At AY CDC meeting, state finally provides more info on project's affordable housing record, but it doesn't stress the middle-income skew. What about 2025 fines?

This is the second of three articles about the Atlantic Yards Community Development Corporation (AY CDC) meeting March 26. The first concerned the project's murky future. The third concerned oversight of EB-5 spending.

How much affordable housing"--better-termed "income-linked" or "income-targeted"--has been delivered in Atlantic Yards/Pacific Park? 

We know there are 1,374 below-market apartments, among 3,212 total units, but who do they serve? Anna Pycior, Senior Vice President, Community Relations at the parent Empire State Development (ESD), provided an update, as requested previously by AY CDC directors.

The information was more extensive than presented by ESD previously, but it still didn't go far enough to point out how much the below-market "affordable" units serve middle-income households.

Nor did it fully explain how the configuration diverges from that promised in the 2005 Housing Memorandum of Understanding (MOU)--non-binding but much promoted--that original developer Forest City Ratner signed with housing advocacy group ACORN.

From ESD presentation

The slide above notes that the ACORN agreement was affordable to households earning up to 160% of Area Median Income (AMI). 

However, it didn't make clear the ranges, as shown in the MOU excerpt below: 20% of the total rentals, or 40% of the affordable ones, were supposed to be low-income units for those earning up to 60% of Area Median Income.

From 2005 Memorandum of Understanding

Yes, as shown in the slide below, ESD did show that 32% of all units are middle-income affordable units, while only 8% are low-income and 3% moderate income. That indicates a skew.

But it doesn't show the MOU benchmark or that, for example, the 694 middle-income units in the fourth "band" already well exceed the 450 total set in that 2005 document.

Pycior quoted the MOU as saying the developer desired to build 2,250 units in the residential project as affordable,"which was 50% of the total 4.500 expected units at that time."

Unmentioned: Forest City then swapped three office towers around the arena for housing, increasing the number of units. The additional apartments, as of then, were expected to be condos. Atlantic Yards was later approved at 4,500 rentals, plus 1,930 condos, though the latter can be market-rate rentals. 

She didn't mention the MOU's goal that the affordable housing would be 50% studios and one-bedroom apartments and 50% two- and three-bedrooms, on a square foot basis. That goal has never been met.

Timing issues

Pycior then cited the June 2014 agreement signed by ESD with the coalition BrooklynSpeaks, which, she said, stipulated a minimum of 35% affordable units completed at any stage of construction until the project's completion or until the total of 2,250 affordable units is completed. Once 1,050 affordable units have been built, the minimum percentage of the affordable units dropped to 25%.

"We're still working to meet a goal of the minimum of 2,250 affordable units by the end of Phase 2," she said. 

That was an indirect reference to the most important clause in the agreement, a May 2025 deadline for 

From ESD presentation

all those affordable units.

In other words, the main announcement in 2014 was that new deadline, ten years ahead of the 2035 "outside date" granted by ESD, though beyond the ten-year buildout long promised.

Master developer Greenland USA will not deliver those units, however, and had indicated it might ask for some kind of extension. Or maybe it'll go out of business.

Pycior didn't mention the crucial $2,000/month in liquidated damages for each unit not delivered, which would be $1.7 million a month and more than $21 million a year--a penalty that ESD has seemed reluctant to anticipate. Nor did the slide mention those damages.

The money would go to the New York City Housing Trust Fund, a fund administered by the NYC Department of Housing Preservation Development, to fund preservation or development of affordable housing with preference given to projects in Brooklyn Community Districts 2, 3, 6 and 8.

Breaking it down

The slide below lists the units by block but not timing. 

The key thing, Pycior pointed out, was that buildings that relied on financing from the New York City Department of Housing Preservation and Development (HPD) could deliver a broader range of below-market units, at a range of AMI levels, than those later that relied on the state 421-a tax break, which allows buildings to limit their "affordable" units to middle-income households.

In other words, they were all in compliance with various programs.

AY CDC Director Gib Veconi, who was a leader of BrooklynSpeaks helped negotiate the 2014 agreement, pointed out that the skew to middle-income "compares unfavorably" to the 2005 commitments, which envisioned a broader distribution.

