Saturday, June 30, 2007

358 Grove, Bushwick gentrification battles, and the 421-a map

If you want an example of a development that probably pushed Assemblyman Vito Lopez to add all of Bushwick to the "exclusion zone" where affordable housing would be required in exchange for the 421-a tax break, look no farther than 358 Grove, a much-hyped 14-story condo tower. The building also serves as the jumping off point for a Village Voice investigation this week into landlords unscrupulously pushing gentrification in Bushwick.

In promoting 358 Grove, the developer generally plays down its location. The image at right, for example, comes from the Halstead web listing, which states "358 Grove is located in one of Brooklyn's fastest growing neighborhoods; just one block from the L train and 15 minutes into Union Square Station."

And, when the development hit the blogosphere three months ago, most comments on Curbed were withering, pointing out, for example, that the claimed 15-minute access to Union Square is a fantasy and that Bushwick is hardly close to the hipster haunts of Williamsburg.

It's worth noting, however, that the promoters have tweaked the location. Currently, the web site states, "Situated in the heart of burgeoning Brooklyn, 358 Grove offers ultra-convenient access to the myriad restaurants, shops and entertainment options of both East Williamsburg/Bushwick and Manhattan."
(Emphasis added)

In March, as the above graphic shows, the neighborhood was more boldly defined as Williamsburg.

Still, it's a stretch to say that a building near border of Ridgewood, Queens constitutes is "the heart of burgeoning Brooklyn."

The Voice takes a look

In a Voice article this week headlined The Second Battle of Bushwick: Thirty years after the blackout riots, it's getting hot all over again, Tom Robbins, with reporting by students in a class on urban investigative reporting at Hunter College, sketches the changes.

The article begins:
From the top of the spanking new steel-and-glass 14-story condo tower now open for inspection on Grove Street just off of Myrtle Avenue, you can see most of Bushwick—the landmarks of the neighborhood that was, and the one that's fast being remade, the sites of the bad old memories, even of some of the good.

This is the Brooklyn neighborhood's first major luxury residential construction project, but the marketers of the 59 condominium units for sale here steer clear of the name Bushwick as much as possible. Promotional materials aimed at luring hipsters with the means to buy a one-bedroom for $270,000, or a three-bedroom penthouse for $682,000 refer to "ever-expanding Williamsburg" or "East Williamsburg" as the building's locale. This despite the fact that the tower at 358 Grove Street is in deepest Bushwick; look it up on any map.

...What's at work here is straight out of the brokers' handbook: Link the property in buyers' minds to the worldwide cachet of that now-prosperous and booming neighborhood a couple miles west of here. "The Peter Luger Steakhouse is just a couple of blocks away," the agent says, leaning over an unfinished rooftop cabana. Actually, Peter Luger's is a solid eight subway stops away from here on the M train that rumbles along Myrtle Avenue. But no matter. There are some very solid marketing rationales for this approach.


Why? Bushwick burned in 1977, during the blackout July 13, and residents looted the neighborhood, which the Voice describes as such: Pummeled by the loss of its blue-collar, job-generating breweries and knitting mills in the late '60s and early '70s, the neighborhood underwent a wrenching racial transition as low-income blacks and Hispanics replaced fleeing Italian and German families.

Then came drugs--indeed, those at 358 Grove Street can see down Irving Avenue to Maria Hernandez Park, named in 1989 for a heroic local activist who "confronted the local crack merchants," as the Voice puts it, and was shot to death, with no arrests.

There's an excellent exhibit on Bushwick's recovery at the Brooklyn Historical Society, called Up From Flames, through August 27. Public disinvestment fostered the neighborhood's decline, and public investment to rehabilitate and build affordable housing helped stabilize the neighborhood before gentrification.

Gentrification

As in Williamsburg and the Lower East Side, the Voice notes, "artists are the shock troops of gentrification," willing to adapt industrial spaces and to live alongside poverty, they spawn bars and restaurants and soften up the neighborhood for development. It's happening all along the L train.

And gentrification isn't necessarily bad, as the Voice observes:
A neighborhood that ranks in the top 10 poorest areas of the city, that has the highest rate of asthma hospitalizations and the most serious housing-code violations, can use all the help it can get. New investment means new residents, new stores, new jobs. And, whether city fathers choose to admit it or not, it means much closer municipal attention to crime and the quality of local life. For those who already own a modest piece of the rock, and who held on through the bad years, rising real estate values also yield a once-in-a-lifetime bonanza, a hike in net worth that trickles down to the rest of the family, providing a nice cushion against an otherwise fickle economy.

The problem is that some people lose out, those living in buildings of fewer than six units, which are not subject to rent regulation. And, as the Voice points out, even those in buildings subject to rent regulation are under siege:

But those in rental buildings of six apartments and over—roughly half of Bushwick's housing stock—are supposed to enjoy the full protections of the law. They're entitled to basic services like a paint job every few years, regular visits by an exterminator, and a locked front door, not to mention security against illegal rent hikes and harassment. But try telling that to the avid buyers now answering the clarion call of a new hot real estate market in, of all places, Bushwick. In the past two years, residents and community groups say, new landlords have flocked to this once woebegone territory, their apparent mission to empty and re-rent these now valuable properties—regardless of the rules—as fast as possible.

The rest of the article chronicles the "huge displacement going on," and points out that, in some cases, city officials are trying to enforce housing codes to stop unscrupulous landlords.

Up From Flames

The real estate market is in flux, as Adam Schwartz writes on Up From Flames:
One measure of a successful public policy is the extent to which it encourages private investment. By this measure, the redevelopment of Bushwick has been a roaring success.

But such success can also be a danger to itself. It was a mad dash for profit that started Bushwick's burning 30 years ago, just as that same force is sending both rents and buildings sky high in todays hot real estate market.

True sustainability is about balance and public policy is needed once again to provide that balance. Bushwick currently needs affordability, zoning and historic preservation laws to maintain the community's neighborhood feel.


In the New York Observer this week, Matthew Scheurman's article, headlined Grinding Sausage Late at Night: Albany Reforms 421a Program, explains why certain neighborhoods were added to the exclusion zone:

An old-school politician who understood that housing was a bread-and-butter issue for his working-class Hispanic constituents, Mr. Lopez held an unusual amount of power both as the head of the Assembly’s Housing Committee (meaning that any bill would have to go through him) and as the new head of the Brooklyn Democratic Party (meaning that he had particular pull with fellow legislators from his borough).

The 421a reform was an easy sell for his colleagues, especially those who represent poor and minority areas that the Sunday New York Times real-estate section was calling the next hot neighborhoods. To these legislators, the 421a program appeared to symbolize the government’s complicity in gentrification, for it gave developers an incentive to tear down tenements and replace them with new, higher-priced apartment buildings. The fact that the people who voted for these Assembly members were the ones being driven out made the point all the more clear.

When Mr. Lopez asked for input on the bill a few months ago, he said he received responses from 17 legislators who wanted some or all of their districts to be added to the exclusion zone; these would be neighborhoods where the 421a tax break would be reserved only for new buildings that included low-income housing. Three of those legislators later changed their minds, Mr. Lopez said.

The 14 legislators who asked to be included did not necessarily represent neighborhoods that were far enough along in gentrifying that market-rate housing needed no boost to take root. Rather, they represented that swath of minority neighborhoods where displacement fears raged most fiercely. The exclusion zone that Mr. Lopez offered in his bill extended north in Manhattan through Harlem, Washington Heights and Inwood; east through central Brooklyn to encompass large parts of Crown Heights, Ocean Hill, East New York and Mr. Lopez’s entire district. The northern shore of Staten Island, and small spots in Queens and Bronx, were also mapped.


And why weren't areas like Riverdale or Corona added? The legislators didn't ask.

AY echoes?

In the Atlantic Yards context, Forest City Ratner hasn't had to withdraw services from the buildings it owns that are slated for demolition. For one thing, the large developer is subject to more public scrutiny than some shadowy investors in Bushwick. More importantly, Forest City has the ultimate hammer; the state will exercise eminent domain.

However, a property owner just two doors down from the AY footprint, at 499 Dean Street, last fall bricked up the building and allegedly withdrew services to get a rent-regulated tenant to leave. (That threat seems to have passed, as there are now new windows.)

And gentrification in the area around the Atlantic Yards site has already begun. In some cases, investors are building on empty lots. In others, buyers are jacking up rents.

The Prospect Heights/Crown Heights area, as Brooklyn College sociologist Aviva Zeltzer-Zubida pointed out, is ripe for displacement. Maybe that's why Lopez's bill, however flawed, extended the 421-a exclusion zone to Crown Heights. His argument was the public should not, as with 358 Grove, subsidize luxury development without getting something in return.

The new 421-a map certainly does not, as the Observer suggests, represent the best balance to nudge the housing market along. Then again, the City Council reform, with a more modest "exclusion zone," isn't necessarily the solution.

