Downtown Bklyn Project Moves Ahead with Construction; Last to Use 421a Abatement
By: Hadassa Kalatizadeh
One of the last developments in the city, being built with the expired 421a tax exemption program, is underway in downtown Brooklyn.
As reported by Crain’s NY, The Brook is a massive 448,000 square foot luxury apartment project with retail space. The project, which includes affordable housing in exchange for a tax abatement for the developer, will span across two separate sites. The first is at 565 Fulton St., where a 51-story Eastern site is being built. It boasts 591 residential units, and 17,200 square feet of ground-floor retail space, plus 30,000 square feet of amenity space. The seconds, western site is at 547–557 Fulton St., boasting 14,000 square feet of retail space. One third of all the apartments in the project will be set aside as affordable, under the state’s 421-a program, which expired without being renewed on June 15. The program had worked to offer developers a tax break in exchange for turning a percentage of the residential units into affordable housing.
Developers Witkoff and Apollo Commercial Real Estate Finance were still able to receive the 421a tax benefit because they began construction on the foundation before the program got axed. The developers recently secured a $388.4 million construction loan with which they will move ahead with the construction. The financing was obtained from Bank of America, according to Walker & Dunlop, a financial services company which brokered the loan. Earlier this year, the developers were reportedly in the market searching for a $420 million loan.
The developers are considered among the lucky ones who were able to utilize the 421a abatement program, which was first introduced in 1971. Progressive lawmakers have since called the program out for providing too much tax relief to big real estate developers, leaving the city bereft of potential tax revenue and not doing enough to help with the city’s affordable housing crisis, but rather offering housing for medium income residents. Developers counter that they would otherwise have no incentive to set aside new units as affordable housing, and that this program has accounted for a very large chunk of all the new affordable housing added in recent years. Since 2010 nearly half of all residential units built in the city were created via the program. It has worked to add 9,071 affordable units to the city.
In January, Gov. Kathy Hochul had proposed a modified housing program which would also provide developers with incentive to build affordable housing. As per Crain’s, her plan, which was supported by the real estate community, would offer similar tax abatements, but would eliminate eligibility for higher earners, permanently set all affordable units to rent stabilization and extend the length of tax benefits for condos and co-ops, among other alterations. The plan, however, did not make it into the current state budget. No other housing programs has been yet put into play, to replace the 421a.
