Affordable housing faces city budget cuts; as city gets more selective, keep watch on future Atlantic Yards/Pacific Park towers

De Blasio's signature housing plan poised to take big hit from coronavirus, Politico's Janaki Chadha reported 4/28/20, noting more than $1 billion in cuts over the next two years, a significant contrast with the $1.7 billion spent in 2018. It's part of widespread city budget cuts.

That's capital subsidy, as far as I can tell, which is separate from financing. The latter cuts in two ways. As Politico reported, "record-low interest rates in recent weeks have pushed down the value of federal housing tax credits that contribute to the vast majority of the country’s affordable housing development."

However--and this wasn't addressed in the article--I think that low interest rates could also make it easier for the city's Housing Development Corporation to issue tax-exempt bonds, assuming the projects are deemed viable.

City more selective

The upshot, though, is that the city is getting more selective, while hoping for federal help:

"The agency is taking a hard look at the projects in our pipeline and working creatively with partners to find additional sources of financing to move our projects forward," said Matthew Creegan, a spokesperson for the city's housing department. "We understand that affordable housing will be more important than ever on the other side of this crisis, which is why we are advocating for more federal resources to support our push forward."

From yesterday's Politico New York Real Estate newsletter, a link to the paywalled STRAPPED FOR CASH quoted de Blasio: "It's sad to have to delay some of that. It's very sad. But that is the budgetary reality we're dealing with."

Atlantic Yards impact?

The bottom line for Atlantic Yards/Pacific Park is that new construction will be competing for subsidy and financing with other projects.

The B12 and B13 towers--615 Dean Street and 595 Dean Street--were supposed to start in the middle of the year, and are surely delayed. The financing structure was not announced, so it was unclear whether the towers would rely only on the Affordable New York tax break, or another combination of subsidies.

Note that, as I reported last June, an executive at TF Cornerstone, which is developing those two towers, expressed general dismay about affordable housing requirements. Surely his company is reassessing the bottom line for projects, including those on Dean Street.

A new emphasis?

Politico quoted

“To the extent that there’s more limited city subsidy overall, this is an opportunity to think about [mandatory inclusionary housing] projects in neighborhoods where there is a stronger real estate market and where it doesn’t need additional subsidy to make MIH work,” said Michelle de la Uz, executive director of Fifth Avenue Committee. “Perhaps there’d be more openness in those neighborhoods than in prior, different conditions.”

That's a reference to parcels in more prosperous areas, like the upzoning for the 80 Flatbush project--on which de la Uz is partnering--at the border of Boerum Hill and Downtown Brooklyn. Atlantic Yads/Pacific Park is a state override of zoning, not a city project, but the affordable housing financing comes from the city.

Lowered costs, new challenges

City Limits, in a 4/23/20 article headlined What Will COVID-19 Mean for Housing Development in NYC?, noted that the coronavirus could cut both ways:

An economic downtown could reduce some costs for acquiring and building new housing, but it could also hamper the ability to fund new housing and deepen the needs of the tenants it serves.
According to the NYU Furman Center, the immediate future of affordable housing depends on two factors: whether social-distancing rules force a slowdown in new construction, and whether there is any substantial drop in the value of tax credits, which are vital to funding new housing. During the last recession the value of tax credits fell substantially. If the value falls, then the government (city, state or federal) has to put in more subsidies to achieve the same volume of housing.

What happens to condos?

The article quotes real estate attorney Jonathan Adelsberg regarding market-rate units:

Given those challenges, Adelsberg said developers, including some of his clients, will need to renegotiate the terms of their loans with their existing lender and condominium sales will have to be reevaluated for potential extensions or deferral of payments. Sellers and buyers will also face some difficult choices: A seller may not get the best price and buyers may want to hold onto their down payments.

For that, at least, the developers of Atlantic Yards/Pacific Park might be glad that they built only one condo tower.