Superfund designation: Good for Gowanus?

EPA designation might help real estate values, brokers say

Mar.March 31, 2010 03:51 PM

At left: The canal, a narrow 1.8-mile, tilde-shaped waterway, includes bits of neighborhoods like Park Slope and Carroll Gardens. At right: The EPA plan would curb runoff and remove the sludge in the Gowanus Canal.

Last month, Brooklyn’s Gowanus Canal became one of the most polluted places in the country, at least in the eyes of the federal Environmental Protection Agency, which named it to the infamous “Superfund” cleanup list.

While that environmental scarlet letter may not make for the most compelling marketing gimmick — New York’s Love Canal, whose toxicity led to the creation of the Superfund in 1980, is hardly prime real estate today — Gowanus probably won’t see its property values dip, according to many brokers, landlords and developers.

There are a couple of reasons for that counterintuitive assessment. For one, the neighborhood around the canal, a narrow 1.8-mile, tilde-shaped waterway, includes bits of established neighborhoods like Park Slope and Carroll Gardens.

What’s more, mopping up the mess from oil refineries, tanneries and raw sewage, which have contaminated the Gowanus since it was dug in the 1860s, will likely mean better things to come.

If anything, the effect will help prices, especially in the long-term, said Greg D’Avola, a broker with nearby Frank Galeano Real Estate. “It won’t bring values down, it will bring them up” by 10 percent, said D’Avola.

Brokers said homes close to the canal usually trade for less than comparable ones away from it. For example, a two-story, two-family rowhouse on President Street, near Bond Street, might fetch $850,000 today, though a nearly identical one near Hoyt Street might get $950,000.

Of course, the point might be moot for those who already live near the Gowanus, where blocks contain a mix of modest residences, parking lots and warehouses, as well as a scattering of high-end apartments.

But even developers planning new complexes seem to be taking the news in stride. For example, David Kramer, a principal of the Hudson Companies, is committed to two major projects.

One is Gowanus Green, a $300 million development where the Hudson Companies is partnering with the Bluestone Organization, Jonathan Rose Companies and the Fifth Avenue Committee for 774 affordable units across nine buildings. Because the city still owns the project’s intended 8-acre site along Fifth Street, Gowanus Green is still a ways from the finish line, but delaying the groundbreaking can only work in the project’s favor, Kramer said. “We won’t even break ground till 2012, and by then, everybody will have a clearer idea about the way forward,” he said.

Less certain is the effect of the Superfund designation on Third & Bond, a new 44-unit market-rate condo complex near the Gowanus’ western edge. When sales begin this month, studios will start at $312,000.

Though that price was set in April 2009 when the offering plan was approved, the plan won’t be amended in light of the EPA’s decision, Kramer said. In fact, he points out that another Superfund site, along the upper Hudson River, where the EPA is now removing chemicals dumped by General Electric, doesn’t hurt that body of water’s reputation.

“The Hudson River is a Superfund site, and that hasn’t imperiled Richard Meier’s condos” in the West Village, he said.

While reputations might not suffer, the Superfund seems to present significant hurdles for certain projects.

Under rules passed last June, the Federal Housing Administration won’t issue any mortgages for homes located within 3,000 feet of a Superfund site, which is largely why Toll Brothers, the national housing developer, has pulled the plug on a 450-unit condo and rental complex slated for a 3-acre site on the western bank, between Carroll and Second streets.

Thirty percent of the homes in the project, which was much further along than Gowanus Green, would have been affordable, and those residents often depend on FHA loans, said David Von Spreckelsen, a Toll senior vice president.

Plus, it would be hard for his company to line up insurance to break ground on the $250 million project, which was planned to have community space, retail and a 40-foot-wide canal-side esplanade.

“There’s too much uncertainty about who is going to pay for it, and what it’s going to cost,” Von Spreckelsen said of the Superfund designation, which attempts to get polluters to pay for the cleanup. Polluters identified so far include National Grid — the successor to Brooklyn Union Gas — Con Edison and the U.S. Navy, among others. “I am absolutely disappointed,” Von Spreckelsen said.

He said he favored the city’s alternate cleanup approach, which would have left toxic sludge at the canal’s bottom undisturbed but would have curbed storm-water runoff, and which would have been wrapped up in about five years. The EPA, on the other hand, will curb runoff as well as remove the sludge.

Refuting Kramer, Von Spreckelsen also pointed out that more than a decade passed before the EPA started work on the Hudson.

Similarly, the Superfund designation could jeopardize the city’s efforts to rezone the area to allow more housing, which could depress values, said Bill Appel, an executive director of the Gowanus Canal Community Development Corporation, a nonprofit group that has been advocating for revitalization since the 1970s.

The group is also raising money for a canal-themed museum planned for under a subway trestle at Ninth Street.

“It’s tantamount to economic devastation for the South Brooklyn area as far as development goes,” said Appel, a 32-year Carroll Gardens resident, who added that an EPA cleanup is also unnecessary because unless people go swimming in it, the canal doesn’t pose any measurable health risks.

For its part, New York’s planning department admits its goal may now be harder to reach. A Superfund designation “adds a layer of additional complexity (and uncertainty) to an already very complex process,” said spokeswoman Jovana Rizzo in an e-mail.

What lies ahead may be hard to predict, though, because the Gowanus is so different from so many other of the 1,600 Superfund sites, particularly in that it has people living so close to a polluted waterway.

Indeed, the Hudson River cleanup, along a six-mile stretch near the town of Fort Edward in Washington County, is occurring in a place so rural that GE had to build roads just to put in remediation facilities there, explained Beth Totman, an EPA spokeswoman.

In fact, even though there have been many Superfund sites in the metropolitan area (19 in Nassau County, 18 in Suffolk County and 2 in Westchester County), there’s been only one in New York City — in Woodside, Queens, and that involved mostly soil excavation, Totman said.

Perhaps the most comparable project is in Milford, N.J., on the Delaware River in Hunterdon County, where the asbestos-laden former Curtis Paper Mill became a Superfund site last summer.

Lisa Raborn, a broker in Coldwell Banker’s Flemington office, which is 15 miles away, admitted that joining the most-polluted list might have downsides.

“It might temporarily make people think twice about venturing there,” she said. “But times have changed a lot since Love Canal, with the whole thing about going green and the environment.

“Now,” she said, “Superfund’s seen as a positive thing, that it will be cleaned up.”

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