The Growth Dividend

Print More

Not since the days of urban renewal have New York City neighborhoods faced such sweeping transformations. The City Planning Department is proposing to rezone about a fifth of the land in Greenpoint and Williamsburg–property now mainly devoted to manufacturing–in order to open it to residential development. The area is ground zero for two of the Bloomberg Administration’s top priorities: creating affordable housing and opening up the city’s waterfront. But with community unrest growing over the city’s proposal, the administration faces a potential political showdown.

In late June, the Department of City Planning released its long-awaited proposal for redevelopment of a nearly two-mile-long stretch of city waterfront and 170 blocks of warehouses and old factory buildings. In place of the rubble- and trash-strewn waterfront, the proposal calls for a 1.6-mile-long esplanade with 49 acres of open space and residential towers ranging from 15 to 35 stories. Inland, amid the dusky, low-lying manufacturing areas, the city would permit construction of six- to 12-story residential buildings. Up to 7,000 new units of housing could eventually be built. City housing officials say the proposed rezoning will help relieve housing pressures on the low-income residents of Williamsburg and Greenpoint.

But while community groups and local elected officials support the city’s stated goals, many strongly oppose its proposal. They say the current rezoning plan represents a financial reward for speculative real estate investment more than it does a workable plan for affordable housing.

At issue is the claim by city officials that developers will take advantage of some of the $3 billion in subsidies that the Bloomberg administration is offering, as part of its pledge to create 65,000 units of affordable housing throughout the city. According to city officials, the financial incentives are so attractive that developers will create affordable housing even in super-hot real estate markets such as Williamsburg and Greenpoint. “Developers will gladly develop properties using these programs,” says City Planning spokesperson Katie Maccracken, “because there is no sweeter deal.”

City planning officials say it is significantly more complicated to build along the waterfront than elsewhere, and they maintain that the added expenses make the city’s affordable housing subsidies that much more attractive to developers working there. “Because of the inherent risk of developing along the waterfront, developers are likely to look at bond financing and other ways to reduce their equity,” says Regina Myer, Brooklyn Director of the Department of City Planning. “Waterfront development doesn’t just include construction of buildings but also street construction, public utilities, public access and bulkhead repairs. All of those things require significant investment.”

City housing officials are also confident that developers will take advantage of the city’s affordable housing programs, such as 421-A bond financing, which offers 25 years of tax exemptions in exchange for making one in five units affordable to low- and moderate-income tenants. “We really do expect that the housing that will be developed along the waterfront will be financed with tax-exempt bonds,” says William Traylor, deputy commissioner for the New York City Department of Housing Preservation and Development. “Developers are going to make a financial decision based on whatever limits their risk.”

But many Williamsburg and Greenpoint community leaders are skeptical that developers will voluntarily take advantage of financial incentives with affordable housing requirements when their neighborhoods are in the midst of a luxury housing boom. For one thing, developers can already qualify for a 15-year version of the 421-A program that comes without any mandate to include affordable housing. Skyrocketing land prices are another deterrent to developing affordable housing in the area, say local nonprofit developers. “In the late 1990s we were looking at the $30 to $50 range,” says Paul Parkhill, a developer with the Greenpoint Manufacturing and Design Center, a nonprofit group that develops manufacturing space in the area. “It’s gotten very difficult to find industrial property for less than $100 a square foot.” Virtually all the land in the proposed rezoned areas is privately owned.

Property prices are so high that the city’s financial incentives to build middle-income housing, such as the New Housing Opportunities Program (NewHOP), won’t be attractive to developers, say builders who have worked with the program. “All of the sites where NewHOP has succeeded are in places like Harlem, where developers have gotten the property from the city for a dollar or substantially less than market rate,” says Jaye Fox, an independent real estate development consultant. Fox notes that the city’s financial incentives are generally used solely for construction costs. In Williamsburg, she says, “incentives under the existing NewHOP programs are not enough to compensate for the higher acquisition costs.”

In a recent rezoning controversy at the edge of Park Slope, another gentrifying Brooklyn neighborhood, affordable housing advocates say that the city’s refusal to implement inclusionary zoning precludes the development of affordable housing. The housing market in Park Slope is so hot that developers can make substantial profits without taking advantage of affordable housing programs, says Brad Lander, executive director of the Fifth Avenue Committee. “So far there are several hundred units being built along Fourth Avenue,” Lander says, “but not one unit of affordable housing.”

_______

Instead of giving developers the choice of building affordable housing, many community groups and local elected officials want the city to create more aggressive incentives or legally require it, through a process known as inclusionary zoning. “The administration representatives said that ‘we’re confident that developers will take advantage of the programs and do affordable housing,'” says City Councilmember David Yassky, chair of the council’s Special Committee on Waterfronts. The City Council will ultimately have to vote on the zoning as part of the city’s Uniform Land Use Review Process. “My response to that is, well, if you are confident, then there’s no harm requiring that it be written right into the zoning.” Yassky asserts that the proposed rezoning will at least quintuple the value of former industrial property. “When property owners are getting a windfall like that,” he says, “there’s no reason part of that windfall cannot be used to generate affordable housing.”