It all shows the difficulty of trying to predict the housing market. And there are other factors; "Up From Flames" points out that the zoning in Bushwick allows larger buildings, which are another incentive for profit.

Friday, June 29, 2007

Bloomberg calls for 421-a veto, says Ratner "doesn't need" tax break

Mayor Mike Bloomberg offered his first public criticism of the "Atlantic Yards carve-out" during a radio interview today, saying developer Bruce Ratner "doesn't need" a special tax break that could be worth $300 million.

The criticism came almost as an aside while Bloomberg made the larger argument that Governor Eliot Spitzer should veto the 421-a reform passed by the legislature.

Listening in

At about 20:45 of the mayhor's weekly appearance on the John Gambling Show, the host raised the question of 421-a, subject of an extensive article in today's Times.

Bloomberg responded: Well, I hope the Governor vetoes it… You want people to build affordable housing, but you don’t want it to be so onerous that they won’t, and there are places they’re going to build anyway, so there’s no reason to give them tax breaks... Our City Council… came up with a good balance of building affordable housing and also building the market-rate housing that we need. We consulted with everybody, it was an extensive study, it was done totally on the merits. It gets to Albany and, with some pressure from one real estate group here who ought to be ashamed of themselves, all of a sudden it applies to a much bigger area, which will really keep housing from being built there. It’s going to hurt the very people that everybody talks about helping. And gives some tax breaks to a developer that doesn’t need ‘em, which we didn’t have to do. I can only hope the governor stands up and vetoes it, because it really should not become the law of this state.

Arguable

As noted, it's arguable that the City Council balance is perfect. And the Real Estate Board of New York (REBNY) didn't pressure the state to expand the "exclusion zone;" rather REBNY acceded to the map proferred by Assemblyman Vito Lopez in exchange for a six-month extension of the current law and, apparently, the special deal for Forest City Ratner.

Slam?

The Brooklyn Paper broke the story earlier this afternoon with a story headlined Bloomy slams the “Ratner carve-out”. It wasn't quite a slam, but, given that the mayor is a vigorous supporter of Atlantic Yards, it is notable.

When I asked Bloomberg Wednesday about 421-a and the carve-out, he declined the opportunity to comment on FCR's special deal. Apparently things are heating up.

Yassky and James ask Spitzer and Bloomberg to withhold aid

Council Members David Yassky and Letitia James, in a letter to Governor Eliot Spitzer and Mayor Mike Bloomberg, have asked the state and city to withhold previously pledged direct subsidies for the Atlantic Yards project, citing the "Atlantic Yards carve-out" in the state's revision of the 421-a tax break.

They write:
The most egregious aspect of the carve-out is the amount it will cost taxpayers. New York City has already approved $205 million for the project, and the State has pledged $100 million. The rewrite of the 421a legislation will cost taxpayers at least an additional $100 million and could reach $170 million in forfeited tax revenue.

Because of the size of the 421a tax break for Atlantic Yards, we ask that the money previously set aside for land acquisition aid--$100 million from the City and $100 million from the State—be withheld. This $200 million should not have been allocated in the first place—there is no justification for the government to subsidize a developer’s bottom line—and now, with this latest development, any distribution of this money is inexcusable.


Note that city officials told the Times that the tax break could be worth $300 million.

City says "Atlantic Yards carve-out" worth $300 million; will Spitzer veto?

Previous estimates have valued the "Atlantic Yards carve-out" in the state's revision of the 421-a tax break at up to $170 million. Now the New York Times, in a post-mortem on the much-criticized closed-door negotiations, reports the figure could be nearly double that.

Today's article, headlined City’s Plans for Housing Flop in Albany, focuses on decisions made by Assemblyman Vito Lopez, the chair of the Brooklyn Democratic Party and of the Assembly Housing Committee, in negotiation with Steven Spinola of the Real Estate Board of New York.

The Times reports:
But the bill would also provide what the city estimates are an additional $300 million in tax breaks for the vast Atlantic Yards complex being developed by Forest City Ratner Companies, the development partner with The New York Times Company in the Times’ new Midtown headquarters, without getting any additional affordable units in return. Mr. Lopez said it was a concession sought during negotiations with Mr. Spinola and the Senate over his bill.

State Senator Martin J. Golden, a Republican from Brooklyn, who sponsored the bill in the Senate, acknowledged yesterday that Mr. Spinola “may have had a little bit more of a role than most,” in negotiating the bill. But, he added, “Everybody was checked with.”

Yet, State Senator Frank Padavan, a fellow Republican, contends that the Senate bill was rushed through with little discussion of the special deals for developers like Forest City. “It didn’t pass the smell test,” he said.

Real estate developers say that the real estate board, whose leading members are active in Manhattan, was principally concerned with extending the 421-a program beyond Dec. 31, and had little interest in the impact of the bill on development in the other boroughs. Mr. Spinola was on vacation this week and unavailable for comment.


Golden, of course, is an Atlantic Yards supporter and Lopez has received campaign contributions from developer Bruce Ratner's brother and sister-in-law.

City objections

More significant to city officials critical of the state bill is the size of the "exclusion zone," where developers would be required to build affordable housing in exchange for the tax break. The City Council extended it to Brownstone Brooklyn, Greenpoint/Williamsburg, the Queens waterfront, TriBeCa, and parts of Harlem. The state bill extended it to neighborhoods in all five boroughs.

I think there's room for debate on the outline of that zone, and I'm not sure it would "scuttl[e] the city’s efforts to build middle-class housing at Queens West on the East River," as the Times reports. (Could the city just readjust the income mix, as it already has apparently done, substituting 40 percent market-rate units?)

The zone was expected to expand, given Lopez's concerns about gentrification around the Bushwick/Williamsburg area he represents. But it appears that Lopez got the map he wanted in exchange for the six-month extension of the current law, rather than via sufficient public deliberation.

The Times reports:
“We thought we had the makings of a good deal, and we thought it would get modestly better in Albany,” said Brad Lander, director of the Pratt Center for Community Development. “Instead it emerged with a bunch of loopholes.”

So the question remains: Will Gov. Eliot Spitzer spend some political capital, veto the bill, and thus fulfill the reformer role he claims?

Thursday, June 28, 2007

A rally against eminent domain abuse, four City Council members and the "Willets Point effect"

As the fight against eminent domain abuse heats up, maybe it's time to start talking about "the Willets Point effect." The coalition fighting the Atlantic Yards project has gathered savvy from a high-profile battle lasting more than three years. Those challenging Columbia University's West Harlem expansion have a clear David vs. Goliath fight. And the two homeowners on Duffield Street in Downtown Brooklyn have strong suggestions of a link to the Underground Railroad in the face of denial by the city agency that wants their land.

(Photos by Jonathan Barkey; here's the full portfolio.)

But the 225 businesses operating in the “Iron Triangle” of Willets Point, Queens, employing some 1800 workers, have the manpower and muscle to mount a very public fight against the city’s plans for an upscale development that would include some 5500 housing units, a hotel and convention center, a million square feet of retail and 500,000 square feet of office space.

So, as the four disparate groups gathered yesterday on the steps of City Hall to join in a rally as New Yorkers Against Eminent Domain Abuse, the Willets Point contingent was the largest and the loudest, wearing hats and t-shirts indicating their protest, arriving by bus with signs in tow.

And given that a good number were white guys who do physical labor, the group in some ways echoed the contingent of construction workers who flooded Atlantic Yards public hearings last summer to argue for, rather than against, condemnation.

More than 100

The rally, hosted by Lumi Rolley of NoLandGrab (who has honored me here and here) and promoted by Develop Don’t Destroy Brooklyn (DDDB), drew more than 100 protesters, including City Council Members Letitia James and Charles Barron of Brooklyn, Tony Avella and Hiram Monserrate of Queens, plus the chief of staff of Council Member John Liu, also from Queens.

The gathering occurred just a few days after the second anniversary of the Supreme Court’s controversial 5-4 Kelo v. New London decision, which reaffirmed the right of governmental entities to take private land for economic development, again saying that tax revenues do constitute an example of “public purpose”—as opposed to “public use” as eminent domain was originally defined.

The decision generated a backlash around the country across the political spectrum, beyond the right-wing and libertarian groups that have long opposed eminent domain. (Several people yesterday carried signs produced by the Institute for Justice, a longtime opponent of eminent domain.)

Many states—though not New York--have passed laws to narrow the use of eminent domain. Still, most states have not tightened the definition of “blight,” which was not affected by Kelo, and has been used to pursue condemnations, including in the Atlantic Yards case.

“The legal definition of blight is so absurd,” Rolley said, leading off the rally. Her web site is mainly a portal cataloging and critiquing Atlantic Yards-related news and information, though it does extend to other issues related to eminent domain.