Indeed, my chart below--which has a slight discrepancy in numbers--shows how disproportionate the skew has been. There have already been been far middle income units than expected. I count 1,054 of the 1,374 total affordable units, while ESD counts 1,031. (I'll check.)

"Anecdotally, I will say at various points during the history of this project, members of the development team commented that the difference could be made up at the end and more affordable and cheaper affordability could be introduced at the end," Veconi said, "but it's not clear there's a there's an opportunity to do that today under the current subsidies that are available."

The cost of delay

Nor is that practical, because rising AMI, which depends on regional income, means that rent levels once considered moderate-income would not be low-income, which means that only extremely low-income units, below 30% of AMI, could serve them.

My chart gets part of the way there, showing that the 100% of AMI in 2005, as of the MOU, has more than doubled, from $62,800 to $141,200. (Stay tuned for a better chart.)

That's one of the key lessons from this project, which I've described as the problem of time and the cost of delay.

What next?

"So I think one of the things that we should be concerned about is how the project can deliver more deeply affordable apartments which are the ones that are most desperately needed in this part of Brooklyn," said Veconi, "a part that has seen significant displacement of lower income people since the time the project was announced."

"We are open to exploring ways to see that the future units are more affordable in future phases of the project," Pycior said. "And we understand it's a priority is the board."

 

Director Ron Shiffman, a veteran advocacy planner, again stressed the skew toward middle-income units.

Joel Kolkmann, ESD's Senior Vice President, Real Estate, noted that language in the MOU was that the developer and ACORN would work to get the city to provide the appropriate subsidies, "but again--we weren't there."

"I think in retrospect, probably some of us would agree that having something as important as the affordability levels of the affordable housing being negotiated in a private agreement beginning the project wasn't ideal," Veconi said, "especially when the definitive agreement that was made in 2009 set a much higher AMI."

It wasn't just the state's 2009 Development Agreement that allowed a broader definition of affordable housing: participating in a government program that regulated incomes and rents. That language came from the 2007 City and State Funding Agreements negotiated in 2007, which most people missed.

In other words, while the affordability levels were negotiated, aspirationally, in a publicly promoted agreement among private parties, city and state officials, supposedly representing the public interest, privately gave the developer a lot of slack.

Community preference

Veconi also noted that the community preference for this affordable units--half the apartments for people on Community Districts 2, 3, 6, and 8, applicable to the first three buildings with affordable units--no longer applies.

"So today, there's actually no community preference for affordable housing" in Atlantic Yards/Pacific Park, he said, not even the 20%-ultimately 15%-- the administration of Mayor Eric Adams negotiated in a recent fair housing settlement. (That said, future city-funded units could come with a preference.)

Chair Daniel Kummer asked if there was any data on the distribution so far.

"I'm sure that HPD would have that information," Veconi said.

A legislator's question

Kummer brought up a public comment (bottom) submitted by Assemblymember Robert Carroll, who represents nearly all the project site.

Carroll cited ESD Commissioner Hope Knight's observation, at a Joint Legislative Budget Hearing in January, that Greenland might be able to convert units already built to fulfill the requirement to deliver the requisite affordable housing by May 2025. 

"It would be helpful to have more details on this possibility," Carroll wrote. "Where are the units under consideration, what are the affordability levels, and what would be the steps necessary to accomplish this?"

"So that is an option that the developer could choose," ESD's Pycior commented. "It is not something that ESD could enforce. It's very unlikely that they would choose that."

Indeed, as I wrote, Knight's comment was "magical thinking."

Shiffman noted that, if ESD enforced the damages, "maybe you would force their hand to consider it."

Kolkmann noted that they haven't abandoned the damages and have reiterated that they retain the right to enforce it.

Veconi noted that even if Greenland wanted to do that, it's impractical (as I've written). The firm has an interest in only one existing building, 18 Sixth Ave., aka B4 or Brooklyn Crossing, which it developed with The Brodsky Organization.

Moreover, they surely don't want to convert units now commanding very high rents.

So the state, Veconi observed, doesn't have much leverage on the master developer. Except, perhaps, regarding Site 5, as described yesterday.