421a limbo? New resi unit applications hit a low in April
With key legislation's fate up in the air, developers may be wary to move ahead
Uncertainty over the fate of the 421a program may be giving developers pause, with last month seeing the lowest number of permits filed in the last year for new residential units in New York City.
Total units filed in April fell below 1,000 for the first time in at least thirteen months, according to The Real Deal’s analysis of DOB permit applications, adjusting for residential developments with 15 or more units or at least 15,000 square feet.
The findings show that April’s applications included only 781 of these qualifying units, the lowest such count in 12 months by a considerable margin.
Compare that figure to December, when some 6,700 of these units were included in permit applications. Or September, when a development filing spree put a whopping 11,500 future units on the board.
So how low did April go? The median monthly count of units during the past 12 months sits at about 3,834 units per month, with a monthly average of just over 4,000 units.
The numbers come in just after the New York Building Congress released a construction report stating that in 2014, residential construction hit a record $12 billion. The same day, Barbara Corcoran went on Bloomberg to say that there might be a new real estate bubble developing, and that if you’re looking for middle class housing in the city going forward you can “forget about it”.
It’s that issue of affordable housing that David Behin, partner and president of the investment sales division at MNS, said might be behind the April drought in permit applications.
“The next big date in real estate right now for new construction is June of 2015,” Behin told TRD, referring to a pending decision in Albany regarding expiring 421a tax abatements for new developments that include affordable housing.
“I can definitely tell you that there has been hesitation because nobody knows,” he said of the upcoming decision. “Are they [developers] going to be doing an 80/20 project, are they going to be doing a 70/30 project––what are they going to be building?” he said, in reference to 421a eligible projects that include at least 20 percent affordable housing.
Andrew Gerringer, a managing director at Marketing Directors, echoed Behin’s comments.
“I would say there was probably a rush because of the expiration of 421a,” said Gerringer, referring to the higher filing numbers in previous months, “but I think it’s a combination of things,” he said, citing that there were a flurry of trades of development sites in the past year, which postpones construction.
“We’ll look at the next couple of months and we’ll see what that tells us,” Gerringer continued, “but I think a lot of it has to do with 421a… No one really knows what’s going on with 421a.”