Council Members speak

“We cannot engage in the subjective definition of blight,” James (right) declared, after leading the crowd in a chant of “Hell no, we won’t go.” “It must be based on deteriorating buildings, not just blight created by the developer. Forest City Ratner should not be rewarded.”

James said eminent domain was “stealing property for individuals in high places,” adding that “the Mayor cannot talk about [PlaNYC] 2030 and support eminent domain.” She said she hoped the Atlantic Yards case challenging eminent domain—currently pending appeal in federal appellate court—goes all the way to the Supreme Court.

“It’s probably the only time I agree with Clarence Thomas,” said the generally liberal Council Member, contrasting herself with the right-wing justice. Both are African-American.

The firebrand Barron, after criticizing eminent domain, also made reference to the special deal for Atlantic Yards inserted into the state legislature’s reform of the 421-a tax break. “If you get the information an hour before… you need to vote no,” he said.

Avella, a candidate for mayor in 2009, hearkened back to the traditional notion of eminent domain, which took homes for highways and other clear public use. “Now we’re taking private property so we can turn it over to private developers,” he said. “That is so un-American.”
(At right, Avella, with James and Barron behind him.)

Actually, it is legal—the question is whether states will narrow the powers.

Willets Point

Dan Scully of the Willets Point Industry and Realty Association (WPIRA) said that business owners had been ignored. “For 30 years, we’ve been telling the city we need sewers and we need streets. For 30 years, they’ve ignored us,” said Scully, who's in the top photo.

WPIRA aims for “owner development” of the area. “We’re not blighted. “We’re neglected by the city,” said Scully, a vice-president at Tully Construction. (Here's Tom Angotti's May article, A Sustainability Test at Willets Point, from Gotham Gazette.)

Joe Ardizzone, a crusty 74-year-old who’s the only legal resident of Willets Point, declared, “It’s so un-American. It’s too much to even explain.”

(Now there's a Coalition for Willets Point arguing for community benefits if eminent domain proceeds.)

Other voices

Nellie Hester Bailey of the Harlem Tenants Council, talking about the fight against Columbia, said, “We have to look at the elected officials who are not here today,” pointing to Mayor Bloomberg.

Ron Shiffman, founding director of the Pratt Center for Community Development and a longtime consultant to community planning groups, said, “if we want New York City to grow, the only way to do it is with a diversity of jobs, not just FIRE [Finance, Insurance, and Real Estate] but also manufacturing.”

Eminent domain, he said, must be used “only for public purpose, not to make the rich richer.” Shiffman’s on the DDDB Advisory Board.

Council Member Monserrate showed up in the middle of the event, and declared, “We should never use eminent domain to enrich others.”

(At right, Monserrate, with Rolley next to him and Bailey and Henry Weinstein, a major property owner in the Atlantic Yards footprint, behind him.)

Simeon Bankoff, executive director of the Historic Districts Council, called eminent domain “the thermonuclear warhead of city planning.”

Who’s responsible?

Joy Chatel, a Duffield Street homeowner, asked, “Governor Spitzer, where are you?" He hasn't spoken out against eminent domain abuse.

Closing the rally, DDDB spokesman Daniel Goldstein (right) declared, “When they say it’s a public use just because they say it’s a public use, it doesn’t mean it’s a public use.” He offered the same mantra substituting the word “blight” for “public use.”

“The mayor says often, ‘you can’t let one guy’ stand in the way of development,” Goldstein continued. “We’re not ‘one guy.’”

He pointed out that eminent domain does seem to be an official policy, citing the June 2001 Group of 35 report, organized by Sen. Chuck Schumer, that identified condemnation as a tactic to assemble sites for office space.

(Note that Mayor Bloomberg made fighting federal curbs on eminent domain a priority last year; meanwhile, his law department stresses a principled approach, as with development of Melrose Commons.)

What to do

There were only a handful of reporters at the rally, plus various observers, including some from the New York City Economic Development Corporation, keeping tabs on the opposition.

At the end, with most people drenched in sweat, there was only one question: what should the legislature do?

Goldstein pointed out that bills to reform eminent domain had languished in the legislature. “When it comes to blight, we need a strong definition,” he said, suggesting that government neglect, cracked sidewalks, and underused properties—all cited or hinted at in the state’s Atlantic Yards Blight Study—should be struck in favor of “genuinely unsafe and unhealthy neighborhoods.”

“I have a joke,” he continued. “What’s the definition of blight? Yours.”

Bloomberg on subways ("not that crowded"), Doctoroff, and 421-a

The topic of Mayor Mike Bloomberg's address yesterday morning at a breakfast presented by Crain's New York Business was education, but he answered questions about a range of issues, from his presidential ambitions to congestion pricing.

On the latter topic, Bloomberg improbably--and not too convincingly--deflected criticism that took off from the disturbing announcement from New York City Transit that certain subway lines, notably the numbered ones, are at or over capacity and can't add trains.

The event, held at the Sheraton New York was in Midtown, was broadcast yesterday on the Brian Lehrer Show, and the issue came up at about 17:09 . Crain's editor Greg David posed the question:
The Transit Authority said this week there’s no room on the numbered subway lines for any new riders that would head to subways if congestion pricing went into effect. Doesn’t that lend support to the opponents’ view that we’re just not ready for congestion pricing?

Bloomberg responded: So we’ll do nothing about improving mass transit, and they’ll say that’s the solution to the problem. I don’t think so.

The audience, mostly business people, clapped.

In denial

Then the mayor embarked on his own twist of reality. (He did similarly in 2004 when talking about Atlantic Yards financing.)

Bloomberg continued: If you want to fix the problem…If the subways are that crowded—and, incidentally, I take the Lex most days, and it’s not that crowded. So you stand up next to people, get real, this is New York, what’s wrong with that?

The mayor similarly told the New York Times Magazine last September: “I take the subway. My attitude is go earlier if the train’s crowded.”

Except that now there are statistics--which Bloomberg ignored. The statistics came from New York City Transit, an agency of the Metropolitan Transportation Authority (MTA), but Bloomberg acted as if a government agency were being criticized by some outside gadflies.

He continued:
…I protected Con Ed, now I’m gonna protect the MTA. When I come to New York City in 1966, the subways were filthy, there were panhandlers, there was graffiti all over the place, they broke down, they weren’t air conditioned. I would suggest all of you take the subway with me today or tomorrow. You will find every one of those things different. It’s a great ride, it gets you where you want to go, quickly, safely, cleanly. And I can think of only once somebody ever yelled at me on the subway, this guy yelled at me, “Fix the Knicks.” OK, I can do a lot of things.

He got laughs and claps, but he'd avoided the question. And subway capacity is a very big deal if the Atlantic Yards project goes forward, since the environmental review stated that the lines serving the project site were under capacity. Congestion pricing may be a very good idea, but the city can't avoid the math.

The Post today pointed out that Bloomberg generally travels before the rush hour. The Daily News today quoted congestion pricing critic David Weprin as saying the F train in Queens is overcrowded.

Streetsblog notes that New York City Transit head Howard Roberts said that congestion pricing revenues could be used to improve the transit system, in time, notably via the Second Avenue subway. In other words, Bloomberg could've endorsed, rather than denied, the reports of crowding.

On Doctoroff

Continuing, Bloomberg endorsed a pilot program for congestion pricing, and said he expected that the State Legislature would eventually act on it, rather than micromanage. And in doing so, he suggested that Dan Doctoroff, the Deputy Mayor for Economic Development, would find a place in history.

He stated:
That’s why the pilot is the right answer. We’ll do the best we can and then see what happens. Y’know, if you take a look—history will write a book--somebody will write a book—[Robert Moses biographer Robert] Caro or somebody like that and will say, Doctoroff had a bigger impact on this city than the last big builder that came through, who lived, incidentally, in an awful lot easier time. Didn’t have the courts, didn’t have the community boards, didn’t have all of the visibility that we have today.… Dan’s done the study. He’s had experts. We’ve included every single advocacy group, whether it’s traffic or environment, pros and cons, left and rights, outer borough, inner borough. Everybody. They’ve come up with a plan that we think has a reasonable chance of working and I think we need to do it.


Doctoroff in February presented himself as a planner who'd learned the lessons of the Robert Moses era. Majora Carter of Sustainable South Bronx disagreed.

On 421-a

After his speech and the public interview conducted by David and Lehrer, Bloomberg took some questions from the press. I asked his views on the reform of the 421-a tax break passed by the State Legislature, specifically the expansion of the "exclusion zone" and the special break for the Atlantic Yards project.

In his answer, he ignored the Atlantic Yards question but simply said that the reform passed last December by the City Council struck the right balance.

Note that the city bill, which would require 20% affordable housing in all buildings in the exclusion zone in exchange for the tax break, would not have affected the dozen or so rental buildings planned for Atlantic Yards.

However, assuming that three or four of the 16 towers would be primarily market-rate condos, the city's reform might have cost developer Forest City Ratner more than $100 million, the value of the special break. That's an impact that I and others writing about the city's bill last December seem to have missed.

