Skip to main content

Pratt Center on 421-a renewal plans, which extend subsidies without affordability: A Luxury Housing Subsidy New Yorkers Can't Afford

According to a new issue brief (embedded below) by the Pratt Center for Community Development, the 421-a tax exemption to support new housing, cost New York City nearly $755 million last year in foregone taxes, or two-and-a-half times the level of property taxes forgiven under the program just five years earlier.

Now, the state legislature is poised to renew it, part of negotiations on rent regulation, the Pratt Center notes that it has produced only 5700 units of affordable housing over some 25 years.

What news outlets have picked up this news? Just City Limits, as far as I can tell.

The failure of reform legislation

Brooklyn readers should note the failure of reform legislation, announced just about the time that Atlantic Yards was first approved.

(Red dots show projects that have been completed and are currently receiving a 421-a abatement; black dots represent sites for future development that are exempt from the affordable housing obligation. Note several sites in Prospect Heights and in other neighborhoods reasonably close to the Atlantic Yards site.)

The report states:
Four years ago, the City Council and state legislature both sought to strengthen affordable housing production under 421-a by expanding the “exclusion zone”—so-called because projects in this area do not qualify for the as-of-right benefit but must instead contribute affordable housing in order to receive a tax break. The zone now includes areas in all five boroughs where developers must include affordable housing in tax-abated development projects, generally in neighborhoods where new market-rate housing is particularly expensive (see map). The administration also committed to placing $400 million into a new “421-a affordable housing fund” to be used for development in the city’s highest-poverty areas; combining Battery Park City revenues and city capital funds, it replaces an inefficient system under which affordable housing developers sold certificates to market-rate developers who claimed the abatement. The City capped benefits, so that owners of ultra-luxury apartments would no longer claim breaks worth tens of thousands of dollars annually. Finally, the revised law determined that all projects receiving benefits in the exclusion zone would have to provide their affordable housing on site.

“The changes have modernized the tax incentive to better target it towards the creation of housing for low- and middle-income families and will generate hundreds of millions of dollars for affordable housing,” the Bloomberg administration announced in the 2009 update of its New Housing Marketplace Plan. “The reforms are designed to create the maximum amount of affordable housing for the city while also ensuring that construction of new housing will continue at a strong pace.”

Unfortunately, projects built at the end of the boom were not covered by the expansion of the exclusion zone, and produced little or no affordable housing. In renewing the abatement in 2007, the state legislature determined that projects in the expanded exclusion zone had until June 30, 2008, to begin construction under the old law, under which they were granted the 421-a benefit as of right. This has enabled developers to build thousands of market-rate housing units in the expanded exclusion areas, and reap the tax benefit, without including affordable housing. These projects were also granted an exemption from a cap the City had sought to impose in an effort to rein in subsidies for ultra-luxury housing; the cap would have limited the exemption to about $9,000 per unit annually.

A Pratt Center analysis has found that in the two years leading up to that 2008 deadline, developers initiated construction on 271 residential sites eligible for 421-a, totaling more than 7,800 permitted units, in the new exclusion zone areas. Of those, 123 sites are now built and occupied, totaling 2,219 units of housing.... The remaining 148 sites are vacant, according to the Department of City Planning Pluto database 2010. Under the legislative measures introduced this year in Albany to renew 421-a, all will continue to remain eligible for 421-a benefits without an affordable housing obligation, under a new provision allowing for an “extended construction
period” of three years, in addition to the three years already allowed. Developers have established tax abatement eligibility for 5,642 units for these permitted sites, worth $30.9 million a year—again, with zero commitments for affordable housing production.
Pratt Center 421-a analysis, June 2011


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…