As 421-a tax break faces June 2022 sunset, the real-estate industry is unsettled. Would Cuomo's departure affect legislative "fix" to enable Atlantic Yards/Pacific Park housing obligation?

Real Estate Developers Already Worrying About 421a Expiring Next Year, the Commercial Observer reported 8/3/21, and that has to include the developers behind Atlantic Yards/Pacific Park.

As I've previously written, they have to get the next building started by 6/15/22--less than a year away!--under the current tax break, and the lack of a succession to the current policy makes it difficult to plan ahead. (See NYC Department of Finance FY 2021 report, at bottom, on tax expenditures including 421-a.)

The tax break requires as much as 30% affordability, but those can be all middle-income units, at 130% of Area Median Income (as with 18 Sixth Ave., aka Brooklyn Crossing), so that's diverged significantly from original Atlantic Yards plans.

And a deadline of May 2025 looms to deliver the project's required affordable housing, in at least two more buildings.

But getting a new building launched is not simple. Six towers rely on construction of the two-phase platform over the Vanderbilt Yard, and that first phase has been delayed. The developer has cited negotiations with the Long Island Rail Road, but it's hard to imagine that financial considerations aren't part of it.

Another complication: what will the somewhat more left-leaning state Legislature do, and what would be the impact of the departure of embattled Gov. Andrew Cuomo, facing calls for resignation or, if not, an empeachment process? 

I yesterday noted that, even with Cuomo's departure, there would likely be continuity in the governor's office posture toward big projects, given gubernatorial control of Empire State Development (ESD), but in this case the legislature has more of a role.

What next?

One wild card: the possibility of a legislative "fix," as suggested in March by Steven M. Cohen, Chairman of Empire State Development, to help the project avoid those onerous $2,000 a month fines for missing affordable housing. 

As I wrote, what that "fix" means is unclear, though it could include a targeted extension or modification of the Affordable New York tax break to allow for buildings that start after that date. 

But if Cuomo is gone that complicates things, since the Governor was key to the last revision of the tax break, after negotiating with the real-estate industry and construction unions. As the Commercial Observer reports, real estate industry players wonder if the tax break--which they claim is crucial to new rental construction--will be repealed, or modified to require more affordable housing.

“Nobody is really looking past that date. It’s like the apocalypse in some ways,” attorney Jim Power told the publication. “People don’t want to think about what comes after, because it’s very difficult to build in a financially feasible way without 421a.”

Policy twists

In the CO, attorney Mitch Korbey noted that 421-a fits with the Mandatory Inclusionary Housing (MIH) program from Mayor Bill de Blasio, which requires affordability on land rezoned by the city. (Atlantic Yards/Pacific Park is a state override of zoning, which preceded MIH.)

Interestingly for a publication with an industry bent, the article ended with multiple quotes from Emily Goldstein of Association for Neighborhood Housing & Development (ANHD), who said, among other things, “There’s just no need to incentivize luxury housing in New York City."

That's surely the posture of more members of the Legislature than ever.