The Real Deal New York

L+M’s Ron Moelis says 421a lapse won’t kill all affordable housing

Developer says he expects mixed-income rentals to suffer without tax break
By Kathryn Brenzel | April 13, 2016 05:50PM

From left: Vicki Been, Ron Moelis, Ruben Diaz and Erica Buckley

From left: Vicki Been, Ron Moelis, Ruben Diaz and Erica Buckley

Many developers have pointed to the death of 421a as a major obstacle to Mayor Bill de Blasio’s affordable housing goals. But developer Ron Moelis, head of L + M Development, said he doesn’t expect the lapse to dramatically disrupt the pace of all affordable housing construction.

“The city’s doing a great job, has a lot of resources to create affordable housing,” he said during a panel at Strook & Strook & Lavan LLP Wednesday. “I don’t think it’s going to kill the production of affordable housing.”

In an interview after the panel, Moelis said housing that is eligible for other state tax exemption programs — like 420-c or article 11 — will continue to be built, but mixed-income rentals or buildings with a higher area median income (AMI) tenant requirement will suffer from the lack of 421a. A majority of L+M’s projects include an affordable housing component, and Moelis said that some of its mixed-income housing developments are stalled by the tax break’s absence.

Following the collapse of negotiations over the future of 421a in January, developers and public officials have emphasized the need for a replacement program to offset sky-high property and construction costs. Without the incentive, they’ve warned, developers will turn to luxury condos because market-rate and mixed-income rentals won’t turn a profit without a property tax break.

Vicki Been, commissioner of the City Department of Housing Preservation and Development, said she “took exception” to the name of Wednesday’s panel — “Will New York City Ever See Affordable Housing?”— saying that the city is “going gangbusters” and has financed 40,000 affordable new housing units in the past two years. She did, however, note that a replacement for 421a is needed to encourage mixed-income rental housing.

Bronx Borough President Ruben Diaz Jr. said that he supports the mayor’s housing goals “conceptually” but he feels that the Mandatory Inclusionary Housing text amendment didn’t adequately take into consideration the different dynamics of the borough. He said that the city needs to create affordable housing that not only helps the Bronx retain lower-income families but also working professionals who are at a higher-income level.

“In the Bronx, it’s very complex,” Diaz said. “What you’re doing is you’re painting the city with one broad stroke. Something as profound as trying to plan out how the city is going to look was done in such haste.”