The Daily Dirt: Fixing 485x’s condo problem

The condo component of 485x has a problem.

Developer Sam Charney flagged it at The Real Deal’s New York Forum during a panel discussion. The session filled a huge room despite coming at the very end of the day-long event. Real estate people are clearly thirsty for information about how the state’s new development policies will work — or not work.

Less clear is whether New York’s elected officials are interested. I didn’t see any among the 2,500 attendees, although the mayor of Miami was there.

Back to 485x, which was passed last month to replace the expired mixed-income, multifamily project tax break 421a:

At one time, 421a incentivized affordable condos as well as rentals. But when 421a was overhauled in 2017, the provision for mixed-income condos was rendered unworkable. No one has built any since.

Certain legislators came to regret that, and sought to make affordable condos part of 421a’s replacement, 485x. The lawmakers wanted New Yorkers of modest means to have a path to ownership.

The result was “Affordability Option D,” a 20-year tax exemption for homeownership projects outside of Manhattan. The main requirement is that units must initially have an average assessed value per square foot of $89 or less.

Unfortunately, Charney notes, the city does not decide units’ assessed value until they are built.

A developer cannot finance such a project without knowing if it will receive the 20-year tax break. That is obvious to people in real estate but not to most lawmakers, who think developers have large, predictable profit margins, fund projects out of their own pockets and can set prices and rents as high or low as they please.

Charney says the $89 problem could be overcome if city officials would, based on project plans, stipulate the assessed value in advance. Until a solution is worked out, no affordable condos will be built in New York City.

What we’re thinking about: Has anyone in real estate been contacted about donating to state Sen. Zellnor Myrie’s campaign for mayor? Email me at eengquist@therealdeal.com.

A thing we’ve learned: Government regulations account for 40.6 percent of multifamily development costs, and building code changes were the largest driver of those costs over a 10-year period, according to a 2022 report by the National Multifamily Housing Council and the National Association of Home Builders.

Elsewhere…

— Fifteen years ago, you would have been laughed out of the room if you predicted New York City would soon be the No. 2 market for the technology sector, said Related Companies’ Philippe Visser at Wednesday’s TRD event. But now New York is indeed No. 2 “and if you ask a lot of tech companies, it’s actually No. 1,” ahead of San Francisco, he said, citing Gotham’s talent pool as the main draw. (Worth noting: Related owns a lot more office space in New York City than anywhere else. Its website lists 13 office buildings in Manhattan and two in San Francisco.)

— A four-story townhouse at 3 East 10th Street in Greenwich Village sold for $25 million last month in an off-market transaction. The Greek Revival-style home, built as a one-family in the 1840s, was carved into a multifamily long ago but was recently converted back into a mansion. The financial rationale for such conversions has played a role in New York’s housing shortage, but the architect behind this one cited a different reason: “the building’s respect for the neighborhood.” One can imagine the folks as Open New York cringing.

— The April issue of the RSA Reporter, a publication of the Rent Stabilization Association, counted up the number of signs required to be posted in a multiple dwelling. The total was 37, according to attorney Sherwin Belkin. “Many signs are duplicates of notices already contained in the tenant lease,” he noted. Perhaps the city will next require a sign enumerating all the required signs. That would make it 38.

Daily Dirt Data

Residential: The priciest residential sale Thursday was $9 million for 2,500-square-foot condominium unit 3GN at 150 Charles Street in the West Village. Jared Halpern, Michael Lorber and Alexander Boriskin of Douglas Elliman had the listing.

Commercial: The largest commercial sale of the day was $152 million for an industrial portfolio in Springfield Gardens, Queens. Blackstone sold 21 lots to Terreno Realty Corporation.

New to the Market: The highest price for a residential property hitting the market was $19.9 million for a 3,500-square-foot condominium at 988 Fifth Avenue, Floor 6, on the Upper East Side. Rona Davis of Compass has the listing.

Breaking Ground: The largest new building application filed was for a 34,500-square-foot, 16-story, 28-unit residential building at 341 Lenox Road in Flatbush. Alexander Blakely of AB Architekten filed the permit. The same firm filed an application in January to build a 12-story, 46-unit, 31,400-square-foot project across the street at 340 Lenox Road.

— Matthew Elo