One coalition of community groups, Mobilization Against Displacement (MAD), is demanding that a full 40 percent of the housing developed in the rezoned area be made available for low- and moderate-income residents–people now being forced out of the area. In the last decade, Greenpoint lost 5,500 affordable rental units, more than half the neighborhood’s stock, according to a report issued by the Northern Brooklyn Religious Cluster. “This is a golden opportunity to create affordable housing,” says Martin Needelman, chief counsel for Brooklyn Legal Services, one of the organizations in the MAD coalition. “Our community is dead without the immediate creation of large amounts of truly affordable housing for current residents.” Other groups in the coalition include St. Nicholas Community Development Corporation, Los Sures and North Brooklyn Development Corporation.

Inclusionary zoning has been used in cities throughout the United States and Europe. It can be an outright mandate or a voluntary program, in which a developer can construct a larger, more profitable building than zoning would otherwise permit and must build a certain number of affordable units in exchange for the bonus. In New York City, inclusionary zoning has been implemented only in expensive, high-density neighborhoods of Manhattan and a small part of downtown Brooklyn.

The Citizens Housing and Planning Council, an independent civic group, recently released a proposal calling for the Bloomberg administration to expand inclusionary zoning citywide–implementing a voluntary policy in which developers would be allowed to construct bigger buildings as a bonus for incorporating affordable housing. Says Executive Director Frank Braconi, “In the proposal that we issued last fall, we designed [inclusionary zoning] in a way we think would encourage all development, not just affordable housing. It would be a pro-development initiative.”

But city officials maintain that an inclusionary zoning requirement could deter the deep-pocketed developers they’re counting on to take on the redevelopment of manufacturing areas in Williamsburg and Greenpoint. “We’re very, very concerned that a requirement for inclusionary housing might possibly discourage housing production,” says Myer. “It essentially becomes another burden on the developer.”

If the city imposed inclusionary zoning, Myer adds, it would also have to allow developers to build bigger projects. “An inclusionary requirement would require more density–taller buildings,” she says. “That’s not something the community wants.”

_______

Williamsburg and Greenpoint have been planning for redevelopment since 1989. After more than a decade of community workshops and public forums, Brooklyn Community Board 1 generated planning documents for development of the waterfront, known officially as 197-A plans. The plans, approved by the City Council last year, stressed industrial growth, open space along the waterfront and affordable housing.

The city’s rezoning proposal doesn’t fully address the community’s need for affordable housing, says Christopher Olechowski, chair of the board’s rezoning task force. “Affordable housing wasn’t really explored–it was touched on pro forma,” he says of the city’s June presentation of the plan to the board. To win the community’s support, the city is going to have to provide some kind of affordable housing guarantee, says Olechowski.

This September, City Planning will start putting together an environmental impact statement–the first of many steps in the rezoning process. The statement is supposed to analyze the effects of the rezoning plan as well as different alternatives to it. Yassky says it’s urgent to make sure an inclusionary zoning option gets included in the document. “What we cannot let happen is [to let] the folks who oppose affordable housing in the administration get to a year from now, and tell people like me, ‘Well it’s too late, we didn’t study the affordable housing option,'” says Yassky.

While it opposes inclusionary zoning in Williamsburg and Greenpoint, the city is planning to help local nonprofit community development organizations build affordable housing in the area. It is in the process of establishing a special $15- to $20-million revolving acquisition fund to enable them to buy land in Williamsburg and Greenpoint.

But even with the fund, it will be difficult to compete with the private sector for development sites, says Michael Rochford, executive director of the St. Nicholas Neighborhood Preservation Corporation. The acquisition fund “is an essential tool,” he says. “But we’re still somewhat handicapped competing against private developers.” The slow processing of government funds, he explains, makes it difficult to snag real estate deals before big developers with readier access to capital get them.

Nor will the acquisition fund stretch very far, say affordable housing experts. “That $15 million has to underwrite the difference between the cost of acquiring city land,” says Jaye Fox, “which is basically nothing, and the amount that a developer would expect to pay on the open market.” According to Fox, a similar, $6 million acquisition fund that the city made available to Park Slope nonprofits would “probably pay for one building with approximately 40 affordable units.”

Those high land prices aren’t just a reflection of the neighborhood’s popularity, says Ron Shiffman, former director of the Pratt Institute Center for Community and Environmental Development and one of the authors of the neighborhoods’ 197-A plans. Shiffman says speculation on the rezoning plans themselves has been a big factor. Speculators “anticipated because of the city’s actions in the last five to 10 years that the area would be rezoned, so many of them bought manufacturing land at excessively high prices,” says Shiffman. “Land that was worth $10 to $15 million was being sold for $20 to $24 million.”

While city officials say that an inclusionary zoning policy could make Williamsburg and Greenpoint unattractive to market-rate developers, Shiffman says that wouldn’t necessarily be a bad thing. In the event that inclusionary zoning depressed real estate prices, affordable housing would still emerge, says Shiffman, who served on the City Planning Commission in the early 1990s. Developers “drove out manufacturers; they held the land out of development for many years for a speculative reason. We don’t have to reward that,” he says. “If these developers don’t want to [build affordable housing], the land values will go down so that other developers can do it. If this a free market economy, let’s really make it a free market economy.”

Alex Ulam is a Manhattan-based freelance writer.