Wednesday, May 12, 2010

Another push to turn luxury condos into affordable housing, but cost is unclear; report proposes eminent domain for condos but slams it for AY

Can 4000 empty luxury condos, including some in and around Downtown Brooklyn, really be converted into low-income housing owned by a community land trust or the New York City Housing Authority?

Several activist groups say yes, though their proposals--involving tax foreclosure and the use of eminent domain--are thin on the actual number of condos that might qualify, given that only a fraction are in empty buildings rather than simply languishing on the market.

Also not estimated is the cost of such housing programs, which would be significant, and the comparison of this tactic with others aimed at achieving subsidized housing. The cost likely would be much greater than the Housing Asset Renewal Program, proposed by Council Speaker Christine Quinn, and Project Reclaim, proposed by Brooklyn Assemblyman Hakeem Jeffries, which have similar goals but do not require permanent affordability nor limit the buildings to low-income residents.

Still, a report issued yesterday makes some policy recommendations that deserve discussion: development tax breaks should be suspended, and owners of buildings who warehouse their units for more than a year should be assessed fees.

Among the e
lected officials supporting the report are Brooklyn City Council Members Letitia James and Brad Lander.

What about AY?

The report criticizes New York State for using eminent domain "to pave the way for large-scale, luxury development projects," such as Atlantic Yards, the "vast majority of which will be luxury, market-rate housing despite the proliferation of failed luxury housing that already currently exists in this area."

(The report says AY will help" further the gentrification of low-income communities." By contrast, ACORN, Forest City Ratner's partner, contends the project will help fight gentrification. The Empire State Development Corporation says gentrification was already happening in the areas nearby.)

Also, given the large number of market-rate units yet unsold, the report implicitly casts doubt on projections by Empire State Development Corporation consultant KPMG that condo prices in AY towers would reach $1217/sf in 2015.

The overview

From a press release issued yesterday:
Six primarily low-income neighborhoods across the city are home to 4,092 empty housing units, on the market for an average of nearly $2 million, as New York City continues to face record homelessness and increasingly unavailable low-income housing, according to new data released today by Right to the City-NYC (RTTC-NYC). The report, "People Without Homes and Homes Without People: A Count of Vacant Condos In Select NYC Neighborhoods," follows RTTC-NYC’s fall count of vacant condos in these six neighborhoods.

The luxury units, in both completely and partially vacant buildings, include 138 condo buildings that collectively owe $3.8 million to the city in back taxes for being more than one year delinquent on property, water, or sewer taxes. RTTC-NYC— a coalition of community organizations—joined with elected officials today to call on the City to acquire the tax delinquent buildings through tax foreclosure and convert vacant units into permanently affordable housing for low-income New Yorkers.

“Luxury buildings are sitting empty in the middle of neighborhoods impacted by the recession and high rates of homelessness. These same buildings are costing the city millions in missing tax revenue. This is no brainer— New York City shouldn’t stand for vacant housing when so many people in those same communities are in need of a place to live,” said David Dodge, the Right to the City Coordinator and one of the primary researchers on the project.
To which Real Estate Board of New York president Steven Spinola told Metro, “If an owner wants to charge a certain amount and believes he can get it, he has a right to hold onto it."

Looking more closely

Well, yes, but. If buildings are in tax arrears, the owner's rights diminish.

And, as Manhattan Borough President Scott Stringer has suggested, based on a plan from Boston, taxes could be increased on warehoused land and buildings.

Some of the examples, as shown at left (click to enlarge), do not necessarily make the case for turning condos into low-income housing. Yes, the Forte condo faced foreclosure; that led to lower prices. The owners of the Oro were forced to lower their prices as well, and might have had to do so faster were a law in place regarding warehoused apartments. (KPMG lied about sales at the Oro, as well.)

Crain's New York headlined its coverage 4,000 new luxury condos sitting vacant. The New York Daily News headlined its coverage Taxes take hit in luxury condo bust: study.

Solution: public housing?

More from the press release:
In addition to the proposal for buildings in tax arrears, RTTC-NYC’s report includes other recommendations for creating affordable housing from empty condo units including: converting units into public housing or community land trusts and seizing vacant condos by eminent domain.

RTTC-NYC is additionally recommending suspending development tax breaks to developers and imposing fees on owners of buildings who warehouse their units for more than a year. The Coalition is encouraging the City Council to pass legislation— Housing Not Warehousing (Intro 48)—to require an annual, citywide count of vacant properties in New York City. The legislation, introduced by Council Member Melissa Mark Viverito, currently has 28 co-sponsors.
Downtown Brooklyn

RTTC-NYC identified empty units and buildings in tax arrears in six neighborhoods, including Downtown Brooklyn, defined generously as extending to Bedford-Stuyvesant, including Community District 2 and part of Community District 3.

In Downtown Brooklyn, canvassers identified 829 empty units. Most of them, 711 units, were in 36 partially vacant buildings where, presumably, price cuts could lead to buyers.

However, there are 15 completely vacant buildings with 118 vacant units.

There are also 26 buildings in tax arrears, with more than $1 million outstanding. Is that enough to lead to foreclosure? Unclear.

Looking for the list

I asked for a list of buildings and was told it wouldn't be released. RTTC did provide two additional Downtown Brooklyn buildings, among those with the largest tax arrears:
  • 525 Clinton Ave in Clinton Hill (owes $324,689)
  • 80 DeKalb in Fort Greene (owes $240,980)
Forest City Ratner's 80 DeKalb, according to a Brownstoner tipster, is supposed to be 50% rented. If it's in tax arrears, I'd bet it's less that the building is vulnerable to foreclosure than Forest City Ratner maintaining cash flow.

Or maybe it's more complicated. FCR also missed a mortgage payment at 10 MetroTech, which is the main component of the block-wide complex that includes 80 DeKalb.

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