As June 15 approaches, watch for building permits (including for B5) aimed to lock in 421-a benefits for not-so-affordable units

Debate is heating up about the future of the 421-a tax break, currently known as Affordable New York, which developers call key to housing construction but which has, it's now clear, disproportionately incentivized "affordable housing" for six-figure earners. (I'll write separately about that future.)

Examples of such not-so-affordable housing include Atlantic Yards/Pacific Park B4 (18 Sixth Ave., aka Brooklyn Crossing) and B15 (662 Pacific St., aka Plank Road), with 30% income-linked units geared for households at 130% of Area Median Income (AMI). 

And the "affordable housing" at the under-construction B12 and B13 (615 Dean St. & 595 Dean St.) almost surely will be aimed at such households. It's just the most lucrative option. And that, of course, means that the project's income-targeted units are skewed to better-off residents.

As the tax break is set to expire by 6/15/22 (and will apply to projects completed by 6/15/26), keep watch for a flurry of efforts by developers to "commence construction," which means--according to lawyers--a building permit, and the installation of a building pile.

A start for B5?

That seems within reach for the B5 tower (700 Atlantic Ave.), the first to be built over the Vanderbilt Yard, just east of Sixth Avenue, because part of the parcel (likely) includes terra firma, at-grade space once occupied by buildings. 

In other words, though building completion depends on a platform that hasn't started yet (but is getting closer), it's plausible they could get a pile in the ground. Indeed, foundation permits have been pending at the Department of Buildings since 9/13/21.

The 41-story B5 tower, according to developer Greenland Forest City Partners' latest (and not necessarily reliable) Exhibit M (bottom), would have 652 units, half of them affordable.

According to a Department of Buildings filing, the 41-story apartments would have 682 units. There's no indication of the percentage of affordable units, but, without additional subsidies beyond the 421-a tax break, the maximum would be 30%, or 205.

The affordable deadline

Either way, it's ever less likely that the developers can meet 5/31/25 deadline to complete 877 more affordable units. That means they'd face an onerous $2,000/month penalty for each missing apartment--unless that deadline/fine is renegotiated or relaxed.

Keep watch--it's not implausible that Greenland Forest City will propose to add more affordable units at Site 5, the parcel catercorner to the arena, in exchange for some kind of deal.

Also, while there have been no permits filed for the B6 tower, it might (?) be possible that foundations could be installed on terra firma by the end of the year--assuming that, as in 2015, the 421-a deadline gets extended. The B6 tower is supposed to have 550 units and, according to Exhibit M at least, half of them affordable.

That said, completion of the tower would have to be in tandem with completion of the platform, which might be very complicated. 

I've typically referred to the platform as two phases, the first over the railyard between Sixth and Carlton avenues, and the second over the railyard between Carlton and Vanderbilt avenues. Each is expected to take three years. 

But one document suggested that the western block platform would be built in two stages, for B5 and then for B6/B7. That suggests that the B5 segment could be started sooner, and the tower built faster..

What if B5 is delayed?

To avoid fines and meet the May 2025 project deadline, the developers will have an incentive to pursue after-hours variances, which could mean--as in the past--disruptive early-morning and evening work.

But the June 2026 completion requirement under the current Affordable New York tax break may be more important.

Iif a building with 30% income-linked units at 130% of AMI is late, it still might be worth having to pay $2,000/month fines for a while.

Consider: Gov. Kathy Hochul's proposed 421-a replacement, known as 485-w, would require 25% below-market units at a blended average of 56% of AMI.

 

So let's compare rent levels estimated by NYC's Department of Housing Preservation and Development at 55% of AMI (averaged from 50% and 60% of AMI) and 130% of AMI:

• studio: $867 and $2,263 (difference: $1,396)
• 1 BR: $1,092 and $2,838 (difference: $1,746)
• 2 BR: $1,303 and $3,397 (difference: $2,094)

These estimates, of course, need adjustment: 56% is slightly more than 55%, and the current 30% affordability requirement is more than Hochul's proposed 25%. And Hochul's proposal might well change, if it gets passed.

But it's clear that the temporary pain from delay would be made up by much higher "affordable" rent levels that could make up for the fines fairly quickly.That doesn't rescue the developer from the overall unit count required, but it shows the advantages of getting started under the current 421-a policy.

Exhibit M

The document, Exhibit M from the Seventh Amendment to the project Development Agreement, is dated 7/30/20 but was effective as of 6/29/20. I acquired it via a Freedom of Information Law request to Empire State Development, the state authority overseeing/shepherding the project.

It seems unlikely that the affordable units would be distributed as predicted.