Wednesday, June 27, 2007

The 421-a map emerges--shocker?

So this is what the New York Daily News, City Council Speaker Christine Quinn, and some others are so shocked by.

The New York Observer yesterday published the map of the proposed expansion of the 421-a exclusion zone--where developers would have to construct 20% affordable housing (for households with incomes up to 60% of area median income, or AMI) in exchange for tax breaks. The map comes via the Pratt Center for Community Development.

The maroon area, in Manhattan, was added in the 1980s to require affordable housing (achievable via a certificate program in low-income neighborhoods, typically in the Bronx) as a tradeoff for new construction The rust color indicates the areas--notably Brownstone Brooklyn, Greenpoint/Williamsburg, the Queens waterfront, Lower Manhattan, and parts of Harlem--added last December by the City Council (which eliminated the certificate program).

And the zones in yellow were added by the State Legislature. Missing from the map, of course, is the outline of the Atlantic Yards project, which gets a special exemption.

The expansion

Several members of City Council wanted the so-called "exclusion zone" expanded citywide, and Assembly Housing Chairman Vito Lopez, who also chairs the Brooklyn Democratic Party, also wanted the zone expanded.

It's notable that Lopez did not expand the zone to middle-class neighborhoods in central Queens, southern Brooklyn, and Riverdale, where 421-a probably distorts the market. Clearly he was particularly concerned about the areas around his Bushwick/Williamsburg base.

As I wrote, I think it's a victory to have continued to expand the zone. Still, critics who point to the absence of transparency--on both the boundaries and the "Atlantic Yards carve-out"--deserve attention from Gov. Eliot Spitzer before he signs the bill. It's not too late to order a revamp.

Development effects

The Observer noted:
The new policy is likely to slow development in the earth-toned areas and keep it pretty much as it is in the gray parts.

That may well be true, but there are numerous other factors--zoning, cost of materials, etc.--that affect development. So the question is not so much whether the absence or presence of the tax break would affect development, but whether it would distort appropriate development.

If Spitzer signs the bill, it would go into effect July 1, 2008. That gives the real estate industry, which apparently cared much more about the six-month extension (from a planned end-of-2007 deadline passed by City Council) than the expansion of the exclusion zone, to take advantage of the tax break at sites in Manhattan.

Tuesday, June 26, 2007

NYCT contradicts ESDC, saying subways are too crowded

Today's New York Times reports, in an article headlined Some Subways Found Packed Past Capacity, that crowding on the subways, "especially the heavily used numbered lines," leaves little or no room to accommodate riders, according to the president of New York City Transit, Howard H. Roberts.

(Graphic from the Times--note that the 2/3/4/5 trains would serve the Atlantic Yards project.)

Contrast that with the sunny predictions of the Empire State Development Corporation in its Atlantic Yards environmental review, predictions that were criticized again and again by transportation analysts Brian Ketcham and Carolyn Konheim.

From the Atlantic Yards Final Environmental Impact Statement (Response 13-2): The DEIS includes a detailed subway line haul analysis based on 2005 NYCT passenger counts that show that all subway routes serving the project site would continue to operate below capacity in the peak direction in the AM and PM peak hours at their maximum load points in both the 2010 and the 2016 future with the proposed project. As described in detail in the EIS, the proposed project would also include a major new on-site entrance and internal circulation improvements at the Atlantic Avenue/Pacific Street subway station complex to accommodate new demand from the proposed project. As also discussed in the EIS, during the weekday 10-11 PM and Saturday 4-5 PM post-game periods, when surges of subway trips generated by an event at the arena would be arriving on the subway platforms, the potential may exist for crowding on the platforms at the Atlantic Avenue/Pacific Street subway station complex under certain post-game conditions. Such crowding, if it were to occur, would constitute a significant adverse impact, which would be addressed by providing additional subway service (i.e., more trains) during post-game periods.

Emphases added. Apparently the statistics were a little bit out of date.

Two years later, flashback to Times Magazine interview with Bruce Ratner

Bruce Ratner doesn't talk much to the press--and when he does, he's protected--so it's worth another look at excerpts from his 6/26/05 New York Times Magazine interview conducted by Deborah Solomon, headlined Stadium, Anyone?.

Note that then-Public Editor Byron Calame criticized the Times for failing to disclose the parent company's business relationship with Ratner, but the Times never printed a note or a letter about the issue. Also note that the headline refers to a stadium, not an arena. They're not interchangeable.

Arena revenue

Q: How do you explain the sudden vogue for stadiums and arenas? So many teams want a new home -- the Mets in Queens, the Yankees in the Bronx, the Jets with their doomed project in Manhattan. And you're building a new arena for the Nets in Brooklyn.

A: It has to do with the economics of sports. The high salaries of athletes drive the whole thing, because it creates a need for revenue. In the case of the Nets, we need an arena that has suites and luxury seating, and where you can put up advertisements all over the place.


Ratner was being reasonably candid here, warning that the issue was maximizing revenue. He also could have said that the price of the team--the tail wagging the much larger Atlantic Yards dog--was a component. And he also could have explained that naming rights to the arena might pay much of its costs.

Brooklyn and hoops

Q: You and your fellow investors bought the Nets last August for $300 million. Have you always loved basketball?

A: I was never a basketball fan, but I wanted to bring a team to Brooklyn, a team that could be like the Brooklyn Dodgers. There's something intangible that a team contributes, something as intangible as a soul.

No team could be like the Brooklyn Dodgers, as agent Keith Glass and Brooklyn activist Scott Turner have observed. Fifty years later, professional athletes earn much more than their predecessors, and are far more divorced from the public. Sports franchises leave little dead air for contemplation; a game is one continuous marketing opportunity.

Real estate interests

Q: When did you get so spiritual? I would think the arena serves your interests as a real-estate developer and will boost the value of the apartments, condominiums and stores that make up your development in progress, the Atlantic Yards.

A: Not necessarily. Your friends who have bought brownstones in Park Slope and Fort Greene have inflated neighborhood values more than an arena would.

Here's where interviewer Solomon really missed the boat. While Ratner may be right that the arena itself may not do much for neighborhood values--who wants to live acrss the street?--but the arena certainly serves Ratner's interests as a developer.

Without the arena, he wouldn't have gotten public and political backing, including the exercise of eminent domain and override of city zoning, for the 16-tower development project involving what Chuck Ratner of Forest City Enterprises called "a great piece of real estate."

Nets social value?

Q: How would you define the social value of the Nets?

A: The players are terrific. They are of good character. They are incredibly charitable. They are family-oriented. They have integrity.

Ratner should have stuck with observing that they are excellent basketball players. Jason Kidd is far from a role model and Vince Carter is also going through a divorce.

The bottom line

Q: Well, you and your fellow investors did acquire a whole team. Was that a complicated process?

A: We were the highest bidder for the team. Like so many things in life, it was just a matter of money.

Enough said.

City Limits explains the 421-a changes

There's no map (yet) of the exclusionary zones added to the 421-a reform legislation passed by the State Legislature last Thursday (but not yet signed by Governor Eliot Spitzer), but City Limits has a good article, headlined REDRAWING THE 421-A FORMULA FOR TAX BREAKS AND HOUSING, summarizing the law's multiple factors.

Along with the expansion of the zones where developers would be required to build affordable housing in exchange for a tax break, the bill features the notorious "Atlantic Yards carve-out" and, crucially for the real estate industry, an extension of the current law for six months--which should spark a frenzy of building, especially in Manhattan north of 96th Street and south of 14th Street, boundaries of the current exclusionary zone.

City Limits points out that some "healthy real estate markets," including Riverdale in the Bronx and downtown Flushing and Forest Hills in Queens are oddly left out of the zones and explains that city officials oppose some expansion of the exclusion zones because some neighborhoods would be taken off the list of those targeted for benefits.

More details

A summary of other details:
• A reduction in the AMI income threshold to 60 percent from the city’s 80 percent to qualify for affordable units (for every place other than Atlantic Yards);
• Reserving 50 percent of affordable units for "community preference," meaning for existing residents within the community board district;
• Building all affordable housing on the actual site where a building is being developed, thus eliminating the "certificates" granted to developers allowing them to build their required affordable component offsite;
• An extension of the certificate program for six months before ending;
• Rent stabilization of such units for 40 years; and
• Bolstering the city and state’s monitoring and enforcement practices.


And some criticisms:
State Senator Liz Krueger, the Upper East Side Democrat and ranking member of the Senate housing committee who had sponsored her own legislation, criticized several aspects, including: that only 20 percent of created units were required to be affordable instead of the 30 percent included in the original legislation; that they'll remain affordable for 40 years rather than in perpetuity; the special terms for Atlantic Yards; and that the certificate extension “allows the real estate industry to continue to operate under old, flawed rules during that time.”


