How nonprofit developers financed Harlem River Houses’ major rehabilitation

Harlem River Houses’ histor­ical land­mark desig­na­tion as a shining example of New Deal progres­sivism is gener­ally a point of pride for its resi­dents, manage­ment, and devel­opers. But when it came to plan­ning — and paying for — a clean energy upgrade, that land­mark status also posed a challenge. 

“I would say the real chal­lenging part was balancing the scope and different scope prior­i­ties with the avail­able funding,” said Eliot Hetterley, a senior project manager at Settlement Housing Fund, the nonprofit devel­oper that co-led reha­bil­i­ta­tion on the HRH complex. 

In order to retrofit the prop­erty in 2022, the owners figured out a way to turn the unique chal­lenges of the Harlem River Houses into unique financing advantages. 

They found a way to make financing the HRH reno­va­tion more afford­able through the Permanent Affordability Coming Together (PACT) program. The city first created the initia­tive in 2016 as a way to bring private and non-profit dollars into public housing explic­itly for reno­va­tions. Under the program, resi­dences are converted from Section 9 housing, which is totally owned and oper­ated by NYCHA, to project-based Section 8 housing, which opens up oppor­tu­ni­ties for private devel­op­ment and funding, while also protecting tenants’ rights to remain in rent-assisted housing. The program has not been without its contro­ver­sies, but has still taken off. Today, it covers roughly a quarter of NYCHA’s port­folio, with roughly 30 PACT-paid projects underway across the city. 

At HRH, a team of devel­op­ment part­ners were selected through the PACT program to lead the public housing property’s reno­va­tions, including modern­izing the outdated steam heating systems, updating the property’s windows to be better insu­lated, and substi­tuting LED lighting across multiple build­ings. The HRH complex’s phys­ical upgrades took several years to complete and cost $275 million in total. 

Doing these retrofit projects under the PACT program allowed devel­opers to use a mix of public and private funding to complete the public housing site’s upgrades. ​“We pulled together a lot of different sources with the help of a lot of very crit­ical part­ners, espe­cially NYCHA and HDC [the city’s Housing Development Corporation],” said Hetterly. Both NYCHA and HDC provided subsidy loans for the project’s completion. 

Additionally, one of the most signif­i­cant financing sources for the project was a historic tax credit equity that devel­op­ment part­ners secured from JP Morgan Chase as a private bank investor. The older 1930s portion of the HRH complex, made up of a seven-building enclave that now has the land­mark site desig­na­tion, gave it access to this historic tax credit, which covered roughly $63 million — or about 23 percent of the project’s total cost.

New York’s historic reha­bil­i­ta­tion tax credit program has been lever­aged by devel­opers and land­lords to revi­talize hundreds of prop­er­ties across the state, including public housing sites. Since 2022, an esti­mated 106 afford­able housing projects have used New York’s historic tax credit program to create 1,757 new units and reha­bil­i­tate 2,412 existing units. Although a rigorous review process by federal and state author­i­ties is involved as part of the process to secure the historic tax credit, many NYCHA-owned housing prop­er­ties reha­bil­i­tated through the PACT program have been able to success­fully secure the preser­va­tion-based tax credits, according to Hetterley. 

Yet securing financing was only half of the battle. Once the diver­si­fied pool of resources was secured, the next chal­lenge was to stretch those funds to cover the reha­bil­i­ta­tion project’s ambi­tious goals.

Reporting contributed by John Surico.