With tons of predatory real estate dealing taking place out there, Anderson is looking like a veritable superhero in a sport jacket.
Tuesday, April 29, 2014
Digging It
The L-shaped apartment building with entrances on Lincoln Road and Flatbush is humming along nicely.
You won't find any complaints from this blombre (short for blogger hombre). Despite the fact that he chose not to borrow from government sources, developer Tom Anderson chose to honor his commitment to 20% affordable units. That's right, folks. He didn't have to. He's making it up by going market on the other batch, which would have been priced 10% below market had he used HDC financing.
With tons of predatory real estate dealing taking place out there, Anderson is looking like a veritable superhero in a sport jacket.
With tons of predatory real estate dealing taking place out there, Anderson is looking like a veritable superhero in a sport jacket.
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15 comments:
He's not doing 20% affordable out of the goodness of his heart. He's doing it because it gets him a big real estate tax exemption on the new building (421-a, to be exact). Same as 626 Flatbush.
Duh Ek. I apologize for not using the sarcasm emoticon.
One would assume that any developer worth his for-profit status would not GIVE AWAY housing. What's interesting to me, though, is that under ANY circumstances it is advisable to choose to build affordable over market. That suggests to me that the "giveaways" are pretty intense, particularly in a hot market, where the upside is seeming sky-high.
The only entity with a long-enough lifespan to envision the future and plan for it is government. Not that they're particularly good at it, but still...There is no incentive for the markets to concern themselves with what happens after tax abatements disappear, or boom and bust cycles happen, or water levels rise, or buildings get knocked down by planes. Cooked into every commercial deal is the risk/return calculation, and if you're doing tons of deals any one makes little difference. Corporations can declare bankruptcy in the worst of circumstances, with individual partners left temporarily jobless but hardly penniless.
I often wonder what's going to happen to all these wonderful buildings when the next serious recession hits. No one ever talks about these things in a boom do they?
There's got to be a way that we can use that money we give away to build, perhaps in partnership, in a way that leaves US in control of the outcome and the underlying property. I'm not the least bit convinced than inner-city housing can be maintained by the half-ass programs we have going now. It's too piecemeal, with too many haywire incentives for people to do the wrong thing.
The "giveaway" is a cap on real estate taxes, so it doesn't get more valuable just because the market is hot. In fact, I think the fact that the developer is willing to give up 20% of the project as affordable to get the tax benefit shows that they don't think the market rate units will be all that valuable. You aren't seeing projects in Park Slope doing that, for instance.
I think it's certainly fair to talk about how effective the incentives to developers are to build affordable housing. But you seem to be implying that the answer to more cost effective affordable housing is government-owned affordable housing. We tried that for a long time--it's called public housing authorities. I don't think anyone believes NYCHA is a model for cost effectiveness or efficiency. The idea of providing incentives for the private sector to build and own and manage affordable housing came out of the disastrous nationwide experience with public housing.
There is a lot of privately owned affordable housing in our 'hood. Look at what CAMBA did over on Albany Ave-- do you think that was done by half-ass programs and haywire incentives?
Ek: This is where I really think you have the propaganda so fixed in your head that you don't see the reality on the ground. CAMBA's project ARE basically government housing, but run by an outside non-profit - that's the FIX the City's trying to address. Recognizing that poverty often comes with social ills, the thinking is why not have a group experienced with those problems manage the property. The majority of the funding is coming from various affordable housing initiatives initiated by the City, State and Feds. It's designed quite specifically to address the shortcomings of the housing projects we built in the '40s, '50s and '60s.
When head of CAMBA Joanne Oplisky was at a CB9 meeting explaining their various projects in the area, I asked her point blank what her plans were to avoid the problems at infamous projects like Cabrini Green in Chicago and Pruitt Igoe in St. Louis, not to mentions a few NYC projects (though the buildings themselves were never torn down). She felt confident that the government had provided them enough capital set-aside to provide proper maintenance well into the future. We'll see. Remember a lot of this housing is for people with various special needs. Not all of it is for the general population, so the chances of longterm income being generated from residents as they climb the economic ladder is negligible.
Watch Pruitt-Igoe Myth, a fascinating documentary that I think lays to rest the idea that somehow it was the IDEA of public housing that failed. We failed. We put all our energy and money into building the infrastructure for white flight, and left our Cities underfunded and destitute.
Regardless, your faith in the private sector is absurd. Show me how the private sector has done anything for middle and lower income people, beyond taking government subsidies to barely scratch the surface of the problem. They can handle the market rate buildings OKAY (not great - a lot of tall crap for foreign investors if you ask me). But they're miserably equipped to deal with the social issues that some want to sweep under the rug.
@Clarkson FlatBed It is very hard to respond to your posts as they contain so many unsupported claims, conjecture and assumptions. As ektorp says, the developer is taking advantage of the 421(a) tax abatement here. So, he calculated what he thought he could make in an all market-rate building vs. his return if he took advantage of the tax abatement. And in this case, he chose the 421(a) and the obligations that come with that. You (and I) have no idea how he financed his building, what his tolerance is for risk or a myriad of other factors he considered when making his decision.
