Skip to main content

Empty luxury condos, government intervention, and AY housing

The slogan "the right to the city," formulated in 1968 by the French Marxist Henri Lefebvre to imply a right to housing and other elements of urban life, has lived on in several ways, including a controversial effort to turn empty luxury condos into subsidized housing.

The Right to the City-NYC coalition, which includes housing advocacy groups and several elected officials (including Prospect Heights Assemblyman Hakeem Jeffries) held a press conference in Downtown Brooklyn on October 27 to urge the city "to convert these vacant condos into deeply and permanently affordable housing for low-income New Yorkers." (Here's CityRoom coverage.)

Others involved were City Council Members Melissa Mark Viverito, Letitia James, and Maria del Carmen Arroyo. While the group has the same general goals as the city in its Housing Asset Renewal Program (for which $20 million has been allocated), the latter is aimed at moderate- and middle-income families.

As Crain's reported in an article headlined Survey finds 601 troubled condo projects:
Right to the City identified Be@Schermerhorn, a 246-unit luxury condo, with a vacancy rate of more than 93%, and Forté, a 108-unit luxury condo, with a vacancy rate of more than 60%. Both buildings have been on the market for at least a year. Forté was recently taken over by its lender Eurohypo bank. The group has not identified specific buildings in the Manhattan neighborhoods yet.
Can it work?

Crain's offered some skepticism:
It's unclear how many developers want to participate in the Housing Asset Renewal Program, but industry officials note that developers may shun such a program for a number of reasons. They note that such government programs will take at least two years to implement. And some developers may have the resources to wait for the economy to recover.

“By the time government takes action, apartments will start to sell or rent,” said Boaz Gilad, president of Ore International, a Brooklyn-based developer who has been scooping up troubled projects and finishing them at bargain prices. “It might not be a relevant program anymore.”
Another advocate's take

Not every affordable housing advocate is on board. I asked Williamsburg activist Phil DePaolo of the New York Community Council for his take:
The plan to convert stalled site into “affordable housing” is another gift to developers who have abused communities throughout the city with nothing more than a taxpayer bailout. The market adjustment is going as we have seen auctions of properties in Greenpoint, Brooklyn and the Riverdale section of the Bronx. I am also skeptical about the permanency of the “affordable” units and who would be in charge of their oversight.

The city and State must adopt a “multilayered” approach that ensures the protection of Section 8 and Mitchell-Lama housing programs; fights for the repeal of the Urstadt Law that cramps the city’s ability to make its own rent regulations; and cracks down on warehousing of low- and middle-income units by landlords.
Jeffries' justification

In a Daily News op-ed headlined Let's help New York's middle class move into luxury housing on 4/23/09, Jeffries wrote:
Skeptics might view this effort as a utopian solution - after all, why would developers who just invested millions of dollars in an apartment building take so much less in sales price or rent? Quite frankly, they have no choice. The housing market has completely collapsed, and developers confront the prospect of steep financial losses as excess apartment inventory continues to build.

The Department of Housing Preservation and Development and the state Housing Finance Agency can offer developers tax incentives and bond financing to encourage the transformation of luxury apartments into affordable homes. Banks receiving federal bailout money must also be urged to refinance mortgage debt under the condition that the developers rent or sell their apartments at prices the community can afford.
Free-market response

The free-market response to the Right to the City plan comes in a 9/17/09 column by Nicole Gelinas, headlined NY's housing grab: 'Affordable' bribes for banks:
For starters, these plans are huge taxpayer gifts to politically connected developers and banks -- who'll have to cut their prices anyway, without any government bribes.

Developers and their financiers can hang on for a while, keeping condos empty. But eventually, they'll have to throw in the towel and sell off the units at prices that somebody will actually pay -- which isn't likely to be half-a-million bucks for a no-frills Harlem box.

Second, even if these programs really did benefit a few home buyers, it's at the expense of everyone else.

More than three-quarters of New York families would qualify for an "affordable" apartment under the government's income guidelines -- $108,000 a year for families in the state program.

...Middle- and working-class people would do better waiting for market forces to work. As prices for "luxury" condos plummet, they'll also pull down prices of older-stock housing down -- making more homes affordable in all price ranges.
...Finally, Paterson and Quinn would waste money that's needed elsewhere.

Quinn's $20 million for developers and banks could fund all but $5 million of the MTA's five-year plan to fix ceilings in subway stations. Using state credit to guarantee mortgages leaves less debt available for other worthy infrastructure projects.
Sorting through it

After a community meeting last month, I asked Jeffries to comment; he pointed out that the market won't necessarily work, because speculators would just buy the units and hold them, all the while leaving buildings--aided by bailed-out banks and city tax exemptions--empty and thus blighting neighborhoods.

(At the same meeting, Daniel Goldstein of Develop Don't Destroy Brooklyn raised some eyebrows with a half-serious suggestion that the state pursue eminent domain on such empty buildings.)

Gelinas has a point. As does Jeffries. The free market was never really allowed to work--otherwise a lot of those buildings wouldn't have been built in the first place.

To get those empty condos filled without new subsidies, theoretically the city could increase taxes on vacant lots and empty buildings, as in Boston, to incentivize owners. But the city won't do that. In fact, it will let developers maintain stalled building sites for up to four years, so it's going in the opposite direction.

Once upon a time the city was bending over backwards for developers. Now it's making some visible but spotty efforts to help those who need housing.

But what the city needs, more than anything, is a coherent overall policy. And that would mean that privately-negotiated affordable housing agreements like Atlantic Yards, with a privately-negotiated zoning bonus, wouldn't be necessary.

A market for AY?

Maybe the luxury market will sort itself out by then, but this situation does not bode well for the market-rate rentals and condos promised for Atlantic Yards. Will there be a market for $1217/sf condos in 2015?


Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…