Homeless Shelters are Big Business in New York City

homeless shelters are big business in new york city

Homeless Shelters are opening everywhere.

There’s even a homeless shelter opening on Billionaires row.

As part of Mayor de Blasio’s strategy to house the City’s homeless, no community is excluded from sharing the burden.

Not even wealthy residents can stop one from opening.

But as news outlets cover local outrage, little is paid to a handful of well connected non-profits providing emergency housing.

the Money in Homeless Shelters

267 Rogers Ave is a brand new, 165 unit residential building that was originally a market rate rental development.

But as new developments along Eastern Parkway opened, getting people to lease their apartments would prove more challenging.

Enter Samaritan Daytop Village, a non profit organization providing services through NYC Human Resource Administration and operates a significant number of homeless shelters.

When NYC’s homeless population swelled over 130,000, the Department of Homeless Services issued requests for proposals for emergency housing.

And on November 15th, 2017, Samaritan Daytop Village was awarded a $57.62 million contract to provide emergency housing at locations that included 267 Rogers Ave.

It allowed them to negotiate a long term agreement with Heights Real Estate Advisors to lease 132 units to operate a homeless shelter there until 2028.

So who benefits?

While homeless families immediately benefit from having a safe, quality facility to live in, it’s only temporary.

Shelter operators fill a critical need by providing emergency housing and services.

But the line between hard cost (i.e., housing) and soft costs (i.e., services) can blur and invite questionable practices that hide waste, fraud and abuse.

And then this happened …

Merchants Capital announced Heights Real Estate Advisors refinanced $10 million in mortgage debt and borrowed an additional $41 million.

With the 10 year agreement in place, the developer monetized future revenue from Samaritan Daytop Village to fund future real estate projects.

Long term agreements where non profit organizations lease newly constructed buildings from developers often mask real market risk.

Especially since new rental developments never open with 80% tenant occupancy after completion.

Which suggests the current homeless crisis is also serving as a taxpayer funded bail out program for speculative real estate development projects and their sponsors.

We’ll continue to watch this space for future developments to explore this topic further


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Click here to read a primer on what’s at stake in next week’s election for Surrogate Court Judge.


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