The Real Deal New York

NYC Bar Assoc. asks city to delay Mandatory Inclusionary Housing until 421a resolution

Legal society says mayor's affordable housing proposal "may become problematic" sans developer tax break

January 27, 2016 06:02PM
By Rey Mashayekhi

Carl Weisbrod Bill de Blasio

From left: Carl Weisbrod and Bill de Blasio

The New York City Bar Association is asking the city to postpone its proposed Mandatory Inclusionary Housing plan until the future of the 421a tax abatement is resolved, citing concerns that aspects of the proposal could suffer in the wake of 421a’s expiration.

In a letter to City Planning Commission chair Carl Weisbrod on Tuesday, the bar association noted that the expiration of 421a on Jan. 15 raises questions regarding Mandatory Inclusionary Housing’s effectiveness “as a method for creating permanently affordable housing” in the city.

While describing its support for the proposal — which would mandate the creation of affordable units at residential developments benefitting from either city rezoning measures or private rezoning applications – the bar association said the city should “consider postponing” any decision on Mandatory Inclusionary Housing given the uncertainty over “whether 421a will be available and with what requirements.”

Alvin Schein, a partner at Midtown-based real estate law firm Seiden & Schein, said that “when the city analyzed what it could do [with Mandatory Inclusionary Housing], everything assumed that 421a would be in place.”

“When they modeled construction with Mandatory Inclusionary Housing, they assumed the [developer] would get a tax exemption,” Schein, who serves on the bar association’s housing and urban development committee and was involved in drafting the letter, told The Real Deal. “You take that away, and the numbers are off.”

Schein added that allowing Mandatory Inclusionary Housing to proceed without clarity on 421a would be “forcing something that may not work,” and said the proposal’s viability – and its constitutional legality, as far as forcing developers to build affordable housing – is contingent on a plan that is “economically viable” for developers.

The letter seems to echo the sentiments of other real estate attorneys and market observers who have noted the potential difficulty of relying solely on zoning proposals to boost affordable housing development in the city.

Other changes to the proposal suggested by the bar association include increasing the 10-unit or 12,500-square-foot threshold over which Mandatory Inclusionary Housing would apply, and allowing projects of greater than 25 units or 25,000 square feet to “buy out” of the program by paying into a city-run Affordable Housing Fund.

“Most districts [nationally] that already have mandatory inclusionary housing have a buy-out at any [size],” Schein said, noting that “flexibility in the program is an important aspect” of protecting the proposal from any potential legal challenges in the future.

A City Planning Commission spokesperson confirmed the agency received the letter and will address it in an upcoming report on the Mandatory Inclusionary Housing plan.

While the de Blasio administration hopes to implement Mandatory Inclusionary Housing by the summer, the proposal has been met with resistance by local community boards and politicians across the boroughs.

There have been concerns over the added density that the measure would bring, as well as criticisms that the average median income thresholds specified in the program would not result in truly affordable units.

But the proposal is a vital aspect of the mayor’s goal of building and preserving 200,000 affordable housing units in the city over the next decade.

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