So, will Spitzer ask for changes, including an elimination of special benefits for Atlantic Yards developer Forest City Ratner?

Monday, June 25, 2007

The 'Blight' Excuse for eminent domain

From the weekend edition (June 23/24) of the Wall Street Journal, in an op-ed headlined The 'Blight' Excuse (subscribers only), Carla Main observes that, two years after the controversial Kelo v. New London decision, which affirmed the use of eminent domain for economic development, states and courts have responded by curbing that option--but another remains:

Armed with a blight exception, private property in nearly all of the loophole states may still be condemned and ultimately used for economic development...

But what is blight? A half-century of experience has demonstrated only that it is in the eye of the beholder, or perhaps more to the point, in the eye of the power holder.


Now New York's blight law may not be as bad as, for example, that in New Jersey, where courts have begun to reform it. But it's still arbitrary.

The question, as Supreme Court Justice Joan A. Madden must face in the pending challenge to the Atlantic Yards environmental review, is whether it's so arbitrary that it violates state law.

Sunday, June 24, 2007

Will the Times advise Spitzer to veto 421-a?

Will Gov. Eliot Spitzer veto the 421-a reform passed by the legislature, one that includes some worthy reforms as well as a handout to developer Forest City Ratner? According to NY1:
The governor tells us he needs time to review the legislation before he decides if he will sign it.

A veto shouldn't kill the measure for good. If there's to be a summer session to deal with outstanding legislation, there's no reason the legislature couldn't revisit 421-a.

In an article Friday headlined 421-a extension will spur construction, Crain's New York Business reported that the six-month extension contained in the 421-a reform will lead to a surge in condominium and apartment construction, as developers will rush to build market-rate projects before a lucrative tax break expires.

Here's the key paragraph:
The bill approved by the legislature has the support of the Real Estate Board of New York, the powerful lobbying group that represents developers. Insiders say it is unlikely that Gov. Eliot Spitzer will veto it.

Now why is that? Could it be that Spitzer, via his surrogates, already gave his blessing to the "Atlantic Yards carve-out" contained in a reform bill that otherwise spreads broad benefits and costs? That would be curious, indeed, given that legislative supporters of the broad reform, such as Assemblyman Hakeem Jeffries, were not told of the special provision.

The Times opines

The New York Times has taken some strong stands against pork-barrel legislation--but not regarding legislation that would help its parent company's business partner, Forest City Ratner, even though the "Atlantic Yards carve-out" that is so egregious that Ratner and Assemblyman Vito Lopez are unwilling to defend it.

(Remember how the Times punted when Atlantic Yards was before the Public Authorities Control Board?)

In an editorial yesterday headlined Mr. Spitzer’s First Round, the New York Times criticized special deals but omitted the one benefiting Ratner:
Mr. Spitzer insists that for all of the fighting over campaign finance, the real problem has been the Legislature’s, and particularly the Senate’s, insistence on pushing through a capital spending plan heavy on pork — “dripping with fat,” in his words. He is right to try to hold the line on the worst of these old-style handouts.

The Legislature will almost certainly be back in a few weeks for a special session on congestion pricing and possibly campaign finance. That would be a good time to winnow out the unnecessary items now packed into the capital spending plan.


The Times, should it choose, could focus on one specific beneficiary of legislation. After all, the newspaper on Friday did so regarding a federal bill. In an editorial headlined Home Depot Amendment, the Times opined:
Squatting beside the bulk of the Senate immigration bill — a once-in-a-generation attempt to change millions of lives and the direction of the nation — you will find a squalid little amendment. It was placed there by Senator Johnny Isakson of Georgia to benefit an Atlanta-based corporate constituent, Home Depot.

The amendment would prohibit state and local laws that required big home-improvement stores to provide rudimentary shelter for day laborers. There aren’t any such laws yet, but the City Council in Los Angeles, where Home Depot wants to open 13 stores, is considering one. Mr. Isakson’s pre-emptive strike would be an extraordinary intrusion of federal power into a local land-use matter.


The AY carve-out

It would be a no-brainer for the Times to criticize the "Atlantic Yards carve-out" in an editorial; all it would take would be some cutting and pasting. It will be their shame if they take a pass.

The Daily News and the larger issue

Today's Daily News, in an editorial on 421-a headlined A threat to N.Y. nabes, takes a pass on the carve-out (who would guess?) but declares the expansion of the Geographic Exclusion Area--where developers would be required to build affordable housing--a threat to middle-class housing. (More likely, it's a threat to luxury housing.)

Council Speaker Christine Quinn, noting that the city approved a more narrow exclusion zone, thinks the bill should be vetoed. Now there's room for debate about the scope of the zone--surely it should be larger in Queens than approved by the City Council--and the Daily News is right that the state law was approved with limited public discussion. (There was a hearing, as I wrote.)

Perhaps Governor Spitzer will exercise some leadership on the micro and macro issues.

Saturday, June 23, 2007

Hakeem Jeffries explains his 421-a vote

So how could Assemblyman Hakeem Jeffries support (and sponsor) legislation to reform 421-a, then vote against it? Below, the press release from his office, and then a further explanation.

Press release issued Friday

Assemblyman Jeffries today voted “No” on A.9293, legislation introduced by Vito Lopez that would treat the controversial Atlantic Yards project more favorably than other developments as it relates to the 421-a tax abatement program.

“The Atlantic Yards project has feasted on government funds for far too long. Enough is enough. There is absolutely no justification for treating Atlantic Yards better than any other development project in New York, when Forest City Ratner has already received $300 million in government subsidies.”

Joining Assemblyman Jeffries in voting against the bill is Assemblywoman Joan Millman, who represents the neighboring assembly district. The legislation passed 105-6 on the floor of the Assembly. It will now be sent to the Senate for consideration.

Assemblyman Jeffries (D-Brooklyn) represents Prospect Heights (the site of the Atlantic Yards project), Fort Greene, Clinton Hill, parts of Crown Heights and Bedford-Stuyvesant.


Further clarification

I asked for a further clarification this morning, and got this response from Chief of Staff Daisy James:

Assembly bill 4408-A is the original 421-A legislation that was introduced in the Assembly several months ago, and amended shortly before it hit the floor to include the Atlantic Yards carve-out provisions. This bill, 4408-A, was passed in the Assembly on Thursday, June 21.

Assemblyman Jeffries did not get the opportunity to vote on 4408-A since he was in the district that morning attending graduations for P.S. 11 and P.S. 20, and serving as the keynote graduation speaker for P.S. 9 and M.S. 353. He returned to Albany that afternoon, but the vote had already taken place. Assemblyman Jeffries supports the bill since it dramatically expands the 421-A affordability requirements to low and middle-income neighborhoods throughout New York City.

On Friday, June 22, a chapter amendment, A.9293, that clarifies the Atlantic Yards 421-A carve-out provisions, came to the floor. Assemblyman Jeffries voted against this bill, and was joined by at least two colleagues from Brooklyn, Joan Millman and Rhoda Jacobs. He could not support a bill that related solely to treating the Atlantic Yards project in a more favorable way than any other development in New York City, without justification.


One more update

(9:55 pm)

Here's the account from the New York Observer, and another statement Jeffries gave me:
I still support the main thrust of the 421-A reform effort in 4408, notwithstanding the Atlantic Yards poison pill, given the dramatic expansion of the affordability requirement to working class and middle-income neighborhoods throughout New York. Standing alone, however, the Atlantic Yards carve-out provisions in 9293 are unacceptable.

A p.r. man's fate: fighting the West Side Stadium, flacking for the Brooklyn Arena

When you're a public relations professional, you often go where the work is, but consider the mental whiplash that Forest City Ratner spokesman Loren Riegelhaupt must experience--especially this week.

He used to work for the investor relations company Sloane & Company, which worked with Madison Square Garden owner Cablevision. So less than three years ago Riegelhaupt worked on the "grassroots" coalition New York Association for Better Choices, which opposed the construction of the West Side Stadium. (One critic said Cablevision had "hijacked" the opposition.)

Indeed, an 8/20/04 Associated Press article, headlined Mayor: Stadium could be used for protesters stated:
Loren Riegelhaupt of the New York Association for Better Choices, which opposes the stadium, criticized the mayor's comments: "Whether it is the most expensive football stadium ever or the most expensive protest area ever, the West Side Stadium is a colossal waste of $600 million in taxpayer resources and that's what the vast majority of New Yorkers are really protesting against."

Hate the stadium, love the arena

Now Riegelhaupt flacks for Forest City Ratner, which is building the most expensive arena ever, as part of a "civic project" using a yet-unspecified amount of taxpayer resources.

In the recent issue of City Limits Investigates, he parried legitimate questions about the timing of Atlantic Yards by calling it "ridiculous speculation by opponents whose only goal is to stop the project."

