Now that 421-a is back, new momentum for Atlantic Yards/Pacific Park units?

Last November, when Forest City Realty Trust announced--presumably after agreeing with joint venture partner/overseer Greenland USA--an unspecified delay in Pacific Park project residential construction, CEO David LaRue cited the impact of increased apartment supply, uncertainty surrounding the 421-a tax abatement, and increases in construction costs.

Well, now 421-a--or, rather, its successor--has been settled in Albany, and will last at least five years, giving developers more certainty in planning ahead, at least regarding rental units. The resolution is surely not the only reasons for delays--two buildings, 615 Dean (condos) and 664 Pacific (rentals)--already have the tax exemption, but have not gotten started, and only the latter is hampered by a related lawsuit.

But the resolution of 421-a surely helps the developers' financial prognostications, and helps with any planned sale of building sites or shares of future rental buildings. So this resolves some uncertainty and should provide some momentum--though perhaps not for condos (see below). Let's see what developer Greenland Forest City Partners says going forward.

Still, that glut in supply may take a while to resolve.

(Atlantic Yards/Pacific Park would have 4,500 rentals, half below-market, and 1,930 condos, 200 subsidized. Four buildings are completed or nearing completion, including one condo building, one 50% affordable building, and two 100% below-market buildings. No other buildings have begun vertical construction.)

The overview

Here's the overview, according to the New York Times, 4/10/17, Affordable Housing Program Gives City Tax Break to Developers

The newly named Affordable New York Housing Program, announced at a news conference in Albany, will annually generate 2,500 units of housing affordable to poor, working-class and middle-class New Yorkers, Mr. Cuomo said. In a change to the nearly 50-year-old program, developers will be required to pay a “fair wage” to construction workers to qualify for the city tax benefits.
...But some housing groups and budget watchdogs said that the new version of the program will be more expensive than past versions and that it was overly generous to developers.

...The city estimates that the housing program will cost $82 million a year more in unrealized taxes than it would have under the 2015 proposal.

For now, 421-a involves some $1.4 billion per year in forgone taxes, according to the Times, and the revision would cost $82 million a year more. The 421-a vote was part of an overall plan that also allots $2.5 billion statewide over five years to build 100,000 units of affordable housing and 6,000 units of supportive housing, according to the Real Deal,

Condos included?

From the Real Deal:

Other casualties of the final deal included the Senate’s earlier proposal to increase the number of eligible condo projects. The Senate introduced its own version of 421a, where condo developments with as many as 80 units could qualify. However, the agreed abatement still only allows condo projects in the outer boroughs with a maximum of 35 units and an average assessed value of no more than $65,000. 

(Emphasis added)

That would seem to exempt the future Atlantic Yards/Pacific Park buildings, though 421-a can be murky, and the project is always subject to change. Stay tuned.

The Association for Neighborhood and Housing Development (ANHD) produced the following graphic

Criticism from ANHD

From the ANHD statement:

We will need the $1.4 billion – and growing – that we spend each and every year on 421-a to fill the holes that will be left in the local budget by Trump’s federal budget cuts for essential services. 421-a does little to actually create affordable housing, with 79 cents of every 421-a dollar spent going to luxury development, and only 11 cents going to support affordability. A growing body of evidence suggests that the 421-a exemption doesn’t even accomplish the most minimal public purpose of incentivizing new market-rate development.
Resurrecting 421-a is also a body blow to tenants because changes in the law, for the first time, include the interests of the construction trade unions, which severely limit the ability of tenant-friendly legislators to use the program as leverage to defend or strengthen rent regulation against and anti-tenant legislators.
...And the increase in cost won’t just come after year two of the extended tax exemption; it will come immediately. Developers will find the enhanced benefit irresistible since it allows them to not pay taxes for an additional ten years. We will see a rush of developers applying for the new 421-a program and see developments from the last 1.5 years retroactively being granted 421-a, at a great cost to taxpayers.
No additional affordable units, or deeper level of affordability will be generated by the REBNY proposal, and the increase in the length of affordability is minor. The primary beneficiaries will be market-rate and luxury real estate developers, who will have their already substantial public subsidy increased by an estimated 22.5% in each new building. A fraction of the increased value given to the developer will be passed along in the form of higher wages for the short-term construction labor.

Support from REBNY

From the Real Estate Board of New York (REBNY), 4/8/17:

“We applaud the agreement reached between Governor Cuomo and the State Legislature, under the leadership of State Senate Majority Leader Flanagan, Independent Democratic Conference Leader Klein and Assembly Speaker Heastie regarding the Affordable New York Housing Program. It will result in the production of substantially more affordable rental housing that is critical to New York City's growth and future.”