With no renewal/revision of 421-a tax break, a rush for developers by June 15; B5 and platform appear in process, but 2025 housing deadline still looms

The New York State budget was finalized yesterday, without Gov. Kathy Hochul's proposed revision of the 421-a tax break, now known as 485-w, which developers and labor unions consider crucial to new construction in New York City, but which critics consider a boondoggle.

That provides even more incentive for developers to try to get foundations in the ground by June 15 to qualify for the current iteration of the tax break. 

As I've written, we should see foundations being placed for the 41-story, 682-unit B5 (700 Atlantic Ave.), the first tower (partly) over the Vanderbilt Yard, just east of Sixth Avenue, which can take advantage of terra firma jutting south of Atlantic Avenue. Here's the Department of Buildings (DOB) file.

This past Monday, on 4/4/22, the DOB indicates new filings for 716 Atlantic Ave., which is described as "CONSTRUCT NEW BUILDING (PLATFORM OVER RAIL YARD) AS PER PLANS." That platform is crucial to the construction of all three towers over that first block of the railyard.

We haven't seen indications yet regarding construction starts for the adjacent B6 and B7, but don't rule out a rush for a foundation by June 15.

At least two--and possibly three--buildings are presumably crucial for developer Greenland Forest City Partners to deliver the required 877 more units of affordable housing by the May 2025 deadline, before $2.000/month fines for each missing unit are imposed--until and unless that penalty is revised or suspended. 

(I wouldn't rule out a scenario in which additional affordable housing, at the pending--but not yet in process--project at Site 5, across Flatbush Avenue from the arena, is used to renegotiate the penalty and deadline.)

Current incentives

The current incentives are strong: the tax break is far more generous than Hochul's proposed replacement: developers can qualify by providing 30% of the units as "affordable" at 130% of Area Median Income (AMI), which serves middle-income households earning, in the main, six figures. 

The recently opened 18 Sixth Ave. (B4, aka Brooklyn Crossing) and 662 Pacific St. (B15, aka Plank Road), include units at 130% of AMI, and it's widely expected--though not

Hochul's proposed Affordable Neighborhoods for New Yorkers would require, for large buildings with more than 300 units (like most if not all future Atlantic Yards/Pacific Park buildings), 25% affordability at a weighted average of 56% of AMI, which would serve lower-income households.

Via Citizens Budget Commission

As I wrote, a one-bedroom at 56% of AMI would be about $1,100, while one at 130% of AMI could be $2,838, though that's so generous--and above the rent of competing buildings--that developers typically charge less.

What next?

Critics like New York City Comptroller Brad Lander, backed by affordable housing nonprofits, want to kill the tax break completely, with a deadline to achieve structural changes to the property tax system by the end of the year. That would be politically difficult.

So is extending it. As Greg David of The City tweeted, "On its own an extension/revision is a big lift for Democrats facing progressive primary challenges." He added that any fiscal impact from the suspension or ending 421-a would take years, given that current tax breaks are in effect.

As The Real Deal reported yesterday, some form of the tax break may be revived in the future:

In a joint statement, Real Estate Board of New York President James Whelan, New York Building and Construction Trades Council President Gary LaBarbera and 32BJ SEIU President Kyle Bragg said they are looking forward to continuing the conversation about Hochul’s alternative, 485w, or a similar program post-budget.

“Without it, the crisis will worsen as the city fails to produce enough housing to keep pace with population and job growth, and working people will pay the price,” they said.

So expect a period of limbo, with no new construction starts after June 15 until a revised tax break or new program is established.