The Daily Dirt: Crunching the numbers on a replacement 421a

The negotiations over 421a have a number of moving pieces. Now it has one more.

The debate over wage requirements has gotten a lot of attention because of the lack of agreement between the real estate industry and building trades.

Meanwhile, Gov. Hochul pitched to allow the Adams administration to determine affordability requirements for a new program. City officials floated setting aside apartments for tenants making an average of 60 to 80 percent of the area median income, according to Politico New York. 

Deputy Mayor Maria Torres-Springer said on Friday that all stakeholders were still working to strike the right balance, but that for the city, deeper and permanent affordability, as well as better enforcement and labor standards, were critical components of a new program.  

Now, an analysis by New York University’s Furman Center stresses the importance of crafting a new exemption that “not only encourages the development of new rental apartments but also ensures that these developments contribute significantly to the city’s affordable housing stock.”

“To preserve the financial viability of the project, the number of affordable homes required generally must be decreased to make up for the added cost of providing those homes to lower income households,” the report states. “Policymakers therefore will have to choose between providing more income-restricted homes and providing those homes to the households who need them the most.”

The policy brief suggests that less can sometimes be more, at least when it comes to targeting lower area median incomes. The share of rent-burdened tenants who earn between 50 and 60 percent of AMI is more than 2.6 times the share of rent-burdened households with incomes between 90 and 100 percent of AMI, according to the report.

Rather than increasing the percentage of units set aside as affordable, the Furman Center proposes a policy based on what financially works in low- to high-rent areas:

• High-rent: 25 percent of units, where the average area median income would be 50 percent
• Mid-market: 10 percent of units at 50 to 60 percent AMI. 
• Low-rent: 10 percent at 60 percent AMI

The analysis indicates that the mid- and low-rent options would be paired with higher AMIs or an option where smaller projects are market rate but also rent-stabilized.

The report also found that, given the cost of development in high-rent areas, land values would need to decline by 30 percent for a developer to bid on a site without a 421a-like break in place. For mid-rent areas, the land would need to be basically free, and for low-rent areas, the development site would need to be free and subsidized. 

The state budget was due today, and it is not at all clear how these conversations will lead to a housing package that appeases all parties, all while incentivizing the construction of multifamily housing. There are a lot of conflicting forces at play.

What we’re thinking about: I know I have asked variations on this question before, but I will ask again: Will class B and C office buildings make a comeback? Send a note to kathryn@therealdeal.com. 

A thing we’ve learned: Actor Timothée Chalamet is in New Jersey to film the Bob Dylan biopic  “A Complete Unknown,” according to NJ Advance Media. Per a local blog, he is filming at the White Mana Diner in Jersey City this week. It may have also been shooting on my street today, as I saw a camera crew set up by an old station wagon.

Elsewhere in New York…

— City health officials warn that the city has seen an uptick in bacterial meningitis, Gothamist reports. NYC has seen 11 cases so far this year, and 28 were recorded last year, compared with 15 in 2021.

— Residents of City Island are pushing for ferry service to and from the northeastern Bronx neighborhood, CBS News reports. “It would improve the quality of life dramatically,” John Doyle, of City Island Rising, told the network.”It would cut commute times for the average City Islander going to the city, of which 10 percent works in the city, in half.”

— A new law that took effect March 20 requires home sellers in New York to disclose flood history and risk to potential buyers, the Times-Union reports. Sellers previously could avoid doing so by giving the buyer a $500 credit.

Residential: The priciest residential closing of the day was for a condo unit at 500 West 18th Street in Chelsea for $5.6 million.

Commercial: The most expensive commercial deal on Monday was for a religious campus and development site at 12020 Flatlands Avenue in Starrett City for $13.9 million.

New to the Market: The highest priced listing to hit the market on Monday was for a condo unit at 432 Park Avenue for $30.5 million. Jason Haber of Compass has the listing.

Breaking Ground: The largest building filing of the day was for a 13,906 square-foot, 10-unit residential building at 1477 West Fifth Street in Brooklyn. Xiaohong Zhang of Ameriland Brook filed the application. — Joseph Jungermann