On Wednesday, faced with clear evidence that a reform of the 421-a tax break contained a special section to benefit Forest City Ratner, Riegelhaupt, contacted by the New York Observer, would not comment on the legislation itself but offered something we already knew, that the developer intends to “have a mix of market-rate and affordable units in all of the rental buildings.”
(Emphasis added)

After that, Forest City clammed up completely. Remember former executive Jim Stuckey's claim of "tremendous transparency"?

I know Riegelhaupt's just doing his job (though he's never answered any of my queries) and that Forest City Ratner is not unlike other companies in trying to feed and spin the press. But I suspect he could easily argue against himself if there were a Brooklyn version of Cablevision in the Atlantic Yards fight.

Friday, June 22, 2007

On 421-a: FCR won't comment, ACORN calls it "bad public policy," & Lopez gets cover

In a column today headlined Atlantic Yards gets a deal so sweet it's sick, Daily News columnist Juan Gonzalez bores in on the special carve-out in the 421-a legislation. The deal could be worth [updated/corrected] $100-$170 million in tax-exemptions for the condos.

(Still, I'd like someone in government to break down the math, since I don't think the bill will, as Gonzalez writes, allow Forest City Ratner to charge an extra $350 a month for affordable units; I think that might apply only to a subset. Doesn't legislation come with official analysis?)

The issue, Gonzalez suggests, is a test for Governor Eliot Spitzer.

ACORN speaks

Gonzalez put Forest City Ratner on the spot. They wouldn't comment.

He asked their partner in housing, ACORN, which had lobbied for an expansion of 421-a, didn't know of the special provision. NY ACORN's Bertha Lewis called it "bad public policy," which is remarkable because it 1) involves ACORN's first public criticism of the developer's machinations and 2) ACORN is required is required by the Housing Memorandum of Understanding, to "take reasonable steps to publicly support the project," including appareances before community organizations. (In this case, ACORN wasn't needed, so Lewis's criticism is after the fact.)

Assemblyman Hakeem Jeffries illustrates the difficulty of voting on principle:
"It's unfortunate that this developer seems to have an addiction to the government's cookie jar," Jeffries said. Still, Jeffries voted for the overall tax exemption bill. He did so, he said, because it will expand a decades-old incentive program for developers, known as 421-A, to some minority neighborhoods and create more affordable housing.

Little other coverage

Only the Times covered the carve-out today besides Gonzalez. The Times, which covered it yesterday online in the City Room blog, included some of those paragraphs in a broad round-up that mentioned 421-a.

Cover for Lopez

In yesterday's piece, Assemblyman Vito Lopez defended the carve-out, which allowed some of the 20% lower-income affordable housing at Atlantic Yards to be built in separate buildings and to include residents at 70 percent of Area Median Income (AMI) rather than 60 percent, as the law otherwise says. Forest City Ratner, he said, wanted the exemption to be 100 percent.

Not only would that have been way out of line, they didn't need 100 percent; all they needed was 70 percent. The 100 percent number was just to give backers some cover.

Thursday, June 21, 2007

$100 million (?) for Ratner as Assembly passes 421-a bill

The Times, on the City Room blog, reports that the 421-reform bill with the Atlantic Yards carve-out has passed the Assembly.

To the Times, Brad Lander of the Pratt Center for Community Development estimates that the tax break, which could exempt four buildings with condos from including onsite affordable housing. would cost taxpayers $100 million. (The other 12 Atlantic Yards towers would have mixed-income housing.)

That's just an estimate, however, and a closer accounting would be worthwhile. Developer Forest City Ratner saves by not having to provide another 380-plus units of very affordable housing. (The 1930 condos would have to be matched by 20 percent affordable housing.)

Moreover, the state law--though not the carve-out--requires affordable housing at 60 percent of Area Median Income, or AMI, while less than half of the Atlantic Yards affordable housing would meet that qualification.)

There's another benefit for the developer. Condo owners won't have to share their buildings with their poorer brethren. The condo buildings at Atlantic Yards, like other ones under construction (or recently opened) in the Brooklyn "renaissance," are for one-class only. (That should help with pricing, right?) That might seem to be market capitalism, except they all get a tax break too.

How the 421-a reform is being tailored for Forest City Ratner

The reform of the 421-a tax break about to be passed by the state legislature would require developers in the Geographic Exclusion Area to include 20 percent affordable housing onsite in exchange for the tax break. Affordable housing is defined as being geared to households earning up to 60 percent of Area Median Income, or AMI.

The special clause for developer Forest City Ratner benefits the Atlantic Yards project in two ways (updated):
1) the obligation to provide 20 percent affordable units in the same building will be lifted and instead can be met in the aggregate
2) the obligation to provide 20 percent of the units at 60 percent of AMI will be changed so that the developer must provide 20 percent of the units at an average AMI of 70 percent, so as not to disturb the current plans for Atlantic Yards.

Here's the current bill (A 4408), which has both errors that will be changed and clauses that are being updated:
13. A multi-phase project that includes at least 2,500 dwelling units and (i) is being implemented pursuant to a General Project Plan adopted by the New York State Urban Development Corporation and approved by Public Authorities Control Board or is otherwise set forth in agreements with the New York State Urban Development corporation and (ii) includes a development over a number of city blocks, shall be eligible for benefits pursuant to this section notwithstanding paragraph (e) of subdivision 7 of this section if in the aggregate twenty percent of the units in such development are affordable to and occupied or available for occupancy by individuals or families whose incomes at the time of initial occupancy do not exceed 60 percent of the area median incomes adjusted for family size and the rent for such units does not exceed thirty percent of eighty percent of the area median incomes adjusted for family size.

(Emphases are added)

Revision coming

Below is another version of the clause, as it's been circulating. I can't say this is the final version, but consider it an example of changes being tailored for a specific client. (It's possible that the revision won't be posted until the bill passes.)

(Update: Here it is, as part of A9293)

13. A multi-phase project that includes at least 2,500 dwelling units and (i) is being implemented pursuant to a General Project Plan adopted by the New York State Urban Development Corporation and approved by Public Authorities Control Board or is otherwise set forth in agreements with the New York State Urban Development corporation and (ii) includes a development over a number of city blocks, shall be eligible for benefits pursuant to this section notwithstanding paragraph (f) of subdivision 7 of this section if in the aggregate twenty percent of the units in such development are affordable to and occupied or available for occupancy by individuals or families the average of whose incomes at the time of initial occupancy do not exceed {60} SEVENTY percent of the area median incomes adjusted for family size and the rent for such units does not exceed thirty percent of eighty percent of the area median incomes adjusted for family size.

They were so sloppy they changed the word but not the numeral.

Paragraph (e) regards the length of rent-stabilization, while paragraph (f) regards the onsite requirement.

Doing the math

Atlantic Yards, as currently planned, would include 6430 units, including 1930 condos (200 of them affordable, but unlikely at a low AMI) and 4500 rentals, half of them subsidized and thus affordable to low-, moderate-, and middle-income families.

Of the total, 20 percent, or 1286, would have to be affordable--under the 421-a definition of affordability--to meet the law's requirement. The law sets affordability for projects other than Atlantic Yards at 60 percent of AMI.

For Atlantic Yards, as currently planned, there would be 225 units at 40 percent of AMI, 675 units at 50 percent of AMI and 450 units at 60-100 percent of AMI.Under the initial wording of the bill, Atlantic Yards wouldn't qualify, because only 900 units would be under 60 percent of AMI.

Under the revised wording of the bill, which adds the average and nudges the requirement up to 70 percent, Atlantic Yards would easily qualify. Even if those 450 units were rented to households at 100 percent of AMI, that would make 1350 units averaging 65 percent of AMI.

If the AMI in the Atlantic Yards carve-out were kept at 60 percent, the project could still qualify under the averaging option, as long as those 450 units at 60-100 percent of AMI were under 80 percent of AMI.

So a 70 percent average would allow those units in the middle "band" of affordability to be rented to somewhat higher-income families. And that middle "band," as I've written, has already been changed, as the Atlantic Yards income mix nudges upward.

Two men in a room, no transparency, and a bonus for Forest City

The state's revision of the 421-a tax break, as I perhaps overemphasized yesterday, significantly adds to the exclusion area where developers won't be able to get a tax break for building market-rate housing without including affordable housing.

That's a significant advance, but it comes with a cost. The final version of the bill apparently came down to two men in a room, Brooklyn Assemblyman Vito Lopez (and surrogates) and Real Estate Board of New York (REBNY) executive Steven Spinola (ditto), each deputized by the two men who control their respective legislative bodies, Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno.

And in those backroom negotiations emerged a nice plum for Forest City Ratner's Atlantic Yards project. (The lack of an obligation to build affordable housing in AY condo buildings adds to the developer's bottom line in multiple ways.)

Kept in the dark

Assemblyman Hakeem Jeffries, a sponsor of the bill (A 4408), wasn't even told (according to the Observer0 what was being inserted regarding his own district, which includes Prospect Heights.

