The Real Deal New York

De Blasio: More pro-development than you think?

The Democratic mayoral candidate took on developers in the primary, but has more recently signaled that he’ll work with the industry

November 01, 2013
By Hiten Samtani

Bill de Blasio on the campaign trail

Bill de Blasio on the campaign trail

At a gathering of some 800 New York City business leaders last month, real estate mogul Bill Rudin invited Bill de Blasio to the lectern. Slightly ill at ease in his 6’5’’ frame, de Blasio proceeded to outline a vision for New York City that included the end of “giveaways” to luxury housing developers, and pledged to end what he termed the “affordability crisis.” Needless to say, he wasn’t exactly pandering to the crowd.

Still, the Public Advocate and mayoral front-runner received enthusiastic applause from the standing-room-only audience at the Association for a Better New York’s breakfast — a telling sign of both his dominance over GOP rival Joe Lhota and the scramble by the business and real estate communities to make nice before the mayoral guard changes in January.

On the stump, de Blasio has played up his “Tale of Two Cities” narrative, repeatedly taking digs at the Bloomberg administration for coddling the real estate industry. Indeed, in an August interview with The Real Deal, he said that the “relationship between the city and its developer community needs a reset.”

Such statements — combined with his calls for affordable housing and tax reform — have sent pangs of anxiety through the development community, which had been poised to deal with the ostensibly more sympathetic Christine Quinn. (She was leading in the Democratic primary polls until de Blasio rode an 11th-hour surge to victory.)

But a closer look at de Blasio’s political track record suggests that he may be more pro-development than many in the industry realize.

“I have always said Bill de Blasio is someone we can work with,” Real Estate Board of New York president Steven Spinola told TRD. “As everyone has had the chance to talk to him and listen to his answers, more and more people became less concerned.”

De Blasio’s box of chocolates

De Blasio has been a staple of New York City’s political scene for over two decades.

Born Warren Wilhelm, Jr., in Manhattan in 1961 to a World War II vet-turned-bureaucrat father and a labor-organizer mother, de Blasio was raised in Cambridge, Mass.

But he attended two of New York’s most prestigious schools — New York University, where he completed his undergraduate work, and Columbia University, where he earned a master’s degree in international affairs. (De Blasio took his mother’s surname after college.)

In a story that’s gotten regular play in the city’s dailies and has been used as fodder by Lhota, de Blasio made a trip to Nicaragua in 1988 to distribute food and supplies in a war between the ruling leftist Sandinista party — which he supported — and U.S.-backed rebels.

Shortly after he returned, the activist got his first taste of city political life as a volunteer for David Dinkins’ successful 1989 mayoral campaign. He then joined City Hall as an aide to Dinkins’ political guru, Bill Lynch.

After Dinkins lost his reelection bid in 1993, de Blasio served stints in the U.S. Department of Housing and Urban Development and as campaign manager for Hillary Clinton’s successful U.S. Senate run.

In 2001, he moved from the political backrooms onto the stage when he was elected to the New York City Council in Brooklyn. And in 2010, he was elected to the citywide office of Public Advocate, where he gained notoriety among some property owners with his “NYC’s Worst Landlords” list, which singled out landlords with the largest number of unresolved building-code violations.

Despite his deep roots in city politics, de Blasio wasn’t well known in business circles. So when he clinched the mayoral primary, the real estate community was caught off guard.

“When he emerged, there was a lot of concern and surprise,” said Kathryn Wylde, CEO of the Partnership for New York City, a pro-business group.

Hank Sheinkopf, a veteran political strategist, said anyone who thinks they can predict what the city would look like under de Blasio “really need[s] to be hospitalized.”

“It’s like Forrest Gump and the box of chocolates,” he said.

As de Blasio’s policy agenda has come into sharper focus, one of the more worrying changes that he’s pushing for — at least from the perspective of many developers — is mandatory inclusionary zoning, which would require developers who build residential projects that benefit from rezonings to set aside a percentage of their units as affordable housing. (The Bloomberg administration’s current policy is voluntary inclusionary zoning, which incentivizes developers, rather than forces them to build affordable housing.)

Meanwhile, de Blasio argued in his ABNY speech that Bloomberg’s $7.5 billion plan to build or preserve 165,000 units of affordable housing by 2014 does not go far enough. He’s called for building or preserving 200,000 units of affordable housing in the next 10 years, and has also said he would invest $125 million annually from the city’s $140 billion pension funds to do so.

David Belt — founder of development firms Macro Sea and DBI, who has bundled funds for de Blasio — said that the candidate would have to find a way to make mandatory inclusionary zoning financially viable for developers.

“If no one wants to build because the rules are too harsh, then it won’t work,” said Belt, who met with the candidate in September to discuss developers’ concerns.

De Blasio told TRD his plan is feasible if coupled with upzonings and increases in as-of-right density.

“This should expand the city’s stock of affordable housing while also easing price pressure in the market-rate rental market,” he said through his campaign manager last month.

