A Conversation with NYC Council Member Greenfield
June 22, 2017
EisnerAmper tax partner Bill Timlen discusses land use planning, affordable housing and infrastructure in New York City with NYC Council Member David Greenfield. Their discussion addresses the compromises needed to get real estate deals done in New York City, including One Vanderbilt’s agreement to invest $223 million in transit public infrastructure in exchange for the rights to expand their property. Their discussion led to the new Mandatory Inclusionary Housing program, the 421a program, and tax incentives to create more affordable housing in New York City. Their discussion on infrastructure addressed the long travel time on both New Jersey Transit and the MTA, and the need to invest more in infrastructure in general.
BT: I appreciate that. I noticed recently that you were featured in the Commercial Observer’s Power Politicians: The Movers and Shakers of Real Estate Policy. As a person who is a key negotiator on major deals in New York City, what have been some of the recent challenges with navigating real estate policy?
DG:Thank you very much. I never realized how many people actually read the Commercial Observer until I got listed on its Power Player’s list. I first of all appreciate the recognition by the Observer and I appreciate the question. I think that the world of land use development in New York City has gotten a lot more complicated over the last few years and not just because of the increase in the price of land, but also because of the complications in the political world as well. And so one of the big deals that we did within the last year or so was actually One Vanderbilt, which you’re probably familiar with, that was developed by SL Green. It’s a 58-story 1.6 million square-foot office tower next door to Grand Central Station. And the interesting thing about that deal was that originally it was supposed to be part of what we’re hoping to get wrapped up within the next two months, which is the East Midtown rezoning that failed at the end of the Bloomberg administration. So we separated this one application in order to have it move forward so that we would actually see it get built on a faster timeline. That specifically was an interesting project because we ended up negotiating a deal with SL Green where they are going to be doing approximately $220 million in transit public infrastructure improvements as a condition of the city granting them the ability to build this larger tower on a piece of property where they would not normally have been able to build so high.
BT:Do you envision Affordable New York, the replacement for 421a, stimulating affordable housing in your district and throughout the city and, if so, why?
DG:So, Bill, this is a very important question. I think it’s probably something that many of your clients have been very concerned about over the last couple of years and that is the loss of 421a. You know 421a has a brand new fancy shiny name, Affordable New York, but it’s essentially the same program. It’s a program to really encourage the building of housing in New York City. We’ve actually seen, and I’m actually curious to get your take on this as well, a slowdown in applications in the work that I do where I chair the Land Use Committee for folks wanting to come forward and to develop and to change the zoning specifically because of this concern over the lack of 421a. And so I’ve actually heard from developers, as recently as Friday, I“I’m so thrilled because I’ve been sitting on the sidelines for two years and I’m finally going to get back in and start developing again.” This is a very significant tax abatement. The reason it’s so significant is because, quite frankly, real estate taxes are so high in New York City and that’s a big frustration of a lot of folks in the industry. In fact, we saw recently a lawsuit to that effect that was filed just last week. And that is significant challenge for anyone who owns real estate, but certainly for people who are developing real estate. And so there needs to be some sort of tax abatement to encourage it. But there’s another piece of it that hasn’t really been focused on a lot by the press and I think would be very interesting for your listeners. Last year, in the City of New York, we changed the law for the first time in around 50 years in terms of the zoning where we now have a program called Mandatory Inclusionary Housing. It’s similar to what I was discussing in relation to the first question regarding SL Green, the idea of not getting something for nothing. Part of Mandatory Inclusionary and Affordable Housing essentially requires that if you change the zoning to increase floor area ratio for residential housing, then a part of that has to be affordable. And this is really part of the Mayor and the Council’s commitment to trying to build more affordable housing. So it used to be you could get a rezoning, you could build literally 50 stories, 1000+ units, and not a single one of those units was going to be affordable - no longer. Now, it has to be affordable as a matter of law based on what we’re calling Mandatory Inclusionary Housing, which is really a very poor name, quite frankly, for what otherwise should be called Mandatory Affordable Housing. And the reason that 421a is so important is because when the De Blasio administration studied this and tried to figure out, will this work or will this not work, they heavily relied on the 421a program. They so heavily relied on this program, in fact, that in the study the economic analysis the De Blasio administration actually commissioned to try to figure out whether it would work or not, the 421a program was cited 438 times. That is, in fact, the most popular thing that was cited in the study. That’s how pivotal 421a was to Mandatory Inclusionary Housing because the understanding was you can’t build affordable housing in New York City without tax incentives. And it’s not enough just to simply to give you a little bit more room in order to build, but you need to make sure the tax structure works as well. And so I’m very excited about this because I think that we’re going to see a lot more development now as a result of the 421a. And to be sure it was a compromise. You know the great thing about politics is that no matter what you do, you get criticized. And so, you know, if you don’t have a thick skin in this business you’re going to grow one very quickly. This is a program that everybody is a little unhappy with, which, to me, signifies that it’s pretty good because we compromised. And so is it a little more expensive than we would have liked? Yes. Does it do things that perhaps we didn’t initially plan, such as include requirements on construction wages? Yes. But that’s a good thing. I mean, there’s no reason why the people who are building in New York City shouldn’t be able to afford to live in New York City as well. And they need the wages to keep up with that. And so it’s one of those things where it required a lot of negotiations and a lot of different changes, but ultimately we ended up in a place which is a good place, and I think we’re going to see an increase in development of housing in New York City as a result.
