By Liana Grey
PS 90, a luxury conversion in Harlem, is less than ten blocks from Castle Gardens, an experimental housing project with rents as low as $775 a month. The two may seem to have little in common besides location, but nearly a quarter of PS 90’s apartments are set aside for low-income families under a citywide tax abatement program.
“The affordable units are moving and we only have a few left,” said Stephen Kleigerman, executive director of Halstead Property Development Marketing. While affordable by Manhattan standards, the apartments aren’t exactly cheap: prices range from $150,000 to $400,000 for studios through two-bedrooms.
But at Halstead properties across Harlem, including Beacon Towers and the Lore, teachers, government employees, and blue collar workers are rushing to snap up luxury at a bargain. At the Kalahari, a 249-unit condo building on 116th Street developed by L+M, half the units were reserved for moderate-income families earning $63,810 to $131,165 and single residents with a salary of $44,640 to $91,760. (Most luxury buildings with an affordable component have minimum salary requirements, Kleigerman said.)
It’s no accident that mixed-income condo towers are concentrated above 96th Street. “The land acquisition costs are lower,” Kleigerman explained. In northern Manhattan, tax abatements last 25 years, he added. Elsewhere on the island, they expire after 10.
But the demand for affordable housing is widespread. “There’s a tremendous number of buildings built under the 80/20 program all over Manhattan,” said Bob Scaglion of Rose Associates, which owns mixed-income rental towers like the Melar on West 93rd Street and Chelsea Landmark, a doorman building on 25th Street with a fitness center, golf simulator, and washers and dryers in every unit.
Though new construction is still a rarity these days, developers with plans to build mixed-income towers now face a hurdle: the 80/20 program, also known as the 420-a tax abatement, recently expired, and has yet to be renewed.
“Everyone’s kind of waiting for the city,” said Scaglion. “That’s the single program that generates so much affordable housing in New York.”
The 421a was introduced in the 70s to encourage new development by exchanging 25-year tax breaks to builders of new multifamily buildings for a chunk of affordable housing. It cut residents tax bills, helped developers finance new projects and fed demand for luxury in a booming housing market. However, high property taxes and the expiration of 21a in December, has prompted the real estate industry to ramp up its efforts to have it re-instated.
Speaking at a Real Estate Board of New York luncheon last week, Stephen Ross, founder and chairman of Related Cos. — a company which began by developing government assisted housing developments and today is known for some of the most prestigious luxury developments in the country — told industry executives it was time to make more noise about the demise of the incentive.
“Not too many people are aware of the situation today,” said Ross. “But without 421a, we can’t really build any rental housing at all in New York.
“Until we address the issues, there probably won’t be any rental housing, which is bad for New York. There is certainly demand for it and we really don’t want to see rents escalate to the point where New York is not competitive.”
REBNY continues to advocate for an extension to 421a with amendments that include an optional long-term affordability provision for 80/20 projects and an extension of the construction period.
Mayor Bloomberg and housing commissioner Raphael Cestero have supported extending the tax break but have been criticized by affordable housing advocates who see it as a handout to developers.
Assembly speaker Sheldon Silver told the Wall Street Journal last month, “I just fundamentally believe we shouldn’t be extending a tax break for big developers without making sure we are strengthening protections for the tenants who live in their buildings.”
As the debate rages, the disparities in how New Yorkers live continues to grow.
According to recent census data, income disparities have widened across the borough. In northern Hell’s Kitchen, home to elegant brownstones and luxury developments like Griffin Court, where condos sell for up to $2 million, 11 percent of residents earn over $200,000 a year. An equal number scrape by on less than $10,000.
The gap is nearly as wide in Greenwich Village: 10 percent earn in the highest income bracket, and eight percent in the lowest. And even more shocking, given the neighborhood’s reputation as a stopping ground for the rich and famous, 14 percent of residents live below the poverty line.
Architecturally speaking, nothing quite epitomizes the rich-poor divide like Chelsea. Over the last decade, starchitect creations rose within a stone’s throw of the Elliott-Chelsea houses, a sprawling brick low-income project.
“Creating new rent stabilized affordable housing is critical for ensuring that Chelsea stays a vibrant and diverse neighborhood,” said Speaker Christine C. Quinn last October, when ground broke for the Elliott Chelsea, a new public housing complex on 25th Street.
When completed, the 21-story glass and brick tower will offer 168 units for middle- to low-income tenants. Six apartments are reserved for particularly needy families earning less than $30,720 a year. Like Castle Gardens on 140th Street, which has a roof garden, bike storage, and luxury finishes, the Elliott Chelsea was designed to be more aesthetically pleasing than public projects of decades past.
Even at privately-developed residences, swanky homes for low-income tenants and buyers are a relatively recent trend. “It used to be that the affordable units could have different finishes and fixtures” than their market-rate counterparts, said Kleigerman of Halstead. But the Department of Housing Preservation and Development demanded that developers keep things relatively consistent, and mix affordable units among market-rate ones.
Not all luxury buyers are happy about the new rule. Two years ago, one of them vented his frustration on a Streeteasy.com discussion board. “I know this sounds elitist, but the notion of someone making only $30K/year living in the same floor as me, does bother me,” he wrote, in a testament to the widening psychological — not just monetary — gap between the city’s upper and working classes.
A fellow house hunter suggested he concentrate his search on market-rate buildings; another admonished him for his snobbery and told him not to worry about “a small fraction of neighbors that might be teachers or work in the arts or have other lower paying jobs.”
Luckily, most residents of mixed-income towers live in harmony. At buildings owned by Rose Associates, which has taken advantage of the 80/20 program since it was launched 12 years ago, “there are no issues between tenants whatsoever,” Scaglion said. “These are hardworking, committed people taking care of their families.” Prospective tenants of all income levels go through the same rigorous background check, he added.
The only difference between tenants paying at or below market rate is that the latter enter a lottery system to secure a home. “We use a third-party provider for the initial lease-up,” said Scaglion. “It’s purely luck of the draw.”
After undergoing a credit and background check, lottery winners have a chance to tour the property and decide whether to sign a lease. “When you open a building like that, you get thousands and thousands of people,” Scaglion said. “As people move out, you start the process over again.”
