At brief meeting of advisory AY CDC, talk of a potential legislative “fix”--extension of tax break and/or deadline?--as project faces affordable housing crunch.

The meeting Tuesday, 3/23/21 of the advisory Atlantic Yards Community Development Corporation (AY CDC) was brief, less than 40 minutes, and mostly uneventful, with dutiful recaps of previously shared information and no comments submitted from the public.

(Of course, those comments had to be submitted a day early, so there’s no opportunity for real-time reaction.)

But at the end of the session, Chair Steven M. Cohen (also Chairman of Empire State Development, or ESD), a gubernatorial ally, offered a new, albeit not shocking, suggestion: a legislative “fix” might be needed to enable the project to meet its affordable housing obligations, which include 876 more affordable units by May 2025. If not, the developer faces fines of $2,000 per month for each missing unit.

What that "fix" means is unclear, though it could include a targeted extension or modification of the Affordable New York tax break, set to expire in June 2022, to allow for buildings that start after that date. It’s unclear, for now, whether that tax break will be modified or renewed in general.

Or it could mean relaxation of the May 2025 deadline, though developer Greenland Forest City Partners (GFCP) has said it has not asked for an extension, and both it and ESD have previously said the affordable housing obligations remain solid.

Nor is it clear whether a "fix" would enable the project to meet the spirit of the obligations--a full range of below-market, income-linked units--rather than a larger proportion geared to middle-income households.

Affordable housing and the delayed platform

Scott Solish of Greenland USA--which by far dominates GFCP--said about approximately 61% of the total required affordable housing units are on track given the 782 apartments already built and 592 under construction, expected to be finished by 2023.

That means the rest must be built over the six towers planned over the two-block platform over the Vanderbilt Yard--though the platform hasn’t started.

Director Gib Veconi, who has long pushed on this issue via the coalition BrooklynSpeaks, noting that the developers had said the platform would start in 2020 but it had not, asked about the delay.

Marion Philips III, an Empire State Development (ESD) executive who also serves as AY CDC President, noted that “the developer and the [Long Island Rail Road] are still working out a number of concerns,” and “ESD has engaged the railroad and asked to get railroad to get more involved.”

ESD has the twin roles of overseeing and shepherding the project; the latter seems a priority, for now.

Solish said they “lost a number of months with the railroad in terms of the impact of COVID on their operations and their availability.” That doesn’t quite explain the full delay, however.

After Solish noted that it’s a complex endeavor, Veconi pointed out that “this is not a new part of the project” and asked if there was “some new element of the design that they're concerned about.”

Solish said no, adding that the “stack of documents is about six telephone books tall” and 13 or 14 departments at the Metropolitan Transportation Authority departments must review things.

Veconi asked if a contractor was signed to construct the platform. Solish said yes but clarified that “the formal contract has not been signed,” though a contractor with extensive LIRR experience is on board.

Asked if the firm is a MWBE contractor—minority- or women-owned business—Solish said he didn’t know, but noted that only a handful of firms do such work. (I suspect that if the firm were an MWBE, they’d be trumpeting it.)

Middle-income skew

Veconi--at about 24:00 into the video--noted that the income-linked “affordable” units that have been delivered so far have been largely skewed to middle-income households.

He mentioned my Bklyner article that noted a disclosure by the lender for 18 Sixth Ave. (B4) that apartments would be geared to middle-income households earning 130% of Area Median Income, or AMI. That means households largely earning six figures. 

Middle-income apartments, Veconi said, have not been easy to get rented in this project, given that some at 535 Carlton and 38 Sixth have had to go to the open market and even offer rent concessions--a month or more free. 

(Those were units at 165% of AMI. My Bklyner article noted rent concessions have been given at other projects around the city with units 130% of AMI.)

Questions about 18 Sixth

Veconi asked about the affordability breakdown at B4, including by unit size: “This is a very, very important public benefit of the Atlantic Yards project and I'm concerned that we're not delivering it.” 

He didn't quite get an answer.