When Lopez in March held an important hearing where he and others stressed that market-rate housing shouldn't be subsidized so much, REBNY offered polite testimony about why the city's less aggressive bill should be adopted by the state. There was no mention, of course, of Atlantic Yards.

The city's bill at least derived from a task force and much public discussion and debate. The state bill went to the backroom, under the radar. (Did the $3100 campaign contributions to Lopez last September from Michael Ratner, brother of FCR CEO Bruce Ratner, and his wife make a difference? They couldn't have hurt.)

ACORN, FCR change their tune

Both the advocacy group ACORN and developer Forest City Ratner have previously pledged equal treatment. At an affordable housing information session last July, Acorn's Bertha Lewis was quoted, as I reported:
“When we started to talk about it, there was a principle,” she said. Every building would be mixed affordable housing and market-rate housing. “If the elevator works for them, the elevator’s gotta work for you,” she said, to some healthy applause, probably the high point of the night for project proponents. It’s a worthy point; many other affordable housing programs are relegated to separate buildings or other neighborhoods.

And, in a May 2005 City Council hearing, FCR executive Jim Stuckey stated:
...it qualifies for 421A tax abatements for residential projects. So, if anyone else, anybody, not us, any developer, developed on this site as of right, they would be entitled to 25 year tax abatements to get phased in over time, the commercial incentive gets phased in in the beginning of the 15th year, and the residential gets phased in beginning in the 20th year.

Not any more.

WWSD

The Three Men in a Room are, of course, the Assembly Speaker, Senate Majority Leader, and Governor. The first two, apparently, are responsible for the 421-a legislation, while the third, self-proclaimed reformer Eliot Spitzer, must sign the result into law.

What will Spitzer do? Reflecting his ideals, the governor could take a stand against the process that led to such special pleading. Then again, Spitzer has long supported Atlantic Yards, so this might not be the time to expect him to act on principle.

Six-month check: FCR's "initiatives" still murky, but parks funding's a fudge

It's the six-month anniversary (plus a day) of the Atlantic Yards approval by the Public Authorities Control Board, but we still don't know much about the "additional community initiatives and enhanced housing program" announced at the time by developer Forest City Ratner (FCR).

We do know that, when FCR pledged to "invest $3 million to improve existing parks in and around the project," the developer was overstating the case by calling it an "additional" initiative.

After I queried the Empire State Development Corporation (ESDC), the agency confrimed that the sum includes the $1.25 million-plus announced in November to add a comfort station to the Dean Street playground, a partial mitigation for increased noise.

However, a mitigation neither constitutes an enhancement nor an initiative, especially since it surfaced more than a month earlier. (The developer initially offered much less.)

Few details

My January questions to the ESDC hadn't generated details, so a six-month follow-up seemed in order.

There wasn't much more to learn.

FCR announced a reduction to the height of the proposed Miss Brooklyn building, ensuring that no building at the site will be taller than the 512-foot Williamsburg Savings Bank.

What will be that building's revised height and square footage? That has yet to be finalized, according to the ESDC.

FCR announced it will seek to build at least 200 affordable home-owner units on site rather than offsite, making them part of the proposed 6430 units of housing already approved.

When would they be built, and for what income brackets? How is that memorialized? Such details, the ESDC said, will be part of a funding agreement due within the next few weeks and later formalized in project documents before site acquisition.

And what about the "new 21st Century Brooklyn Tech High School"? Would Forest City have any option to acquire the existing Brooklyn Tech building? (Remember, according to the Brooklyn Daily Eagle, any plan to convert the current Brooklyn Tech is off the table.) The ESDC said only that the issue is under discussion.

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.

State revision of 421-a "corporate welfare" subsidy repudiates Doctoroff’s “nothing gets built” warning

It was front-page news last December 20 when the New York City Council passed a reform of the 421-a subsidy law, which offers "corporate welfare" (in State Sen. Liz Krueger's words) to developers in thriving neighborhoods thanks to a 1971 law that long outlasted its usefulness.

So it should be front-page news again, given that the state will further tighten the subsidy. The city's reform increased the Geographic Exclusion Area (GEA) where developers would be required to build 20% affordable housing in exchange for the subsidy, extending it to Brownstone Brooklyn, among other places. (Update 5:50 pm: More details are emerging about this bill, so it may not be as much of a reform as initially assumed.)

(Graphic of 12/21/06 Times front page from New York Magazine's Daily Intelligencer.)

But that wasn’t the end of the story--and now even fewer luxury condos will get that free ride, which lasts ten to 25 years. The New York State Legislature had to approve its own reform and legislators, as Crain’s New York Business reported yesterday, have apparently agreed on a bill demanding more from developers. The state revision, to be finalized on Thursday when the legislative session ends, apparently adds a dozen more outer-borough neighborhoods to the GEA. (Update: Still, it's not over until all parties sign off, so we can't be certain.)

The result suggests that Brooklyn Assemblyman Vito Lopez, chair of the Housing committee, had more sway than the real estate industry and lobbyists for the city, who wanted the state to endorse the bill the City Council passed. And if the city’s reform was to add 20,000 affordable apartments over the next decade, the state effort likely would bring more.

The result suggests that the “market” is a shifting beast, dangerous to predict. It also signals a defeat for the Bloomberg administration’s stance that, if a more stringent state bill was passed, we faced the risk that “nothing gets built.”

It’s also a reminder that affordable housing is a product of complex governmental policies and decisions, and that this legislative change will deliver far more such subsidized housing—and to a less economically-advantaged group of people—than the Atlantic Yards project.

Compromise issues

Note that the affordable housing provided by the 421-a revision would go to families with household incomes up to 60% of Area Median Income, or $42,540. Most of the Atlantic Yards affordable units—1350, or 60%—would go to families above this level, as the affordability scenario has already been tweaked upward.

The law still on the books requires developers building within the GEA to make 20% of total units affordable to families making less than 80% of AMI. The city’s revision set the bar for most units at 60% of the AMI. The state’s bill follows that, and may go further. (We'll see Thursday.)

Still, the results apparently represent a compromise from Lopez’s original proposal. Lopez and allies wanted the market/affordable mix to go from 80/20 to 70/30, but the former percentages will remain, according to a Lopez aide.

Also, as Crain’s reported, the implementation date of the new law will be pushed back six months, to June 2008 instead of December 2007. (The Real Estate Board of New York, or REBNY, had asked for a year.) That gives developers another chance to get as-of-right buildings started; indeed, as the New York Observer recently reported, developers had been working feverishly to get buildings started to beat the anticipated December deadline.

(Update: Will that affect Atlantic Yards? I'll deal with that later.)

The state law also would require a prevailing wage for workers at buildings receiving the tax breaks unless they contain fewer than 50 units or a certain percentage of affordable units.

Doctoroff’s defense

The state's revision has happened mostly under the radar. The contour of the subsidies and the effect on gentrification was the subject of a remarkable Assembly Housing Committee hearing on March 16, in which Deputy Mayor for Economic Development Dan Doctoroff squared off against Lopez; the former essentially argued that any construction was good, while the latter countered that taxpayer-supported market-rate developments distort poor neighborhoods.

(As far as I can tell, the only other media outlets to cover that hearing were the Brooklyn Downtown Star/Queens Ledger, to which I contribute, and, later, City Limits Investigates.)

Doctoroff cited the city’s steady and expected growth, with the addition in the 1990s of 700,000, setting up a situation in which the “demand for housing is far outstripping supply” Now, nearly 29% of renter households pay 50% of their income in rent, while affordability is defined as 30% of income.

The city has launched a multi-prong effort to increase the supply of housing, including rezoning to add density and policies like 421-a, initiated in 1971 when no one was willing to build. In the 1980s, the city established a GEA between 14th and 96th Streets in Manhattan, but clearly that wasn’t enough. It was extended to Brooklyn with the 2005 rezoning of the Greenpoint/Williamsburg waterfront.

Doctoroff called the law passed by City Council last December “a delicate compromise,” as it extends the GEA to encompass parts of Harlem, Brownstone Brooklyn and the waterfront strip of Queens. (Graphic of previous GEA extension from New York Times; I'm waiting for a map of the new extension. Click to enlarge.)

It would establish a new $400 million citywide fund for housing, eliminate the opportunity for developers to fulfill their affordable housing obligation by buying certificates to build housing in low-cost areas like the Bronx, and establish a “luxury cap” so only units will receive abatements for no more than the first $650,000 in value.

It also eliminated 25-year as-of-right benefits for market-rate construction in certain low-income neighborhoods, offering the extended benefit only if affordable housing on-site is included. And it created a commission to review the GEA boundaries.

“We’re trying to strike the right balance,” Doctoroff declared.

