Could a successor to 421-a resurface? It's up for debate, but the real-estate industry is not willing to publicly set a bottom line.

The resurrection of some version of the 421-a tax break program, for which the proposed successor--Gov. Kathy Hochul's 485-w--was denied by the legislature, is key to the construction of future Atlantic Yards/Pacific Park residential towers.

That said, the not-yet-vertical B5 (700 Atlantic Ave.), was supposed to qualify for the previous iteration of 421-a, according to developer Greenland USA (which owns nearly all of Greenland Forest City Partners), which would grant the 35-year tax break while requiring 30% affordability, with middle-income units geared mostly to households earning six figures.

The prevalence of that option, as opposed to other options that provided deeper affordability in tandem with other subsidies, has soured many affordable housing advocates regarding the tax break. As noted in the article, 421-a led to only a fraction of low-income units.

The last two Atlantic Yards/Pacific Park buildings, B15 (662 Pacific St., aka Plank Road) and B4 (18 Sixth Ave., aka Brooklyn Crossing), both contain 30% affordable units, all for middle-income households earning 130% of Area Median Income (AMI). 

Looking more closely

Yesterday, City & State published New York City’s real estate subsidy program is dead. What should a revived version look like?, which was both an interesting look at the options for 421-a revival, and an inadvertent object lesson regarding the lack of candor about the program.

While developers consider it to new rental construction, barring significant tax reform (not discussed in the article), they won't lay down a minimum ask, likely because they hope a compromise gives them more than that.

What could be tweaked? One option is the 35-year exemption, which could be far shorter, according to "one longtime observer" (not identified as with either camp), though that would dampen affordability.

How much could the real estate accept? James Whelan of the Real Estate Board of New York (REBNY) wouldn't answer, while a "handful of large developers declined to comment." That's not surprising--they don't want to negotiate in public--but, again, they want wiggle room.

While Hochul's proposal would have lower the upper bound to 90% AMI and required permanent affordability, that didn't fly.

A compromise?

The article raises the potential of a compromise, quoting an anonymous "observer," again not identified with either camp:

a new 421-a program must prioritize low-to-middle income families, requiring that up to 70% of affordable units in a project be two- and three-bedroom apartments renting between $900 and $1,200. This observer also said that a new version could retain the 130% AMI option but cut the tax exemption period on such units in half, thus incentivizing developers to do projects with more low- and middle-income units rather than upper-income units. In the final version of 421-a, the reverse was true.

It's unclear if those numbers could work, but that's the job for entities like the Independent Budget Office and the Citizens Budget Commission.

One source suggested that a 421-a compromise will be part of "a grand bargain,” involving a “good cause” eviction law, which would add the protections similar to rent stabilization-- limits on rent increases and tenure of occupancy--to market-rate leases.

From the article:

“Tenant advocates will give developers 421-a in a heartbeat in exchange for ‘good cause’ eviction,” said this observer, noting that in the last legislative go-round, “it was the developers who rejected that.”

Yes, tenant advocates certainly might make that trade. But I'm not sure the real estate industry would do so.