NYC pension to invest US$60 million to preserve affordable housing

NEW York City’s US$86 billion pension fund for civil employees is investing in a non-profit-led partnership that took on property loans tied to rent-controlled and rent-stabilised apartment buildings from the failed Signature Bank.

New York City Employees’ Retirement System, or NYCERS, will invest as much as US$60 million in a partnership, led by the Community Preservation Corp (CPC), that will preserve nearly 35,000 rent-stabilised units affected by the Signature Bank’s sudden collapse last March, city comptroller Brad Lander said on Tuesday (May 21). The fund will own a 25 per cent stake in the partnership, which also includes Related Fund Management and Neighbourhood Restore HDFC.

Signature Bank was one of a handful of regional banks that collapsed in 2023. Its failure sparked anxiety among tenants and elected officials in New York City about how it would impact the bank’s loan portfolio of rent-stabilised buildings. 

New York bank regulators put Signature Bank into receivership last March after they lost faith in management and depositors fled. The Federal Deposit Insurance (FDIC) set up ventures to offload US$33 billion of commercial-property loans held by Signature. In December, the FDIC sold a 5 per cent equity interest in two ventures backing the rent-stabilised and rent-controlled loans to the CPC-led partnership. The US$5.8 billion portfolio contains about 35,000 units, 80 per cent of which are rent regulated and represent about 3 per cent of the city’s rent-regulated housing stock. CPC will service the loans held by the ventures.

The pension fund’s investment is a boost to a programme overseen by Lander’s office that aims to generate risk-adjusted market rate returns through investments in affordable housing and economic development. The city’s five separate pension funds for civil employees, police officers, teachers, firefighters and non-teaching school employees have fallen short of a goal of investing 2 per cent of assets in the so-called Economically Targeted Investment (ETI) Programme.

Less than 1 per cent of the pensions’ US$272 billion of assets are currently invested in financing affordable and workforce housing.  

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Lander’s office has previously said that the pensions’ share of ETI investments hasn’t grown because most are longer-duration, fixed-income assets which lost value when mortgage rates started rising in 2022. Over four-decades, the city’s civil employees pension has invested almost US$700 million in rental apartments. All five pensions have invested US$4.5 billion in the ETI programme. 

NYCERS’s investment comes amid the city’s worst housing crunch in more than 50 years. 

A city survey in February found the vacancy rate for rentals dropped to 1.4 per cent, the lowest since 1968, down from 4.5 per cent in 2021. Apartments viable for rent to lower-income New Yorkers were even more scarce. The portion of units available for rent for less than US$1,100 was a mere 0.4 per cent. BLOOMBERG