Lopez bites back

Lopez set out a different vision. “The big dilemma we have, with federal government getting out of public housing and Section 8, it puts a real burden on the underclass, people who earn $15,000, $18,000 a year.” (Lopez used the term “underclass” as a description of very low incomes, rather than an indicator of entrenched poverty or even pathology, as it’s also been used.)

“Affordable—it’s a relative thing,” Lopez said, noting that, while the AMI for a four-person household in New York is $70,000—since the figure is calculated by including wealthier suburbs—“the AMI in Bushwick is $22,000. In Brooklyn, it’s $37,000.

“When we talk about affordable housing, maybe that’s great for Manhattan, that mindset,” Lopez said. “You can build all the $70,000 homes in the South Bronx and Bushwick, it will only go to people out of our neighborhoods.” Later, he said simply, “Regional AMI is a joke.”

He called it “the worst thing in the world” for taxpayers to subsidize luxury condos in Bushwick that are marketed in Manhattan. “I really believe, no construction is better than that,” he said. “You say, we need middle-income houses. That need is great but it shouldn’t be at the expense of people in Bushwick or Williamsburg.”

In the 1970s, he said, the need was different, but Bushwick has since grown by 28,000 units. (Note: a fascinating exhibition on Bushwick at the Brooklyn Historical Society, Up From Flames, points out that land worth nothing in the 1970s might now be worth $500,000, and that developers are responding not only to tax incentives but to zoning that allows some fairly large buildings.)

Doctoroff replied conciliatorily. “Our goals are exactly the same,” he said. “The only thing I’d raise a question about: the sense that it’s better not to build than to build without affordability.”
Lopez pointed out that, after the City Council passed its bill, a local store closed so the property could be redeveloped before the new law kicked in. “No one benefits, except you say the city does.”

“It’s overall pressure on the market as a whole,” Doctoroff responded. “We have a fundamental supply problem.”

(That mantra has so penetrated the discourse that the New York Times last Sunday, reporting on the controversial Ariel towers on the Upper West Side, observed that “[t]he greatest need is for affordable apartments, but even luxury buildings like the Ariel towers relieve pressure on the housing market,” without acknowledging that the buildings benefited from tax breaks.)

Assemblymembers weren’t convinced, in part because the question is whether and how subsidies should be directed to increase the supply. (For example, the Forté condos in Fort Greene, according to a 1/17/07 article in the Brooklyn Daily Eagle, would not have been built without 421-a. But something else might have.)

A free-market oriented critic of the city’s housing policies, Nicole Gelinas of the Manhattan Institute, argues that the city should instead invest in expansion of public transit, thus generating new incentives to build. I’ll discuss her ideas more at a later date.

Gentrification issues

At the March hearing, Assemblyman Hakeem Jeffries, who represents Prospect Heights and environs, described his district as “ an area I believe is ground zero for gentrification in the city,” said he though that 80% of AMI was too high to be deemed affordable. (The city’s mixed-income 50-30-20 program, which would include the 4500 rentals at Atlantic Yards, involves 50% market, 20% low-income, up to 50% AMI, and 30% middle- and moderate-income, 60% to 160% of AMI.)

Shaun Donovan, the commissioner of the city’s Department of Housing Preservation and Development, said the city couldn’t challenge the federal AMI standard. “We agree we need low-income housing, but we need more middle-income housing,” he said, noting that most of the city’s efforts do go to low-income housing.

Lopez said the state should do more. “Somebody has to say, ‘how does 421-a impact Brooklyn?’” He reported that clergy offer stories of elderly congregants displaced from their apartments because they can’t afford to stay in their apartments. (For more, see Jim O’Shea’s comments.)

Whatever the benefits of gentrification, such shifting markets can fray community ties. Williamsburg activist Phil DePaolo, president of the New York Community Council, commented, “Instead of hardware stores, affordable supermarkets and laundromats, the commercial core changes to noisier bars, expensive restaurants, boutique food markets and so on.”

Lopez offered a similar aside about Atlantic Yards: “The stadium in Downtown Brooklyn, it has an impact; it changes the stores, the business, the mentality.”

Doctoroff’s response to Lopez’s take was technocratic. “We are driven by financial analysis, where can we get people to build,” he said. “To the extent you lower that, the risk you’re running is nothing gets built. You’re biting off your nose to spite your face.”

Lopez called the $400 million promise “a good p.r. piece,” but, “at $200,000 per unit, you’re talking about 1000 units.” (Actually, that would be 2000 units, but if the subsidy per unit were less, more units could be produced.) He added, “Four hundred million dollars is not a lot of money when it comes to housing.”

Doctoroff couldn’t resist a mild jab: “Is the state going to match it?”

Lopez: “The state should not only match it, but double it.” (Such a match has not been announced.)

“Just for the sake of building”

Brooklyn Assemblyman Karim Camara also challenged Doctoroff. Owning a house, he said, leads to community stability, pointing out that a member of his grandmother’s generation could buy a houses on a domestic worker’s wages. How, he said, “I have friends working in finance; they can’t afford to live in New York.”

Doctoroff, Camara noted, “said that we don’t want to cut off our nose to spite our face. That’s what we’re doing, if we’re building just for the sake of building.”

Donovan responded, “It’s not either or—we have to build new housing and ensure that a lot is affordable.”

Lopez returned to the contour of the law. “I think 421-a was great,” he said, “but we’re at the point where we’re running out of land. There isn’t a need for stimulating building… As one of my staff said, we’re giving a benefit for doing nothing.”

City Council Member David Yassky, testifying along with a panel of colleagues, took up the issue: “The city is giving away a lot of money in tax breaks and is getting nothing in return. If it’s expensive housing, the taxpayers shouldn’t be subsidizing it.”

Predicting the market

Yassky offered a crucial observation: “People say, ‘you won’t see development without subsidy.’ That may be true today… but ten years ago people couldn’t predict, and look now," he said. “To try to figure out the real estate market ten years from now, it’s a losing proposition…. We should have a simple statement: if it’s affordable, it gets the subsidy.”

Such a blanket citywide GEA didn’t pass City Council, nor did it emerge from the legislative compromise. Still, Yassky and fellow Council Members Letitia James, Charles Barron, and Gale Brewer, who came before the Assembly to support a stricter state bill, got some of their wish.

And apparently the administration, along with the real estate industry, can deal with it. After all, as Michael Stoler reported last month in the New York Sun:
Another prominent real estate leader who prefers to not be identified said, "As to the reductions in prices for condos, I've never met a market rate developer who wasn't all of a sudden going broke because of any adverse change in the law."

Support for city bill

At the hearing, REBNY had argued for no furthering tightening of the law, citing “the continuing rise in construction costs, with the recent surge in land prices and with a property tax system that imposes significant tax burdens on new development, particularly new condominiums…”

The New York State Association for Affordable Housing, an organization of developers and others involved in the construction of affordable housing in the city and state also endorsed the city bill and expressed concern about the 70/30 proposal.

Hope Cohen, Deputy Director of the Center for Rethinking Development at the Manhattan Institute, described 421-a as “a complication invented to offset the problems of a needlessly complicated and unfair system." She called the City Council compromise reasonable, and said the Assembly proposal would be too burdensome on small developers.

Bonds running out?

The New York State Association for Affordable Housing also pointed to a shift in the pattern of subsidies sought by developers. Given that the certificate program expires next this year, “developers in prime neighborhoods… are instead applying for tax exempt bonds to build 80/20 rental buildings.”

Given the finite amount of bonds available, the organization expressed concern that demand for 80/20 financing would “crowd out the 100% affordable projects that our members hope to use this same financing to build.”

Support for reform

Brooklyn Community Board 8, which includes Prospect Heights, endorsed Lopez’s bill, as did the housing advocacy group ACORN. Robert Furman, chairman of the Four Borough Neighborhood Preservation Alliance, also endorsed the Assembly bill, saying the city reform didn't go far enough.

“Taxpayers are subsidizing the destruction of our neighborhoods by developers of so-called luxury housing,” he said, nothing that the GEA was not expanded to most of Queens, “in most of southern Brooklyn, which is also middle-class, not to mention Staten Island.” Apparently his point got through.

Other issues

Lawrence Brinker of the Building Industry Association of New York City pointed to some other issues. “We believe the single most problematic impediment to affordable housing is the cost of land,” Brinker testified, urging the committee “to examine the true cost of downzoning on affordable housing.”

Brinker also asked the committee “to examine the rising cost of building materials,” which affects housing affordability.

Tax policies & federal support

Jerilyn Perine, executive director of the Citizens Housing and Planning Council, blamed “the City’s tax assessment policies which unfairly tax residential rental property,” noting that elevator apartment buildings have an effective tax rate that is more than five times higher that of condos or co-ops.

Beyond the “inequalities in the tax assessment system which continues to unfairly burden the construction of new rental housing,” Perine also pointed to the declining federal support for public housing and Section 8 rental subsidies, which have had a ripple effect in diminishing affordable housing.