In Hochul's revamp of 421-a, a lifeline for Atlantic Yards/Pacific Park? Tax break could bring deeper affordability. Some slam policy as mere "rebrand."

With her proposed replacement for the 421-a tax break, rebranded in 2017 as Affordable New York, Gov. Kathy Hochul may have handed a lifeline to the developers of Atlantic Yards/Pacific Park, offering a robust tax break in exchange for deeper affordability-- at levels the project's most organized critics have encouraged.

That could help the project "recover" the balance between low-income and middle-income units, albeit long after rising Area Median Income (AMI) has steadily lifted the floor for such calculations. And a new tax break, offering certainty in planning, could help the developers move toward meeting the 2025 deadline for 2,250 affordable units, with 876 more to go.

Meanwhile, Hochul's proposal has been embraced by the real estate industry, which means profits remain forecast, and criticized by several housing advocates as bad public policy, as explained below. 

Whatever the broader issue, it seems a relative change in the policy--deeper affordability, rather than the structural revamp critics seek, including property tax reforms--could have a big impact on Atlantic Yards/Pacific Park.

Current benefit

The current tax break enables 30% middle-income units aimed at six-figure earners, as with the recently opened B15 (662 Pacific St., aka Plank Road) and B4 (18 Sixth Ave., aka Brooklyn Crossing), and widely expected to extend to the under construction B12/B13 (615 Dean St./595 Dean St.).

2021 benchmarks, from NYC HPD

Those rent levels--$2,390 1-BR, $3,344 2-BR, for example--has provoked scorn and criticism. After all, that departs dramatically from the mix of low-, moderate-, and middle-income housing long promised by original developer Forest City Ratner's 2005 deal with housing advocacy group ACORN.

Hochul's proposed Affordable Neighborhoods for New Yorkers, 485-w, requires "large rental projects" with 30 or more housing units to offer at least 10% of units at 40% of AMI, 10% at 60% of AMI, and 5% at 80% of AMI.

That means incomes ranging from $33,440 to $66,880 for one person, according to 2021 city figures, and from $42,960 to $85,920 for three people, as shown in the screenshots. 

Monthly rents for a studio would range from $598 to $1,314 and for a two-bedroom from $900 to $1,974, though the levels would presumably float upward over time. (Note: the city considers 80% of AMI "low-income," though that's surely not a colloquial definition. Separately, the city designates "very low-income" and "extremely low-income.")

The provision would apply to buildings started between 6/16/22 and 6/15/27, and completed by 6/15/31.

BrooklynSpeaks' goals

The proposed configuration matches with the publicly stated goals of the coalition BrooklynSpeaks regarding future Atlantic Yards affordable housing:

The remaining project affordable housing to be constructed must be leased to tenants earning no more than an average of 60% AMI, with a minimum of 40% of such housing being affordable to tenants earning an average of 40% AMI. Affordability must be permanent.

Hochul's proposal also involves permanent affordability, in exchange for a 35-year tax break.

A BrooklynSpeaks session on housing will be held next Wednesday, the third of four in the Crossroads initiative aimed at improving the project as it faces an inflection point: an expected effort by the state to change the project plan to enable a much larger tower at Site 5, across from the arena and longtime home to P.C. Richard and Modell's.

So Hochul's proposal could--I speculate--neutralize/limit criticism from BrooklynSpeaks regarding future affordability, and thus aid master developer Greenland Forest City Partner's effort to transfer bulk from the unbuilt "Miss Brooklyn" tower, once slated to loom over the arena, across Flatbush Avenue. The development rights at Site 5 could be worth $300 million.

I queried Michelle de la Uz of the Fifth Avenue Committee, BrooklynSpeaks' lead person on housing issues about the potential impact of Hochul's proposal, but didn't hear back. Presumably she'll address it in her presentation. 

(I also asked whether BrooklynSpeaks, or other housing advocates, knew of or lobbied for the affordability levels Hochul proposed, since they match the BrooklynSpeaks proposals.)

An impact on mixed-use Site 5?

The proposal is subject to revision in the legislature, but it could affect proposed plans for Site 5, which has been floated as containing office, residential, and retail space, since non-residential space erodes the tax break. From the proposed legislation:

If the aggregate floor area of commercial, community facility and accessory use space in an eligible site, other than parking which is located not more than twenty-three feet above the curb level, exceeds twelve percent of the aggregate floor area in such eligible site, any ANNY Program benefits shall be reduced by a percentage equal to such excess.

Assuming that provision stays, that could push the developers to market Site 5 as mostly a residential tower.