The candidate has also called for a change in the tax treatment of vacant land. In August, he told TRD that he would consider taxing vacant land at commercial property rates rather than at the far lower residential rates as a way to “discourage long-term speculation that leaves lots vacant in our neighborhoods,” and to spur the construction of more affordable units.

These positions — along with his pledge to support labor unions — have earned the candidate the support of powerful pro-labor groups, such as the 100,000-member Building and Construction Trades Council of Greater New York and the Building Trades Employers’ Association, which represents 1,700 construction managers and contractors in the city.

“Our sense is that he truly believes in the idea of responsible development,” said Gary LaBarbera, president of the Building and Construction Trades Council, which endorsed the candidate last month.

Assuming de Blasio wins, Sheinkopf said, he would have the support of a “left-leaning” City Council. In particular, newly elected council members are likely “less concerned with what the real estate industry wants to do and more concerned with what the mayor will want,” Sheinkopf said. “So he will have allies.”

 A closer look

Some industry insiders agreed that de Blasio may be more pro-development than he appears on first blush.

For starters, sources said, whoever becomes mayor will have no choice but to play ball with the real estate industry. After all, property tax is the single biggest contributor to the city’s coffers, accounting for 27 percent of the city’s estimated revenue in 2013, according to a June Independent Budget Office report.

In addition, growing the economy is, of course, considered a key marker of success for anyone at the helm of City Hall.

If de Blasio wins Gracie Mansion, “you may be surprised by the relationship that he has with the real estate community, simply because we need each other,” said Bob Knakal, chairman of the commercial real estate brokerage Massey Knakal Realty Services. (Knakal has previously been on the record saying that a Republican would be better for the industry.)

De Blasio has met with several top developers and business leaders in recent months, according to Spinola and Wylde.

“There’s some concern about a few of his policies,” Wylde said, “but he’s come across as a reasonable, smart guy.”

Billionaire real estate mogul and former Republican mayoral candidate John Catsimatidis told TRD that de Blasio has to realize that “we’ve got to give [developers] the incentive to invest it in New York City” because they could easily take their money elsewhere.

While de Blasio hasn’t dialed down his rhetoric against the industry — sources point out that it’s working well in the polls — he has accepted its money. As of September, the candidate had raised about $460,000 from real estate interests, according to an analysis of campaign finance records by the Wall Street Journal. Among those listed as “intermediaries,” or fund-raising bundlers for the candidate, are Silverstein Properties’ Janno Lieber, Related Companies’ Jay Kriegel, Forest City Ratner’s Robert Sanna and Toll Brothers’ David Von Spreckelsen, a TRD analysis shows. Brookfield Office Properties’ John Zuccotti, Midtown Equities’ Jack Cayre and prominent real estate lawyer Edward Mermelstein are also donors.

Meanwhile, early last month, de Blasio pulled in $275,000 in a single night at a Chelsea fund-raiser, according to Crain’s.

Von Spreckelsen, who in 2009 was looking to develop a 450-unit residential complex along the Gowanus Canal, told TRD that de Blasio — then a City Council member — was a key ally. De Blasio did ask for certain concessions, including a greater number of affordable units and a move to unionized labor, Von Spreckelsen said. But he stayed steadfast in his support, even after the U.S. Environmental Protection Agency wanted to declare the Gowanus Canal a federal Superfund cleanup site.

The EPA did eventually get its way in 2010, which prompted Toll Brothers to kill the project. “He didn’t win a popularity contest for supporting us,” Von Spreckelsen said of the candidate. “I have to give him a lot of credit for it.”

De Blasio took several other pro-development stances in the council. Though he had initially demanded an affordable housing requirement for the 2003 rezoning of Brooklyn’s Fourth Avenue, he ultimately voted in favor of a proposal that didn’t include the requirement.

And perhaps most controversially, he backed Forest City Ratner’s Atlantic Yards mega-project in 2006, saying it would bring the borough a much-needed infusion of over 2,000 units of affordable housing.

Forest City Ratner has yet to make good on delivering the affordable units, but as recently as June 2011, Bruce Ratner, the chairman of the firm, hosted a fund-raiser for de Blasio at the Waldorf-Astoria. Other co-chairs of the event included the Durst Organization’s Jordan Barowitz and Pat Purcell of the UCFW Local 1500 grocery workers’ union.

Forest City Ratner declined to comment for this story.

De Blasio has been brainstorming ways to make life easier for developers and to push major projects forward, according to Wylde, noting that he’s called out the Department of Buildings for excessive red tape and not being efficient enough with processing permits, project approvals and inspections.

“Our goal should be providing developers certainty that they will receive responses within 30 to 60 days” for the various permits and other aspects of their plans, de Blasio told TRD.

In addition, the candidate has proposed relaxing restrictions on air rights transfers, saying in a recent position paper that when more expansive transfers have been permitted in areas such as Hudson Yards and West Chelsea, the process “has enabled greater flexibility to promote development and affordable housing.”

