In negotiations over (lucrative) rezonings in M-CROWN district, can more be asked of developers? The discussion at Community Board 8 begins.

See collected coverage of M-CROWN rezonings: click here.

It seems clear, from the examples of 1010 Pacific Street and 1050 Pacific Street, that the upside after a rezoning in the M-CROWN district is huge. The applicants sold the properties for, in the first case, 2.4 times the land cost, and, in the second, 21 times the value of the properties' mortgages.

There are two pending projects: 870-888 Atlantic Ave., and 1034-1042 Atlantic Ave., in Prospect Heights and Crown Heights. We don't know the cost of the land because, in the first case, the transaction hasn't been consummated and, in the second, the developer claims ownership but won't disclose details (and it's not in the city's ACRIS database).

Based on the Pacific Street examples, the two pending rezonings might be worth between $29 million and $50 million, subject to a downward adjustment based on the provision of deeply affordable housing, under the city's Mandatory Inclusionary Housing (MIH), and some space for job-creating uses.

So even with that, plus any additional cost for environmental cleanup, a rezoning seems lucrative. As I wrote, the architect behind those projects--and other M-CROWN rezonings--sees the business opportunity in upzonings along Atlantic Avenue with a Floor Area Ratio (FAR) of 8.5, which is what the Department of City Planning has advocated.

From CB 8 presentation

"I think if people see the price of entry is an Option 3 [for deep affordability]," said Nick Liberis at a Community Board 8 meeting, "and having to work with you, you’ll be having developers knocking on your door all day long to get this done." 

Only in the three most recent rezonings has Community Board 8 asked for deep affordability in exchange for upzoning beyond the M-CROWN guidelines. 

FAR is the multiple of bulk to the underlying lot. Though Community Board 8 recommended an FAR of 7 in its M-CROWN resolutions, its leaders have negotiated deep affordability and job-creating space in exchange for increased bulk, as seen in the chart above right. (That doesn't necessarily mean the developers can claim "support.")

In the case of 840 Atlantic Ave., where the full board did not endorse a last-minute Land Use Committee resolution, no outside agreement, called a Community Benefits Agreement, was signed, and the commitment is in question.

With the two pending projects, agreements might be signed, but only if and when Council Member Crystal Hudson agrees to approve the projects. Right now, she says she's undecided; her call for a neighborhood rezoning did not mention them. 

Looming over all this is whether, with both the pending and future projects, the Council Member and Community Board can ask more from the developers, and whether the city can refine its requirements to ask for more.

What more could be asked?

Reflecting on Liberis's statement, I posed a question to CB 8's Gib Veconi, who's led the M-CROWN subcommittee:  

Given speculative market/rising property values and rising value of buildable square feet, is there any mechanism for the CB or the city to get more out of the developers, or to curb speculation? In other words, if it's easy now for developers to agree to MIH Option 3, what else is there?

His response was that, yes, they could ask for more affordability, job-creating space, and services:

Consistent with the M-CROWN objectives, it may be possible to get agreement for a more floor area for affordable units than required under MIH, and/or more floor area for non-residential light industrial uses. It also may be possible to have developers specifically fund anti-displacement services, workforce development programs, and streetscape and safety improvements on Atlantic Avenue. The latter would require advance discussions with DOT [Department of Transportation] to ensure a plan for Atlantic Avenue was in place to specify the work to be funded by private developers.

Similarly, if the city were to pursue a neighborhood rezoning, it would have to ask for more, especially since it cannot at this point require MIH Option 3.

Map by Kaja Kühl; rezonings in light blue are pending; apartment counts are from
 Environmental Assessment Statements and include areas beyond the parcels owned by applicants;
 the 1050 Pacific project would now have 234 units and 1010 Pacific would have 175 units

An example from Bed-Stuy

Another example shows the slack in the system.

In the rezoning of 1045 Atlantic Ave. in Community District 3, the developers of the 17-story, 426-unit building have pledged to give $50,000 a year to local organizations from a Community Impact Fund. The building would have some 300 market-rate units and 126 affordable ones. 

While $50,000 is not insignificant, what's framed as an act of generosity is clearly within the developer's revenue model: it represents the annual rent roll from, say, two studio apartments renting for $2,083/month, or a single larger apartment renting for $4,167/month.

And that comes from gaining a rezoning to R9A/C6-3A, with a Floor Area Ratio of 8.5. That's 18% more bulk than what Community Board 3 preferred: R8A, with a Floor Area Ratio of 7.2. The latter is close to the 7 FAR guideline set by Community Board 8 in its M-CROWN resolutions, as shown below.

From 11/4/21 CB 8 presentation, regarding two pending projects

What's needed

The issue of asking for more came up at a 3/31/22 meeting of CB 8's M-CROWN subcommittee, which mainly concerned the pros, cons, and challenges of the Community Board itself pursuing a rezoning of the M-CROWN area, if the city fails to act on the request from Hudson and allies. (I'll write separately about that.)

Veconi brought up the non-zoning components of a neighborhood plan, with city-funded services like a homeowner assistance program, monitoring of neglected apartment buildings, tenants' rights education, and the workforce development.

It also could include public realm improvements, such as improvement of open space (like the John Hancock Playground in CD 3), the expansion of Open Streets, and a redesign of Atlantic Avenue "to make it safer for pedestrians and cyclists," as Veconi said.

Board member Sarah Lazur, a member of the Crown Heights Tenant Union (CHTU), asked if such improvements would only come from a neighborhood plan.

Not necessarily, said Veconi; they might be funded today, at least if CB 8 includes them in its annual statement of needs. He was backed by Land Use Chair Sharon Wedderburn.

Asking more of developers

So far, added Veconi, "we have not requested funding for these kinds of services.... That has not been a part of discussions that we've had with private applicants. But that is not to say it couldn't be."

"If we were to get more private applications, and we were to look for requirements for the applicants in order to get support," he said, "funding for these types of services could also be sought."

Mandatory Inclusionary Housing options.
From HPD, using 2016 income levels

Esteban Girón of CHTU noted that some programs are already funded by the city. 

More affordability?

Veconi noted that Mandatory Inclusionary Housing, "as it’s structured right now, can’t be set up to require deep affordability," or Option 3, which is 20% of units at 40% of Area Median Income, or AMI. 

"The best you can get is MIH Option 1, which is 25% at an average of 60% AMI," he said. "There's some requirement inside that for deep affordability."

"But you can't, for instance, force Option 3, so that's one of the reasons why" CB 8 has pressed the applicants for the pending rezonings to commit to that, he said.

Maybe that indicates a systemic flaw. Today, said Veconi, many Council Members "feel like MIH needs to be re-examined and we have to be working on ways to push deeper affordability and maybe even increase the amount of floor area for affordable housing. The problem is, we have we have very few other programs to work with right now."

Girón noted that another factor is the renewal/revision of the 421-a tax break, which is still pending in Albany, since that tax break is part of the developers' financial assumptions.

He said that, even with concessions from the developers, the amount of affordability is not enough to warrant his support for the pending rezonings. "And speaking with the Council Member and DCP [Department of City Planning]," Girón said, "they really think that they can come up with a better way to do it... So we can hope right at this point that there'll be something other than MIH, because it’s clearly not working."