Solish said Atlantic Yards/Pacific Park “ping-ponged around a little bit,” given changing laws, notably the revision of 421-a tax break, now called Affordable New York. That removed condos as well as a “carve-out” that allowed the developers to deliver the requisite percentage across the entire project, rather than, as now, in each building that gets the tax break.

So they had to "relook at the project plan, and also look at the changing priorities of, especially, the city housing agencies, which when you’re looking at projects that are close to 900 apartments, are significant."

"So there’s no public financing in this project," Solish said, omitting the significant savings from the tax break.

"The income levels—the final rents and income bands for all the units has not been set," Solish said. "There will be a variety of units in there." It's unclear whether he meant a variety of unit sizes and/or a variety of income levels, averaging 130% of AMI.

"There's nothing's been finalized yet, but it will be under the Affordable New York plan because there was no [additional] bond financing deal here," he said. He did not refute the statement by the lender regarding units for those at 130% of AMI.

Going forward

Regarding future buildings, Solish suggested that the federal stimulus plan bolsters city and state budgets, and “we remain totally engaged with HDC [NYC Housing Development Corporation] and HPD [NYC Department of Housing Preservation and Development] and look for ways to deliver on a variety of affordable units. And I think to date we have done so and continue to do so.” 

Veconi noted that the Affordable New York tax break expires in June 2022, and could be renewed on different terms, potentially posing a risk to the project.

Solish noted that if construction begins before the expiration date, the tax break applies if that building is finished by 2026. (It's possible that the obligation could be met in only two buildings, if one or both is mostly affordable units.)

Veconi noted, for the benefit of the directors, that the platform hasn’t started and “that's a three-year process.” Each of the two blocks could take three years, though possibly overlap. That said, for now the market for that much housing, especially the market-rate units, is a bit murky.

Solish said there “will hopefully be the ability to phase the construction of the buildings,” so construction continues in parallel with platform construction. He noted the pre-placement of certain foundations in the railyard for B5 (700 Atlantic Ave.), directly east of Sixth Avenue, which is expected to be the first building finished. Permits have been filed for that building, but not yet approved.

A state fix?

Cohen suggested “there may simply be a timing problem.” If so, “the only fix will be I suspect a legislative one,” he said, which would “allow us to stay in a place where we could complete what the directive of this project is.”

Cohen said he would talk to ESD staff and figure out a potential “contingency plan.”

No one discussed what that could mean, but it could potentially mean either an extension of the tax break, an extension of the deadline, and/or additional subsidies and support to enable a range of income targets.

There’s some logic to a partial extension of the May 2025 deadline, keyed to the relatively few months lost to the pandemic, but, given that the developer has steadily said they will meet the obligation and not ask for an extension, it does raise a question of why the fines put in place shouldn't simply stand. After all, the money would go to support affordable housing.

(Update: as Veconi points out, it may be too late to claim Unavoidable Delay. And the escape hatch for "Affordable Housing Subsidy Unavailability" means that "the inability to obtain financing under such programs for Affordable Housing Units then generally available to developers of Affordable Housing Units"--also unlikely.)

Other issues

The board routinely approved the AY CDC’s $250,000 budget, which supports two employees and is paid for by the developer.

Director Ethel Tyus asked if there was a written version of the budget.

“Yes, the budget is part of the directors’ materials that was shared and also it's been posted online with the meeting notice,” said Tobi Jaiyesimi, AY CDC Executive Director.

Note: while I’m not sure when the directors got their materials, the budget, as well as the AY CDC’s President’s Report, were both posted just as the meeting began, as far as I can tell. They are included below.

Phillips’ report was essentially: no news about Site 5, the platform, affordable housing, retail tenancies, though—as previously mentioned—a tenant is soon expected for 38 Sixth Avenue. He noted progress at the four towers under construction and resumption of Brooklyn Nets games at the Barclays Center.

Jaiyesimi offered an update on the two virtual Quality of Life meetings held in the past few months, noting questions about affordable housing, arena operations, and “the construction schedule.”

My translation of the latter: ESD had consistently been mis-reporting the actual work hours, downplaying the scope of after-hours variances.