Real estate-linked NYU think tank evaluates profitability of developing on NYCHA open spaces under land-lease deals

By LOUIS FLORES

A real estate think tank at New York University with ties to major real estate developers, has evaluated the profitability of allowing the privatization of open spaces on the properties of the New York City Housing Authority, or NYCHA, in order to construct more apartments in New York City.

The think tank, known as the Furman Center for Real Estate and Urban Policy, explored in its report the possibility that NYCHA would lease lands of its open spaces for the construction of market-rate and affordable housing.  The proposal to lease some of NYCHA's open spaces to real estate developers was first proposed as a land lease initiative under the administration of former mayor Michael Bloomberg (R-New York City).

A sitting park in the Saratoga Square Section 8 housing development in Brooklyn, which NYCHA sold to a consortium of developers.  Photographed here in March 2015, this open space can be taken away from residents and exploited for new construction by the consortium of developers, according to the transactions agreements approved by the de Blasio administration.  Source :  Louis Flores

A sitting park in the Saratoga Square Section 8 housing development in Brooklyn, which NYCHA sold to a consortium of developers.  Photographed here in March 2015, this open space can be taken away from residents and exploited for new construction by the consortium of developers, according to the transactions agreements approved by the de Blasio administration.  Source :  Louis Flores

Former Mayor Bloomberg's land lease initiative was eventually ditched.  However, under the neoliberal administration of Mayor Bill de Blasio (D-New York City), NYCHA has proceeded to secretly sell open spaces to developers instead of leasing the land under which large apartment towers would be constructed.  

As reported by Progress Queens, amongst the NYCHA properties, including open spaces, sold to developers last year was Campos Plaza I development in the East Village.  The open spaces in that development were reportedly amongst the sites that former Mayor Bloomberg had targeted for development under its controversial land lease initiative.  The development rights that the former Bloomberg administration had failed to convey as a land lease to developers before the end of his third term as mayor were ultimately conveyed, in part, as a result of sales effected under the de Blasio administration.

The Furman Center evaluation report revealed developers'  intent on "leasing NYCHA land for the development of new housing" with calculations made across three different land lease payment models.  The first, where NYCHA would seek to maximize land lease payments with an 80/20 split of units, where 80 per cent. of the apartments would be rented at market-free rates and only 20 per cent. would be reserved for affordable housing, the latter being available to tenants earning 60 per cent. of area median income ; the second, where NYCHA would forgo any land lease payments in favor of maximizing the construction of affordable housing with a range of 45/55 to 0/100 splits, depending on the amount of rents that developers could collect, with models forecast at a range of 30 to 170 per cent. of area median income ; and a third, where NYCHA would blend the goal of generating some land lease payments for NYCHA against the de Blasio administration's goals of building more affordable housing units.  Under the third option, the evaluation report models 70/30 and 50/30/20 splits, where the latter would reserve affordable housing units for tenants earning either 130 or 50 per cent. of area median income.

The affordable housing that would be reserved at the highest percentage of area median income would fail to benefit residents most in need of affordable housing, because low-income residents would not qualify to be tenants in the new construction, given the Furman Center evaluation report's financial models.  Indeed, the evaluation report predictably concluded that the construction of apartment buildings at a 70/30 split would not be financially feasible in low-income neighborhoods.

The evaluation report was produced with assistance, in part, from the Moelis Institute for Affordable Housing Policy, which is funded by Ronald Moelis, a real estate developer and a member of the Board of Governors of the Real Estate Board of New York, or REBNY, the politically influential real estate lobbying group.  Mr. Moelis is also a member of the Board of Advisors for the Furman Center, as are the developers Larry Silverstein and Stephen Ross, amongst others.  

Many of REBNY's members have recently been ensnared in the corruption scandals engulfing Albany state officials, particularly, the federal corruption cases against Assemblymember Sheldon Silver (D-Lower East Side) and State Senator Dean Skelos (R-Rockville Centre).  One REBNY officer, Leonard Litwin, has been reported to exploit the so-called "LLC loophole" to make gargantuan campaign contributions to state elected officials at the same time when Mr. Litwin's company, Glenwood Management, has received subsidies and tax abatements for its properties from Albany officials.

Before the premature demise of the Moreland Commission in 2014, the corruption fighting panel had issued subpoenas to several of REBNY's member development firms, including Extell Development Company, the developer of the $2 billion luxury condominium tower in Midtown Manhattan that received approximately $35 million in tax breaks after the developer had reportedly funneled approximately $300,000 in campaign contributions to Governor Andrew Cuomo (D-New York).  That tax transaction is reportedly being probed by U.S. Attorney Preet Bharara, the nation's top federal prosecutor in New York's southern district.  Extell is also the developer that was granted permission by the New York City Council to install discriminatory "poor doors" in some of its buildings so that tenants of affordable housing units could be segregated from tenants of market-rate apartments.

The real estate industry is currently fighting to ensure renewal of the controversial tax abatement program, known as 421-a, which is set to expire on June 15.  Under the 421-a program, developers receive tax abatements if they either designate some of their units for affordable housing or, in the case of Extell, receive special waivers from Albany officials.  

Tenants' activists are currently waging a campaign for economic justice, arguing that the 421-a tax breaks unfairly enrich politically-influential campaign donors in the real estate industry at the same time when the estimated $1 billion in annual lost tax revenue to New York City is responsible for the deterioration in municipal resources for initiatives to fund smaller classroom sizes in the city school system, a better-funded municipal hospital system, complete resources to provide all homeless residents with shelter, and a better-funded municipal subway system, as examples.

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