Your claim that "the market doesnt care" what happens after the abatement ends or water levels rise is simply not true. If this developer still owns the building after the 421(a) expires, he cares. The next owner will care, too. If he doesn't, he will be in for a shock when the property taxes rise. Same is true for co-ops under the 421(a) program. Owners have to calculate how much the unit will be worth once the abatement expires.
I will take the bait and answer your rhetorical question about what happens to "these wonderful buildings" when the next bust happens. Do you not recall 2008 and 2009 - the Great Recession? What happened to all the buildings built in 2002-2008? Did they fall down? Did they lose every tenant? NO. Some had to lower rental prices, some owners lost money on sales, and some sites under construction were abandoned during the recession. But most are now being built upon. See the market works.
Hmmm. Seems you and I see the world entirely differently. I can't argue with this "See the market works."
To the unemployed, to the middle class that's seen no wage gains while the rich quadruple their money, to the minimum wagers who end up homeless, to the broken health care system, to every single person in this City I've met who rents rather than owns, to the blacks getting kicked from their apartments for having the audacity to live in development zones, to the oil and gas industry that runs the country and its foreign policy, to the factory food racket, to the white collar criminals at every level of finance, to the military industrial economy that helps lead us to war, I must throatily disagree with your assessment that the market works.
Sometimes it works, Bored. It most certainly is NOT working for the majority of people.
clarkson writes:
"To the unemployed, to the middle class that's seen no wage gains..."
What? Every place in the US where oil and gas are found has seen dramatic wage increases in the last several years due to increased drilling and production. From North Dakota down to Texas and over to Pennsylvania. We'd enjoy those increases in parts of NY State too, if the governor would wake up.
"...while the rich quadruple their money..."
Aha, a sort of back-handed slap at people who take big risks to create businesses, some of which succeed, and some of which fail. NY City's Silicon Alley is a pretty hot place these days.
"...to the minimum wagers who end up homeless..."
Fiction.
"...to the broken health care system..."
The cost of Medicaid in NY is about $13,000 per person. If you're poor, you're covered.
Meanwhile, Obamacare is raising the overall costs of healthcare. If you want a better system, then the government has to mandate full and complete price transparency.
"...to every single person in this City I've met who rents rather than owns..."
Due to the stupendous deals enjoyed by those occupying the One Million Rent Stabilized Apartments in NY City, renters account for 65% of residents. Owners are 35%. That's the opposite of the rest of the country.
Rent stabilization gives renters all the benefits of ownership and none of the responsibilities.
"...to the blacks getting kicked from their apartments for having the audacity to live in development zones..."
No occupant with a valid lease is "kicked from his apartment." But owners have rights too.
"...to the oil and gas industry that runs the country and its foreign policy..."
Where do you get this stuff? But just for fun, why don't you put some solar panels on your roof and reduce your ties to the purveyors of oil, gas and electricity? Due to the enormous tax credits -- free money -- offered to those in Brooklyn who go solar, you can get the taxpayers to cover 50% of your purchase price.
"...to the factory food racket..."
Yeah, as if there isn't fresh food bursting out of stores on every corner in the city.
"...to the white collar criminals at every level of finance..."
Oh. Are those the bankers who met CRA banking requirements that mandated mortgages for everyone, no matter how low their credit scores, no matter how tenuous their connection to jobs and no matter that they had no cash for down-payments?
"...to the military industrial economy that helps lead us to war..."
Yeah. As if 9/11 were concocted by Bush and Cheney. As if Iraq didn't invade Kuwait. As if Yugoslavia wasn't collapsing into genocide.
I must throatily disagree with your assessment...
You make my argument stronger with your responses. The homeless fiction? Most rich make money the old fashioned way - they passively invest it. The idea that it's mostly hard working entrepreneurs is the fiction.
Oil and gas the way out of economic doldrums? You're a climate change conspiracy theorist then.
Why don't we go back to unfettered capitalism of the pre-unions variety. That was MUCH more effective, especially the slave wages for 7-day work. Actually, why not go back to slavery? Surely it was the most cost-effective way of growing the economy.
Oh how I wish my liberal brethren would come to my aid. Best to ignore you entirely I think.
clarkson, there's a lot you don't know about banking and bankers. The following is just one tidbit in the news today
Banc of California Announces Investment in Clearinghouse CDFI
Company Release - 05/02/2014
Organization provides funding in low to moderate income communities, helping over 750,000 people annually; Banc of California holds 8% ownership
IRVINE, Calif.--(BUSINESS WIRE)-- Banc of California, Inc. today announced that it has made a $705,000 investment in Clearinghouse CDFI, a mission-based lending institution serving low to moderate income communities in California and Nevada. The Company’s investment was the single largest one-time purchase of shares in Clearinghouse CDFI.
“Clearinghouse CDFI makes a real difference in the lives of over 750,000 people annually. They have created 5,000 units of affordable housing, giving people homes that otherwise would not have them. I am proud of our investment,” said Steven Sugarman, President and Chief Executive Officer of Banc of California.
