Penn South Locks in Low Interest on $190 Million HUD Loan

Penn South, the sprawling 2,820-unit limited-equity co-op in Chelsea, has locked in a favorable 3.23 percent interest rate on its newly approved 35-year U.S. Department of Housing and Urban Development (HUD) loan, the co-op’s manager, Brendan Keany, tells Habitat.

The loan itself was approved in the waning hours of the Obama administration, amid high anxiety that its fate would have been uncertain under the Trump administration and its HUD secretary Ben Carson, an avowed foe of subsidized housing. “We were on pins and needles,” Keany says.

The 3.23 interest rate on the self-amortizing loan – coupled with the City Council’s extension of Penn South’s “shelter rent” tax abatement – means that the co-op will remain affordable at least through the year 2052. And by shedding a Fannie Mae balloon mortgage with a 4.5 percent interest rate, the co-op will save $3.2 million a year on interest payments. Those savings will go into the reserve fund and pay for looming capital projects, including replacement of the 15 buildings’ roofs and the network of underground pipes, sparing the board from having to raise monthly maintenance or levy assessments.

During the meeting when the City Council unanimously approved extension of Penn South’s “shelter rent” tax abatement, council member Corey Johnson said, “As we face the very real prospect that our nation’s affordable housing stock will be jeopardized under the Trump administration, we must not waver. We must not allow our city to become an enclave for only the wealthiest, where the price of admission is a high six-figure salary.”

Speaking of the new HUD secretary, Penn South’s Keany says, “His attitude is that there’s no place for subsidized housing. That’s another saga yet to come.” Of the HUD loan, he adds, “The bottom line is that this is a 100 percent victory for affordable housing in New York City.”