Thursday, November 17, 2011

Bait-and-switch: Ratner says "existing incentives" don't work for high-rise, union-built affordable housing. Which he proposed--and the state approved.

There's a stunning contention in the Wall Street Journal article headlined Ratner Goes 'Modular' in Brooklyn, dated 11/18/11:
The project's planned 6,400 apartments—and particularly the 2,250 units pledged for low- and middle-income tenants—were a key selling point for the development when it was approved by the state over neighborhood criticism in 2006. It was later stalled by lawsuits contesting the use of eminent domain, and then slowed by the economic downturn.

Now Forest City has told government officials that the high proportion of affordable apartments has made it difficult to make the economics work for the towers, despite a surprisingly strong rebound in the rental market.

Previously, the company asked the city for additional subsidy to make the first Atlantic Yards tower move forward, to no avail.

Mr. Ratner said Thursday that the existing incentives for developments where half the units are priced for middle- and low-income tenants "don't work for a high-rise building that's union built."

He added that he had "accepted the fact that we're not going to get more subsidy."
(Emphasis added)

The bait-and-switch

Ratner proposed a development that, at least in part, contained half subsidized units, (Atlantic Yards is supposed to have 6430 apartments, as approved, with 1930 condos and 4500 rental units. Half of the latter would be subsidized, "affordable" units.)

Ratner proposed a development that would have high-rise towers built by union labor. The promised quantity of jobs and amount of housing won him support from unions, advocacy organizations, and elected officials.

He never said he couldn't do what he proposed. In fact, he got a state override of zoning that would allow a the buildout his firm calculated was necessary to deliver profits.

The state approved Ratner's revised proposal in 2009, with a report by KPMG saying that yes, it was plausible to build out the project in ten years, thanks mainly to the demand for subsidized housing. KPMG's report was questionable mainly for its unrealistic estimates regarding the condo market, not the market for mixed-income rentals.

The warning

The state was on notice. A 2009 report by the Kahr Real Estate Group, commissioned by the Council of Brooklyn Neighborhoods, warned:
It is extremely unlikely that the full project can be financed and completed within 10 years at a profit by a private sector developer without substantial subsidies in excess of what has already been currently proposed.

That's exactly what Ratner admitted today and why he's seeking concessions from unions and/or building modular.

Two years ago, did anyone official heed the warning? No.

"Different opinions," Empire State Development Corporation (ESDC) Senior Counsel Steve Matlin said dismissively on 9/17/09, contrasting the KPMG study with the more pessimistic Kahr report.

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