Don’t expect Governor Hochul’s so-called 421-a tax abatement program alternative to encourage the construction of new housing in the same way its predecessor did.
Two little-known provisions have already doomed plans for a grand Brooklyn waterfront project that was so popular that the City Council voted 48-0 to pass the required zoning changes three years ago. It is being
Hochul’s new 485-x program, announced as part of a national budget deal, is thought to encourage developers to build more “affordable” market-rate apartments in cities starved for demand.
This has been praised by many elected officials and civic activists who should learn to read beyond the headlines in press releases.
The 421-a tax abatement spurred the construction of 56,528 new housing units from 2014 to 2021 alone, 16,090 of which were affordable.
The 485-x also offers tax benefits, but it has a fatal trap: two clauses that prevent developers from even considering new projects in an era of tight interest rates.
This misstep resulted in plans for River Ring, a $1 billion, four-acre complex on Brooklyn’s East River waterfront, to be built by Two Trees Management, the developer of DUMBO and Domino Park. I can report that this has resulted in a blister.
Two Trees purchased the property four years ago.
The site, which is currently a truck park, was to be home to two impressive apartment towers designed by acclaimed architecture firm BIG.
There would be 1,050 rental apartments, 263 of which would be permanently “affordable” and enjoy the same amenities as market-rate units.
Two Trees would also have created a 3-acre public park, provided waterfront recreational activities, paid $100 million for new resilient infrastructure, and would have built a 50,000-square-foot YMCA facility. .
The park would connect with neighboring Domino Park and eventually provide unprecedented public waterfront access from South Williamsburg to Greenpoint.
This was beneficial both to the neighborhood and to the purpose of new home construction.
But that dream hinged on state renewal or 421-a replacement.
Mr. Two Trees expected Mr. Hochul to carry out his stated intention to reinstate the tax breaks that developers enjoyed under 421-a.
But the far-left state Legislature refused to renew what it called “perks” for developers.
Their stubbornness forced the government to come up with an “alternative” that would likely give them a promotion. Several Development even though it is not where it is most needed.
Still, it turned out to be more show than substance.
As a result, Two Trees development director David Lombino told the Post, “the goalposts have moved significantly.”
The devil is in the details of 485-x. Mr. Hochul was trying to appease supporters of forcing developers to provide apartments for next to nothing, and to appease politically powerful labor union leaders.
485-x does not require a higher percentage of affordable units than 421-a, but it does reduce the income level of tenants eligible for affordable units to the same level as 421-a. Critically lowering it from 130% to levels well below. -What used to be called “area median income” in the past is between 60% and 80%.
Because allowable affordable rents are based on these incomes, developers like Two Trees receive significantly less rental income from their apartments.
The plan would also unbearably raise construction costs in much of Manhattan and desirable areas of Brooklyn.
Lombino said this would have a “chilling effect” on all development in these areas, not just the Ring River site.
The change mandates “a set wage that is consistently higher than in the past, regardless of union status.”
Two Trees says it has always paid high wages for its construction jobs, but it could not afford the combination of additional labor costs and reduced rental income at River Ring that 485-x would require.
So, unless a miracle happens, River Ring will remain a parking lot off-limits to the public. And New Yorkers will be damned.
