Merchants Capital Finances Nostrand Houses Rehab
A $185 million loan will fund the rehabilitation of a 1,148-unit Brooklyn public housing development.
Updated on Nov. 5, 2026 in Construction
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Merchants Capital structured a $185 million taxable loan from Merchants Bank for the rehabilitation of Nostrand Houses in Brooklyn, with the AFL-CIO Housing Investment Trust providing $50 million as co-lender. The deal is the first financial closing for the New York City Public Housing Preservation Trust.
Why it matters
The financing advances a preservation model that aims to keep affordability in place for a large public housing property while upgrading its physical condition. It also marks the first development to participate in the Trust Mod Program, a pilot for future New York City public housing rehabilitation.
The $185 million loan includes $50 million from the AFL-CIO Housing Investment Trust as co-lender, financing a 1,148-unit property built between 1949 and 1951. Expected completion is 60 months after the October 2026 construction start, and the total project cost beyond the loan amount was not reported.
The players
Merchants Capital
Merchants Capital is a real estate finance firm that structured the $185 million taxable loan for the Nostrand Houses project.
AFL-CIO Housing Investment Trust
The AFL-CIO Housing Investment Trust is a labor-affiliated investment fund that provided $50 million as co-lender for the Nostrand Houses loan.
New York City Housing Authority (NYCHA)
NYCHA is the public housing agency that will continue to manage the Nostrand Houses development with more than 40 on-site staff.
The details
Nostrand Houses, a 16-building complex in the Sheepshead Bay neighborhood of Brooklyn, is being converted from traditional Section 9 public housing into the federal Section 8 program through the Trust Mod Program. Affordability will be preserved via the Rental Assistance Demonstration program and HUD Section 18 process, with rehabilitation occurring in six phases for individual apartments and building-wide systems.
Timeline
October 2026: Construction of Nostrand Houses began.
Approximately 60 months after construction start: Expected completion of the rehabilitation.
Industry Context
The project relies on the federal Rental Assistance Demonstration program to convert traditional Section 9 public housing into Section 8 subsidized housing. It extends that approach to a large New York City portfolio through the new Public Housing Preservation Trust.
Residents of Nostrand Houses, which houses more than 2,000 people, should see apartment and building-wide upgrades over the roughly five-year rehabilitation. NYCHA will keep more than 40 staff on site, and the Kings Bay Y will provide social services there.
The takeaway
The Nostrand Houses financing shows how public housing rehabilitation can be funded through private loans and labor-backed investment while keeping units affordable. Watch how the Trust Mod Program performs as it expands toward its target of more than 25,000 units.
What happens next
Construction at Nostrand Houses began in October 2026 and is expected to take about 60 months to complete.
Further reading
For related coverage, explore Construction news in New York City.
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