Wednesday, June 20, 2007

The Atlantic Yards gift slipped into the 421-a reform

[Updated 10:40 pm] As details emerge today about the contours of the state’s planned reform of the 421-a tax exemption, a bonus for developer Forest City Ratner's Atlantic Yards project appears hidden in the verbiage.

That bonus appears unclear according to the current version of the legislation (A 4408). But a bigger gift is coming. Instead of requiring the condo buildings--perhaps four of the 16 towers--at Atlantic Yards to include 20 percent affordable units, as the tax break reform would require, the developer would be allowed to spread the affordability over the project as a whole—as long as the project met some requirements that would apply only to... Atlantic Yards.

Brad Lander of the Pratt Center for Community Development, who’s reviewed the legislation and has followed the discussion swirling around the bill, thinks that's wrong. "There shouldn't be special side deals for particular developers. Buildings that include 20 percent affordable housing should get a tax break and all market-rate buildings should pay their taxes,” said Lander, who was part of a mayoral task force that recommended reforms last year.

Moreover, the bill would allow this project to violate the spirit of affordable housing. Affordable housing is defined as 30 percent of household income. However, the “Atlantic Yards carve-out” would allow lower-income residents of affordable apartments to be charged a higher percentage of their rent—perhaps 35 percent rather than 30 percent.

The New York Observer reported:
Steven Spinola, the president of the Real Estate Board of New York, the leading industry trade group, told The Observer that he lobbied legislators for the special exception.

“It is similar treatment to what would happen in Greenpoint-Williamsburg,” said Mr. Spinola, referring to the the 2005 rezoning of those Brooklyn neighborhoods. “I had no problem advocating for it.”


Not quite, given that the rezoning occurred through a public process rather than a secret one, that the affordability burden has apparently increased, and that a bill passed in 2007 should build on recent experience.

How it would work

Under the current law, developers of market-rate housing in certain Geographic Exclusion Areas (GEA) must provide 20 percent low-income housing in exchange for the tax break. A bill passed by the City Council in December extended that GEA to Brownstone Brooklyn and elsewhere, but the state still had to pass its reform.

That state bill would extend the GEA even further, but in doing so, offers a bonus to Atlantic Yards. No, it doesn’t name the project specifically, but cites “a multi-phase project that includes at least 2,500 dwelling units and (i) being implemented pursuant to a General Project Plan adopted by the New York State Urban Development Corporation and approved by Public Authorities Control Board.”

There’s only one such project that would qualify.

20 percent lower-income units?

According to the bill, projects would be “eligible for benefits… if in the aggregate twenty percent of the units in such development are affordable to… families whose incomes at the time of initial occupancy do not exceed 60 percent of the area median incomes [AMI]...”

That AMI will become 70 percent today, apparently.

But how could Atlantic Yards have 20 percent of its units affordable to families earning 70 percent of AMI? As currently configured, Atlantic Yards would have 4500 rentals, with 20 percent of them low-income, up to 50 percent of AMI, and perhaps another 5 percent up to 70 percent of AMI. But the 1730 market-rate condos, and 200 affordable for-sale units, would skew the balance upward.

Pay more rent

So the project, and the bill, may undergo some adjustment, but one way of meeting the new goal would be to rent apartments to tenants whose incomes are 70 percent of AMI but to charge them more. The bill states that “the rent for such units does not exceed thirty percent of eighty percent of the area median incomes adjusted for family size.”

Translation. If you earn 70 percent of AMI, you might get an apartment, but you'd have to pay rent as if you earned 80 percent of AMI.

Some of those numbers may change before the bill passes Thursday. The process has not exactly been transparent. After all, as Prospect Heights Assemblyman Hakeem Jeffries told the Observer, he didn't even know of the Atlantic Yards carve-out.

Benefits long expected

A look at the KPMG memo prepared last December for Empire State Development Corporation suggests that the developer was expecting to benefit from 421-a.

The memo states (p. 22):
The development's residential Property is eligible to receive a tax abatement on the new value created by the construction. The abatement starts at 100.0 percent and is phased down to zero. Atlantic Yards is committing 20.0 percent of its apartment housing to low income families and there should receive a twenty-five year abatement of taxes at 100.0 percent of assessed improvements for years one through twenty-one; the abatement would then decrease 25.0 percent in each of the years twenty-two through twenty-five. In addition, the condo unit buyers would receive a pass through savings for the full amount of the increased assessment for years one through eleven, decreasing by 25.0 percent in each of the years twelve through fifteen.

It's the condos that were jeopardized by the reform of the law--and, apparently, now saved.

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