Broader notion of "affordable"?

Given the various sources to fund affordable housing, I'm not sure that the remaining 876 units (or more) would necessarily be funded under Hochul's Affordable Neighborhoods for New Yorkers and thus geared for households at 80% of AMI, or under.

Presumably, that doesn't preclude a building with 25% affordability as stated, plus, say, middle-income units geared for households at 165% of AMI, as with B3 (38 Sixth) and B14 (535 Carlton).

After all, the Atlantic Yards Development Agreement defines affordable housing merely as that subject to a city, state, or federal regulatory agreement. And rent at 165% of AMI is fairly close to market. Another factor: the developers would want to avoid the $2,000/month fines for affordable units not built by May 2025--unless they can get that deadline extended.

Nothing about community preference

(Updated) I should add that the 2017 revision of 421-a into Affordable New York removed the community preference, which allotted half the units in the housing lottery to residents of the local Community District(s). The proposed replacement does not address community preference.

Press coverage, and reaction

Hochul proposes 421-a 2.0, City & State reported, saying:

It keeps the same overall structure and conceit with a few changes to make the affordable units built slightly more affordable. Though applauded by some in the housing sphere, it doesn’t represent the kind of transformational change that housing advocates would like to see, with the plan considered more of the status quo in incentives for big developers.

I think the change is more than slight, though it should be noted that for buildings with fewer than 30 apartments, only 20% affordability is required, at 90% of AMI. And there are lots of such smaller buildings built around the city.

The article cited criticism:

“It’s just more of the same,” said Cea Weaver, campaign coordinator for the Housing Justice for All coalition. “It just doesn’t really seem that significant.” She questioned how the state would enforce the permanent affordability Hochul is promising, referring to the inclusion simply as “window dressing” until advocates know more.

Sam Stein, housing policy analyst at the Community Service Society, said the state could limit subsidies to just the affordable units, or abolish the tax break altogether and use what would have been lost revenue to directly finance construction of affordable housing. “But the new version doesn’t do either of these things,” Stein said. “It just adjusts the parameters of the existing program.

From Herrick

New name, same basic idea: Hochul pitches 421a reform, the Real Deal reported 1/20/22, noting that the permanent affordablity required, a departure from the current program, "does not change anything for projects subject to the city’s Mandatory Inclusionary Housing law, which already requires permanent affordability."

The Legal Aid Society called it a "hollow rebrand":

“This tax credit has long served as a handout to New York’s real estate industry, only generating a finite amount of truly affordable housing for New Yorkers in need,” a statement from Legal Aid reads in part. “We urge the Legislature to reject this proposal outright so that the City can reallocate these tens of millions of dollars to expand already proven housing programs.”

I'd note that many affordable housing advocates and organizations have not weighed in yet, so it's possible they see the proposal as an acceptable improvement.

Meanwhile, the Real Estate Board of New York signed on: "The Governor’s proposal provides the private sector with an important tool for producing rental housing at deeper levels of affordability permanently." (Note significant real estate support for Hochul's campaign.)

The math, apparently, still works. Hopefully future discussion of the tax break will weigh the benefits of deeper affordability with the cost to the public, which is often obscured.

From city Comptroller Brad Lander (who once led the Fifth Avenue Committee):

“The 421-a program is an obscene tax giveaway for market rate housing in the name of affordability, and slightly altering its numbers and letters won’t change that,” said Comptroller Brad Lander. “It makes sense to offer tax incentives for affordable units, but providing full 25-year tax breaks to four luxury units for every one affordable unit, without an underwriting analysis to see if it’s even needed, results in tax giveaways that are far too large.

Affordable condos?

The developers' side law firm Herrick published an analysis, with the graphic above right. It's worth noting that the proposal also contains a home ownership provision, aimed at middle-income households at 130% of AMI. 

That might help revive the long-stalled--and unenforceable--promise to deliver 200 affordable condos within Atlantic Yards/Pacific Park. But it wouldn't necessarily jump-start the building of the rest of the market-rate condos planned. 

For the project, 1,930 condos are approved, with 278 built at 550 Vanderbilt Ave. Subtract 200 affordable condos and that still leaves 1,452 condos. But Atlantic Yards is a "never-say-never" project, and fewer condos have been predicted in previous documents, so who knows.

Lander's comment:

“The new outer-borough condo option is especially concerning. It would provide a full, 40-year tax exemption for housing that’s only affordable to households earning 130% of the area-median income, which is $155,090 for a family of four. Not one single unit in these developments would be affordable to the approximately 75% of New York City households who make less than that.