Von Spreckelsen said that as Public Advocate, de Blasio reached out to talk about improving the way city agencies work with developers. The two discussed potential DOB improvements, as well as ways to shorten the pre-certification process for the city’s Uniform Land Use Review Procedure — traditionally a headache for developers.

And unlike Lhota, who told TRD in August that the city should slow down future rezonings until results of previous rezonings are in, de Blasio has said that they are an “economic and environmental imperative.”

Von Spreckelsen said de Blasio’s campaign rhetoric is likely more anti-development than his actual policies would be as mayor.

In the primary, de Blasio took “a rather liberal position, because it was a crowded field and he wanted to distinguish himself,” Von Spreckelsen said.

Certainly, Von Spreckelsen added, “he would like to leverage his position to get more of what he wants in the city. But I’m not feeling too bad.”

  • robert spitalnick

    Big-shot developers may like him but he has also called for a rent freeze which will destroy small property owners. As Mayor, he will control 4 seats on the RGB. And his plan to tax the “wealthy” to provide for universal pre-K will drive people out of the city at the worst possible time.

    • Crian Bashman

      If the quality of life remains the same, I can’t imagine a 0.55% increase in taxes for earners of $500k to be enough to force them to flee the city. In fact, if the money is earmarked for Universal Pre-K and after school activities for pre-teens and teens, then I believe the quality of life will improve for everyone, including those who are paying a bit more.

      If that 0.55% margin is going to tilt you to the burbs, then you probably weren’t living within your means anyway.

      • robert spitalnick

        I happen to think people have a better idea how to spend their money than the government. Government is good at taking but not very good at running programs. And DiBlasio wants to charge the Charter Schools rent. They are the only thing in the school system that works and he will screw it up.

        • Crian Bashman

          Knowing how to spend the money is irrelevant to this conversation. Do people give up the lifestyle of NYC living over 0.55%? I honestly don’t think so. That is the point.

      • jax

        that tax increase is the stupidest thing ive ever heard. NYC residents already pay enough taxes. Its not going to get approved either way so its moot

  • Ann

    in response to Robert Spitalnick “small” property owners are not suffering by any means they have benefitted from much higher rents. I know of people who are paying $2000 per month for a walk up that needs work just because rents in a building with an elevator is $600 or $700 a month more for the same apartment. So called “luxury” buildings is just that “so called”. Many of the buildings with doormen are by no means “luxury”. Yes those large property owners have benefited enormously because of reduced rent regulations not because the buildings are any better but the “small” property owner has surely benefitted. There is no doubt. Or have they forgotten when the apartments they are now asking more than $2K pm for used to be $600 or $700 or even $900 per month? Greed is never a good thing.

    • Small Landlord

      That is a pretty broad generalization. Apartment buildings should be (and usually are) purchased based on their Net Operating Income (Income – Expenses). If the building is limited by the rent board to only increase rents at 3% per year, but expenses increase at 5% or 6% per year, pretty soon the property owner has to either defer maintenance, jack up the non-rent stabilized rents (if any) or default on the property. No unit is going from $600 to $2k per month, it is not legal or possible in the NYC market. It will take years and a ton of turnover before a $600 a month unit gets to the $2,500 luxury decontrol rent.

      • Gnoll110

        How about selling and investing in something that is a better use of capital?

  • http://www.vjmachiavelli.blogspot.com VJ Machiavelli

    What income levels are the going to build affordable housing for ?

    40%, 50%, 60% 70% 80% 90% 100% etc

    If U cap at 40% everyone above is OUT & U also need a Minimum Income to pay rent rule of thumb is 40xRent say the rent is $500 X 40 = $20,000 so anyone making less can’t afford to pay the rent & then above the (CAP) is over income

    So U get a limit number of people

    Before there was the “Oracle of Delphi” there was Count Vampire J. Machiavelli

    VJ Machiavelli
    http://www.VJMachiavelli.blogspot.com
    On Tweeter @vjmachiavelli

  • Douglas Hanau

    Rent is not the only factor in affordable housing. In terms of location, most affordable housing project of any size are built in less-desirable neighborhoods. Cost of acquistion is too high else where. 80/20 is the only program that has allowed affordable housing to be built in the best neighborhoods in NYC. Teachers, cops and firefighters, and other middle class folks want to live in nice neighborhoods. SO the question is not affordable housing, it is location as well. MANY OF THE BEST RESIDENTIAL neighborhoods are landmarked and face tough anti-development community boards. Bloomberg has fostered development in Bronx, upper manhattan, sourth east brooklyn but not as many — other than 80/20 in the best neighborhoods

    • phil

      the “ONLY” Effective way of bringing down the prices, is by letting drastically increase the amount of unit allowed to be built + get rid of the rent control laws that keep so many apts “far” below market prices and thus contribute to the housing crisis,

      here is proof, the areas with the most regulated housing market is NYC and San Francisco, and those are the priciest locations in the nation as well,

      after decades of experimenting with these kind of policies, the results are in, and free market wins big time,

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