Monday, July 07, 2014

New Atlantic Yards housing configuration (and potential map of clustered all-market towers) reflect prescient question about balance "between developer profit and housing affordability"

As I wrote in my 7/3/14 article in City Limits, Behind Atlantic Yards Housing Deal, Some Big Shifts, "The provision of two 100 percent affordable towers, as well as emerging plans, puts Atlantic Yards on a course to depart from the promise that all rental towers would mix affordable and market-rate units."

Read the article for more but first take a look at the graphic I adapted, based on a tentative Forest City Ratner timetable. (The latter is marked "for illustrative purposes only," but conforms at least to the plans for the next four towers.)
Buildings outlined in yellow: 100% affordable. 
Buildings outlined in red: 50% market, 50% affordable.
Buildings outlined in green: 100% market-rate rentals or condos.
B4, at the northeast corner of the arena block, would include both 50/50 rentals and condos. 
B1, in black next to the arena, should hold office space, but was once supposed to include apartments and a hotel. 
The plan for Site 5, now home to Modell's and P.C. Richard, remains a question mark.

Note that only Atlantic Yards rental buildings were supposed to be 50/50. Then again, when Atlantic Yards was announced in 2003 and when ACORN signed the Affordable Housing Memorandum of Understanding (MOU) in 2005, it was to contain four office towers around the arena and eleven or twelve mixed-income towers with rental apartments.

Only after that MOU was signed—which required ACORN to publicly support the project—did Forest City announce it would swap office towers, for which there’s less of a market and depending on an anchor tenant to gain financing, for more lucrative condominiums. That also upended the pledge that 50 percent of all Atlantic Yards housing would be affordable.

Now not only condo buildings would be all-market, but so too would be some rental buildings. Also note that, in August 2007, Forest City got a "carve out" from state legislators allowing 421-a tax breaks to apply to the project as a whole, based on overall affordability, rather than requiring each building to have affordable units.

A prescient prediction

On 7/1/07, I quoted Boston-based affordable housing analyst, David Smith, after the belated release of Atlantic Yards financials, which the Times suggested showed risk in the project.
“This is an extraordinarily complex undertaking, with many moving parts,” observed Smith. “The moving parts -- the financing plan, with multiple phases, multiple property uses, and multiple potential sources including subsidy and concessionary government capital -- mean volatility.

So, he observed, “sequencing is key: what happens in what order, and who decides what changes are made to the development plan? If the developer has all the optionality -- that is, control over the responsive actions taken after unexpected favorable or unfavorable outside events -- and the city has none of the optionality, then it's very likely that the developer can navigate through all the complexity to a successful deal, and achieve this result by adjusting the affordable housing to be fewer apartments, to happen later in the development sequence, and to be redefined upwards.”

The affordable housing wasn't redistributed later in the development sequence, but the development sequence was extended to 25 years, not ten. Now the sequence has been tightened to 15 or 16 years.

“The question," suggested Smith at the time, "isn't, 'Could the developer make a lot of money?' nor even 'What is the public getting and what is the public paying?' but rather, 'As things change in the future, who decides how the gains and losses are shared between developer profit and housing affordability?'"

The results

Who decides? There was no public process, but what emerged surely is an improvement in terms of the timetable and the provision of family-size units. But there's also a retreat--at least in the first two buildings--in terms of affordability.

Those family-size units presumably cut into developer profit. There are seemingly significant penalties, $2000 per unit per month, for delays, albeit with an asterisk: an ability to claim unavailability of subsidy or financing.

At the same time, as I reported, the affordability in the next two buildings skews significantly toward the upper-middle-income cohort, who'd pay some $3000 for a two-bedroom unit. That cohort would get half the affordable units, not 20%.

Such units would be below market rates. But they're not aimed at the people who rallied for the affordable housing.

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