City Neighborhoods, a nonprofit group funded by his agency, the City Council and others, to provide counseling, legal services and education to help homeowners avoid foreclosures.

The biggest criticisms of Donovan are not really of Donovan but of the city's housing policy. Some homeless advocates say the mayor's affordable-housing plan did not include enough units dedicated to very low-income tenants -- leading to record numbers of homeless families.

Others say that the city did not do enough to advocate for changes in laws at the state level to protect rent-stabilized tenants from landlords who sought to evict them and raise rents as the market continued to soar.

For his part, Donovan said he plans to bring his New York approach to Washington and use government to catalyze market forces to create diverse, sustainable neighborhoods.

"HUD has to get beyond a view of housing that is a generation old," Donovan said. "It has to open up its programs to make it more flexible and invite innovation."


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