Wednesday, May 06, 2015

Does Atlantic Yards serve as a good example of union-built affordable housing? Not quite, given history and changes

The closing paragraphs of the 5/5/14 New York Times article about proposed changes to the 421-a tax break, Lobbying Campaign Aims to Overhaul Housing Tax Abatement Plan:
An increasing percentage of residential construction projects are being built by nonunion companies. Dismayed by their declining dominance, the city’s construction unions have sought to require any projects with government tax breaks or other subsidies be built by companies paying “middle class,” or union wages.
Developers and builders, in turn, have told city officials that they can either build affordable housing or hire union contractors, but they cannot do both. They argue that taxes and land and construction costs in New York are the highest in the country.
Union officials say there are a number of affordable housing developments using union labor, including the huge Pacific Park (formerly Atlantic Yards) project in Brooklyn. Construction jobs, [Paul] Fernandes [executive director of the New York City and Vicinity Carpenters Labor Management Corporation] said, are one of the last avenues into the middle class for poor people.
Atlantic Yards, of course, is hardly the simplest example.

First the project was essentially a private rezoning: Forest City Ratner chose the size it wanted to build based on an analysis of what would be profitable, including both market-rate and subsidized units. That was approved in 2006 and again in 2009.

Then, in 2011, developer Bruce Ratner told the Wall Street Journal that "existing incentives" don't work for high-rise, union-built affordable housing--even though that's what he proposed and the state approved.
Then Ratner launched an ambitious, risky effort to build the entire project using prefabricated modular construction. So far, that hasn't worked.

However, with a new investor and lead partner in a joint venture, Greenland Group, the developer--now Greenland Forest City Partners--is in fact building the affordable housing with union labor.

That suggests several potential adjustments:
  • Greenland, eager to make a splash in New York, requires less profit
  • the cross subsidy from the market-rate rentals and the condos is greater than previously assumed, given the market
  • the de Blasio administration has allowed the target incomes and rents for the affordable housing to rise significantly
By no means does this suggest that developers are right. But the Atlantic Yards example is way too complicated. The devil is always in the details. 

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