Why this matters now

Affordable housing in New York runs on public partnership. When the City contributes capital, subsidy or land to a project, it expects the spending that follows to build capacity in the firms that have historically been shut out of large contracts. HPD’s M/WBE Build Up program turns that expectation into a number every developer must plan for.

For developers, the program is less a compliance hurdle than a sourcing question. The goal is fixed by formula. The only open question is which certified partners will carry it, and how early they are brought in.

Who the program covers

Build Up applies to projects where HPD and HDC together contribute $2 million or more. Exempt projects include those below that threshold and projects with no planned construction. Developers who believe a project is exempt submit a written request through their HPD project manager.

How the goal is calculated

The minimum goal is a dollar figure, set by a three-part formula.

Exhibit 1. The goal is 25 percent of City-supported costs, not of the whole project

On a deal with $10 million in applicable costs and a 40 percent City contribution, the minimum goal is $1 million, not $2.5 million.

Applicable costs are the costs a developer, borrower or general contractor can hire for, or influence the hiring for. They generally include demolition, construction costs before contingency, and the borrower’s soft costs such as architecture, engineering, legal, survey and title insurance. They generally exclude land, contingencies, financing and agency fees, construction interest, taxes, reserves and the developer’s fee.

The HPD/HDC contribution rate is the City’s share of the deal: direct City investment, HDC subsidy and the net value of any City land conveyed or leased to the project.

The minimum goal rate is 25 percent. Developers may commit to a higher goal.

When each step happens

1. Preliminary budget. The developer estimates the goal and identifies applicable costs on HPD’s Goal Calculation Form.

2. Two months before loan closing. The initialed Goal Calculation Form goes to the HPD project manager, who forwards it to M/WBE staff.

3. After budget approval. The developer submits a signed Implementation Plan naming how the goal will be met.

4. Construction loan closing. HPD confirms the final goal, and the developer signs the M/WBE rider.

5. Construction. Compliance is reviewed from the kick-off meeting through completion.

What happens if a project falls short

A developer that misses the goal must show good faith efforts. HPD requires timely written requests for help to the NYC Department of Small Business Services and an account of how its recommendations were acted on. A developer that misses the goal without good faith efforts may face liquidated damages, and the shortfall can affect the developer’s future work with HPD and HDC.

The goal is fixed by formula. The only open question is which certified partners will carry it.

Three moves that make the goal easy to meet

1. Count professional services from day one. Owner’s representation, construction management and engineering contracts are signed early and run the length of the project, so certified firms in those roles build steady progress toward the goal.

2. Write the Implementation Plan around real scopes. Name the trades and services that will go to certified firms, with values, rather than percentages alone.

3. Choose partners whose certifications HPD recognizes. HPD points developers to certification directories kept by NYC Small Business Services, NYS Empire State Development and the Port Authority of New York and New Jersey, among others.

Sources

• NYC HPD: M/WBE Build Up Program

• NYC HPD: M/WBE Build Up program details

• NYC HPD: Calculating the minimum goal