Affordable housing is coming back to Williamsburg, a Brooklyn neighborhood best known for drawing a scene of young artists a decade ago, which then drove up rents.
Now, construction trucks line Kent Avenue, a sure sign that residential development is well under way along the East River waterfront. It’s an encouraging indication that the city’s affordable housing plan for the area is an initial success.
An estimated 1,000 units of affordable housing stock are in the immediate pipeline, built by developers taking advantage of so-called inclusionary zoning, which requires affordable housing as part of market-rate projects on the waterfront. L & M Equity and Douglaston Development are among the builders who’ve signed on since zoning was changed in May of 2005 to promote residential development in old waterfront industrial areas.
Those apartments are nearly two-thirds of the total 1,560 affordable units the city’s Department of Housing Preservation and Development sought for the waterfront as a result of the rezoning, said department commissioner Shaun Donovan.
“Conventional wisdom says that you can’t build affordable housing in a booming housing market like New York City,” said Donovan. By encouraging affordable housing development at the same time market-rate housing is hot, “the program turns the usual real-estate equation on its head.”
But rising construction costs — up 30 percent in the last year alone — are raising concerns among developers who are tackling the projects. Perceptions about affordable housing are another hurdle developers have run up against when selling to market-rate buyers. And the interior of Williamsburg, where affordable housing is not required, is falling short of affordable housing goals set by the city (see below).
The rezoning on the Williamsburg and Greenpoint waterfront passed last May gives developers 33 percent additional floor area in exchange for at least 20 percent of permanent affordable housing either on or off site. Developers can build an additional 1.25 square foot for every 1 square foot they add in affordable housing.
At the Edge, a project that extends from North 5th to North 7th streets on the waterfront, Douglaston Development is planning 1,000 residential units, including 347 units of affordable housing and 557 market-rate units as part of the first phase of the project.
Market-rate units will be in a tower close to the water. The affordable units will sit in a mid-rise building on the upland side of the site.
Because of high constructions costs, the Edge could not do a high-rise for affordable housing since it cost more to build a high-rise than a mid-rise building, said Elan Padeh, president and CEO of the Developers Group, which is marketing the project. “Everything we design into a building has a huge construction cost,” he said.
Another concern for developers is that market-rate units can be priced to reflect rising construction costs, but affordable units must be priced by the terms set in the rezoning.
Despite this fixed pricing, Michael Kaye, president of Douglaston Development, said it made sense to go ahead and build big now, saving by essentially building in bulk.
“We have a pretty big affordable project,” he said. “We thought it would be easier if we build as much now.”
Down the street at the almost completed Schaefer Landing, construction costs were not an obstacle because of the project’s timing — it began far earlier than any other project on the waterfront.
While it sits south of the waterfront area rezoned last year, it still benefits from affordable housing incentives offered by the city. The project consists of two buildings — a 25-story tower and a mid-rise building, with 140 units of affordable rental apartments and 210 condos at market price.
Donald Capoccia, managing principal of developer BFC Partners, said when 90 percent of Schaefer Landing units were sold, it was clear mixed-income integration within the project was not a significant issue for New Yorkers accustomed to living and working with people of different economic and cultural backgrounds.
“That’s the beauty of New York,” he said. “During the two years of marketing, the sales teams were instructed to let buyers know it was a mixed-income project and out of everyone who walked through the sales office, there was only a handful of people who were upset by the idea.”
Inside the inclusionary zoning area, all projects had an option of 20 percent affordable housing for low-income residents or mixed housing for low-income and moderate-income residents.
But affordable housing doesn’t necessarily mean low income. A resident of an affordable unit might make $40,000 to $70,000 annually, have a decent job and be a first-time buyer. With sales prices for units skyrocketing in the last several years and a tighter rental market, affordable housing in New York is at crisis-level, advocates say.
Palmer’s Dock, at 164 Kent Avenue, also sits on the roster of mixed affordable housing and market-rate projects. Plans call for 113 units of affordable housing for residents with incomes as low as $21,300 and up to $56,700 for a family of four. The market-rate portion of the project, called Northside Piers, will include around 190 units. The project is a joint venture of Dunn Development and L & M Equity.
Although not all of Williamsburg is doing as well as the waterfront in offering affordable housing, Brad Lander, director of the Pratt Center for Community and Environmental Development, said it’s a step in the right direction.
“The main focus of advocacy was affordable housing along the waterfront, and evidence suggests it is working,” Lander said.
Incentives falter away from water
Price constraints stymie building in inner Williamsburg, developers say
New zoning has spurred shoreline development in Williamsburg, but the interior of the Brooklyn neighborhood isn’t seeing a much-needed boost in the number of affordable housing units.
Residents are getting skeptical that the city’s promise of 3,500 affordable units is going to be met.
The projection includes 2,000 affordable units in the interior of Williamsburg and 1,500 along the waterfront. More than 10,000 new units of housing overall in Williamsburg are expected to be built in the next several years, according to city estimates.
“I don’t think it’s going to include as much [affordable housing] as people expected,” said Neil Dolgin, executive vice president at Kalmon Dolgin Affiliates, a commercial brokerage that works in Williamsburg.
Height restrictions in the interior, along with rising construction costs plaguing developers elsewhere, are making things harder for residential projects to add affordable housing.
Like on the water, developers were offered a 33 percent increase in what they could build in exchange for a percentage of permanent affordable housing to be provided to low-income residents.
However, height limits along the inner corridors of Williamsburg have made it difficult for smaller developments to add more units in order to use the density bonus. Also, developers have to make 40 percent of new buildings with 15 or more units affordable to families with incomes close to the area’s median income.
“From a monetary standpoint, there is no reason to have affordable housing on the interior done,” said Elan Padeh, president and CEO of the Developers Group. “The bonus isn’t good enough and it’s almost taking away free-market profits from developers. Developers can’t make money.”
According to Dolgin, with costs of building new condos in a market with stagnated sales prices and higher interest rates, developers need to sell at market rate in order to break even.
“Why will they build the extra footage if it’s going to be offset by higher costs? There isn’t enough tax benefits [and] no general benefits,” Dolgin said. “With construction costs today, developers can’t make affordable housing without special benefits.”
Brad Lander, director of the Pratt Center for Community and Environmental Development, acknowledges few developments off the waterfront have chosen to do affordable housing, but said the city’s rezoning of Williamsburg last year accomplished much for affordable housing.
“The two other alternatives were no development or all market-rate housing,” Lander said. “Assuming we get 1,000 on the waterfront from the inclusionary zoning, that’s still a thousand more than we’d get from the other two options.”