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Permits & development · Owners & management · Deals & development · 11/06/2026, 11:26 AM

$185M Loan Funds Rehab of 1,148-Unit Nostrand Houses in Sheepshead Bay

Merchants Capital arranged a $185 million loan, including $50 million from the AFL-CIO Housing Investment Trust, to rehab NYCHA's Nostrand Houses. The 16 buildings will get new kitchens, baths, electric heating and cooling, elevators, and lead and mold remediation in six phases over 60 months. NYCHA will keep managing the site, and current residents will return to renovated apartments.

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Photo: Yield PRO

What happened

Merchants Capital announced $185 million in financing for the acquisition and rehabilitation of Nostrand Houses, a 1,148-unit NYCHA development in Sheepshead Bay, Brooklyn. Yield PRO published the announcement on 11/06/2026. The loan is taxable and comes from Merchants Bank. The AFL-CIO Housing Investment Trust (HIT) was co-lender and provided $50 million of the total.

This is the first financial closing for the New York City Public Housing Preservation Trust, the developer of Nostrand Houses. It is also the first development in the Trust's Modernization & Preservation (Trust Mod) Program. Working with NYCHA, the program converts traditional Section 9 public housing into the federal Section 8 program so the buildings can be repaired and modernized. Affordability will be kept through a conversion under HUD's Rental Assistance Demonstration (RAD) program and the HUD Section 18 process. The project is the first of more than 25,000 units expected to get capital improvements through Trust Mod. HIT also named the New York City Housing Development Corporation as a partner.

Nostrand Houses has 16 residential buildings, built between 1949 and 1951, on two adjoining sites, with more than 2,000 residents. Work will happen in six phases. Planned work includes new kitchens and bathrooms, electrified heating and cooling, new elevators, better accessibility, lead and mold remediation, and upgraded security. Construction started in 10/2026 and is expected to take 60 months.

Current residents will return to their renovated apartments when work is done. Vacant one-, two- and three-bedroom apartments will go to eligible households through the Project-Based Section 8 program. NYCHA will keep managing the development with more than 40 on-site staff. The Kings Bay Y, chosen with residents, will provide social services.

Key facts

Property
Nostrand Houses, Sheepshead Bay, Brooklyn
Units
1,148 apartments in 16 buildings built 1949 to 1951
Residents
More than 2,000
Financing
$185 million taxable loan from Merchants Bank, structured by Merchants Capital; $50 million from AFL-CIO HIT as co-lender
Developer
New York City Public Housing Preservation Trust (first financial closing)
Program
Trust Mod: Section 9 to Section 8 conversion via HUD RAD and Section 18
Manager
NYCHA, with more than 40 on-site staff
Timeline
Construction started 10/2026; expected to take 60 months in six phases

What it means

Tenants and voucher holders

Current Nostrand Houses residents are set to return to their renovated apartments after the work. Any vacant one-, two- and three-bedroom units will be offered to eligible households through Project-Based Section 8, which is tied to the apartment rather than a portable voucher.

Caseworkers

The Kings Bay Y will offer case management, resource navigation, housing stability support and crisis intervention at the development. It will also run programs for health, youth, families, seniors and workforce development, which may help clients living there.

Landlords

This is a public housing deal that NYCHA will keep managing, so it does not directly change private rentals. It is the first of more than 25,000 NYCHA units expected to go through the same Trust Mod conversion.

The highlights

  1. It is the first closing for the NYC Public Housing Preservation Trust.
  2. Units convert from Section 9 to Section 8 via RAD and the HUD Section 18 process.
  3. Vacant units will go to eligible households through Project-Based Section 8.

Why it matters

Over 25,000 NYCHA units are slated for Trust Mod repairs, and vacancies here will be filled through Project-Based Section 8.

What to do: Watch for Project-Based Section 8 vacancies at Nostrand Houses as rehab phases finish.

Not known yet

  • Whether residents must move out temporarily during the six phases, and where they would go
  • How and when eligible households can apply for vacant Project-Based Section 8 units
  • Whether rents for current residents will change after conversion
  • Which buildings are in which phase and the schedule for each

Background

Traditional NYCHA public housing is funded under federal Section 9, which relies on annual federal operating and capital money that has long fallen short of repair needs. Converting units to Section 8 rental assistance, through tools like HUD's RAD program, gives a property a steadier subsidy stream that can support private loans for major repairs. In project-based Section 8, the subsidy stays with the apartment, and tenants generally pay a share of their income toward rent.

Summary written by Bulwark from Yield PRO’s reporting. The original story is at yieldpro.com. This is general information, not legal advice.

Read the full story at Yield PROMore NYC housing news

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