BT:There’s a lot of talk these days about infrastructure spending. What would you suggest to both city government and federal government with respect to infrastructure needs for Brooklyn and for the city?
DG:I think when you talk about infrastructure, the first thing that comes to mind is mass transit. Right? I mean, anybody who has recently taken the MTA or who has recently taken New Jersey Transit will tell you that a big frustration is – when you talk about predictability – that’s something that commuters want as well. Right? You want to know that when you get on a train in the morning it’s going to take you – whatever amount of time – if it’s 20 minutes, or an hour and 20 minutes, you just want to know that it’s going to be predictable. I think if you don’t get from point A to point B within the designated time and if it goes beyond 30 minutes you should get your ride for free. And I’m serious about this because the fact that New Jersey Transit folks are paying really a lot of money for their passes, or even the MTA monthly pass holders, and you’re getting on a train and you think your ride’s going to take 40 minutes and it takes an hour and 40 minutes – that’s very frustrating. Not to mention the economic loss that’s costing the city that you can’t even actually put a number on, but you certainly could agree it’s in the tens of millions of dollars every time you get thousands of people who are coming in late. The main reason for this – the elephant in the room that nobody wants to talk about – and the elephant actually is a good term because in fact I would argue the Republicans have a lot to do with this, is the question of infrastructure, and we’re not spending enough in our mass transit infrastructure.
BT:How can we take Brooklyn to the next level in terms of becoming a leading technology hub?
DG:You know, that’s actually an excellent question. We have seen significant investments happening in Brooklyn, especially, for example, along the Brooklyn Navy Yard. The De Blasio administration has announced that they are going to be investing over $100 million in the Brooklyn Navy Yard. We’ve seen some really exciting, different, economic and technology hubs. For example I just recently met with a group called 1776. These folks are a D.C. based incubator, as well as a fund. They’re a tenant in the Brooklyn Navy Yard, and one of the things that they do is that they help different start-up companies that are trying to fill a technology space within government, and they help them make that connection. Because part of the challenge is that you could have a great idea that involves technology, but it will push up against government interest.
BT:Council Member, those are great insights. One final question – an important question….
DG:Save the best for last.
BT: Yes. It’s midday and I’m in your district. I’m starving. Where am I going for an unforgettable lunch?
DG: It’s midday, you’re in my district and you’re starving. So I’m going to give you the David Greenfield lunch, which is that you don’t have time to sit and have lunch for a half an hour. You want to grab lunch on the go. Here’s where I’m going to send you to. I’m going to send you to Avenue J in East 15th. There are two corners, and caddy corner across from each other there’s two fabulous places where you can grab food on the run. One is Di Fara pizza, which is by many accounts the best pizza in New York City. Now, if you’re not a pizza connoisseur, or if you keep kosher like me and you can’t have their pizza, then I’ll send you across the street to the best bagel shop in New York City which is Kosher Bagel Hole.
BT: Sounds great. Thank you for your time Councilman Greenfield and for this great insight. And thank you for listening to EisnerAmper’s Podcast series. Visit EisnerAmper.com for more information on this and another host of topics and join us for our next EisnerAmper Podcast, where we get down to business.