Skip to main content

REBNY: 421-a reform threatens 5,500 affordable units, including Atlantic Yards/Pacific Park (but evidence/likelihood?)

The Real Estate Board of New York (REBNY), pushing back against calls to kill or reform the 421-a tax abatement, has issued a report arguing that several projects, including Atlantic Yards/Pacific Park, would not go forward unless the tax break is kept. (As I explain below, their explanation is rather thin.)

As reported by Crain's New York, in Developers fire back against calls to kill tax break, REBNY asserts "Nearly 5,500 affordable apartments in just nine projects would never have been planned if not for" 421-a, which expires in June 15 but likely will be reformed. It lowers property taxes for 25 years in most cases, 15 years in some.

"There is little doubt that the 421-a regulatory regime needs to be revised," Jesse Keenan, research director at Columbia University's Center for Urban Real Estate, told Crain's, referring to charges that it subsidizes luxury housing without any requirement for affordability. But he and others don't want to lose it.

There is a logic to the tax break, since it is part of the city's crazy-quilt pattern, which begs for reform. (Here's City & State coverage of the problem.) As REBNY states in the report (below):
According to the Independent Budget Office (IBO) Report on Real Property Taxes, residential rental buildings pay property taxes at a rate five times greater than coop and condo buildings. Given the enormous and inequitable tax burden on multi-family residential rental property, we will continue to need a robust, as-of-right tax exemption program to offset for a period of time the crushing burden of property taxes to build new housing and to preserve existing rental housing
One question, however, is who benefits. As Crain's notes, 421-a has fueled an increase in the price of land, and different parties debate whether a reform or expiration would lower land costs or simply stall construction until the market adjusts.

Crain's 2/11/15 quoted a broker saying three-quarters of the bidders dropped out of an auction because they realized they couldn't start construction to meet the 421-a deadline, which raised risks too high.

From REBNY: Pacific Park wouldn't be built?

The REBNY report, it says, "is not intended as a comprehensive look at all of the projects that are relying on the renewal of 421-a, [but] begins to tally some of the market-rate and affordable rental units that would likely not be created if the 421-a program were not renewed this June... These preliminary findings indicate that over 5,484 affordable rental units would likely never be built, along with the 13,801 market rate rental units associated with the same projects."

The report omits units already in construction, which have secured the 421-a partial tax exemption. That's why the report states that 1,468 affordable units at Atlantic Yards/Pacific Park are in jeopardy rather than the full 2,250 subsidized unit, because three towers with some 782 subsidized units--including B3 (aka 30 Sixth Avenue)--should be under construction by June.

It's not clear why the report claims that only 3,720 additional units in the project will be built using 421-a. Another way to see it is that the entire project will benefit from 421-a, since the eligibility standards were stretched to allow affordability calculations based on the entire project.

More importantly, we're supposed to take it on faith that the project wouldn't work without 421-a *and* that any reform would kill this project. Rather, I suspect that REBNY is using projects like these to argue for the most advantageous retention of the tax break.

If for some reason 421-a reform does affect Atlantic Yards/Pacific Park, that would set up a tension with the 2025 deadline to build the affordable housing.

The developers likely would be able to avoid fines for delay by claiming a subsidy unavailability. But before that we'd likely see a united front among developers, elected officials, and housing activists--at least those associated with this project--to retain the tax break.

The effect over time

The REBNY report claims:
In order to reach its goal of constructing 80,000 new affordable housing units in ten years, an average of 8,000 units per year must be built. The 5,484 affordable units included in this analysis represent over 68% of the units that would need to be produced in a given year. Even assuming these units will be constructed over a few years, this loss would be a significant hit to the City’s housing program, especially since the projects included in this report have already gone through various time-consuming approvals processes. 
(Emphasis added)

Even assuming these units will be constructed over a few years. Yes, how about ten years in the case of Atlantic Yards/Pacific Park.


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…