As a result of its investment, Banc of California now owns eight percent of Clearinghouse CDFI. In 2013, Clearinghouse CDFI funded a record level of community development loans totaling over $70 million. The loans include affordable housing, special needs housing, economic opportunity projects and community facilities.
Gary Dunn, Banc of California’s Senior Vice President & Community Development Officer, who has been involved with Clearinghouse CDFI since its founding in 1996, serves as a member of Clearinghouse CDFI’s Board of Directors.
Banc of California was recognized at Clearinghouse CDFI’s 2014 Annual Shareholders Meeting in April for its commitment to the organization and Dunn was acknowledged for his efforts in support of the organization and its mission.
“This is the largest single investment in the history of Clearinghouse CDFI and comes at an extremely important time in our growth plan. We could not be more ecstatic or appreciative that Banc of California’s leadership has stepped up to take a significant ownership position and support our work, which helps change the lives of people every day,” said Douglas J. Bystry, President of Clearinghouse CDFI.
About Banc of California, Inc.
Banc of California, Inc. (NASDAQ: BANC) provides banking services to California’s diverse private businesses, entrepreneurs and homeowners. Today, Banc of California has over $4 billion in consolidated assets and over 80 banking and lending locations.
Just cause we're your liberal brethren doesn't mean we're going to agree with you on everything.
And on the point of construction I must agree (gulp) with the assertion that we need more construction of every kind. We need more housing projects, more affordable housing, more upper-middle class housing, and more luxury super towers in Manhattan. Build it all. And if another mega recession hits, aint no-one fleeing to the 'burbs this time. It will be more like the panic of the 1890s rather that of the 1970s.
And can people please shut up about fracking in upstate NY. Go visit TX or ND and then see how wonderful living with large scale oil production is.
clarkson says:
"You make my argument stronger with your responses. The homeless fiction?"
Of course there are homeless people. But, as most of us know, the truly homeless are also truly mentally ill. Yes, some relatively normal people are temporarily displaced. But there's a direct link between serious mental illness and homelessness. And no one has found a cure for serious mental illness.
"Most rich make money the old fashioned way - they passively invest it. The idea that it's mostly hard working entrepreneurs is the fiction."
You really are out of touch. It's true that John Kerry married Theresa Heinz and became a de facto billionaire the easy way. But if you're view of capital formation were true, then how would we explain all the businesses that have been created and grown in the US over the last 225 years? Was it magic?
"Oil and gas the way out of economic doldrums? You're a climate change conspiracy theorist then."
There is zero chance the oil and gas and coal industry is going to shrink in the next 100 or so years. And China is still going full speed building coal-fired power plants, so even coal will continue to enjoy a strong market for another century.
It's simple. Almost every person on the planet wants cars, trucks, planes, ships, air conditioners, heaters, electronics, food, healthcare, and loads of other products and services that depend on oil and gas for their existence.
At this point 7 billion people want what oil, gas and coal help to deliver. By mid-century, 10 billion people will want even more of those goods and services that are made possible by oil, gas and coal. You can wave your fist in the air all day, but without oil, gas and coal, life would be miserable.
Without oil and gas it wouldn't be possible to construct anything in NY City.
"Why don't we go back to unfettered capitalism of the pre-unions variety. That was MUCH more effective, especially the slave wages for 7-day work."
Ah. When all understanding of economics is lost, go for the non-sequitur. Labor is about value. And opportunity. Meanwhile, some people are motivated to work 7 days a week because they're so into what they do. And some of them make very little. Others make a lot.
" Actually, why not go back to slavery? Surely it was the most cost-effective way of growing the economy."
Again, another non-sequitur. No, eventually slavery was not cost-effective. Slavery lost whatever edge it had as technologies developed in the US. That's one reason it faded.
Start a neighborhood blog and pretty soon you attract reactionary P.R. men for the Real Estate, Banking and Fossil Fuel industries. Who knew?
Leffertspapa, I probably agreed with your assessment until about a year ago, when I started to see just how few people are helped by the current system. However, the new 50/30/20 model of market/middle/lower might be more useful, depending on how middle is defined.
But when Eric Adams was quoted today as saying "build baby build" I wanted to retch. Really? Grabbing the drill baby drill reference from the 2008 Republican Nat'l Convention? Ich.
To repeat: the Q is not against building, building height (generally), commerce, jobs, competition in the education field, regulated banking, non-predatory investment products, sustainable energy and its development and many other middle-of-the-road positions.
I am also not a basher of street alcoholics like Parkside Guy. If you have a problem with sleeping drunks in front of 205 Parkside, call 311 or 911 if you think the guy is dead or close to it. Support programs that offer help to substance abusers. But don't bash their character. You don't know these people, these stories, and I'll bet you're not close to any addicts yourself, otherwise you'd have a bit more compassion. A drunk that randomly beats people up? Big problem. Drunk that rolls around on the pavement, minor nuisance best dealt with by authorities. I didn't realize I was no living with neo-nazis. Who you gonna bash next? The Gypsies?
I'm almost entirely certain, also, that Ek and Slappz earn a substantial part of their living covering or profiting from the industries they so vociferously support. They are hardly objective observers. And maybe even the same person.
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