by Jeremy Soffin, Vice President for Public Affairs, RPA
Back when he was just a comedian, Al Franken played a self-help obsessed character on Saturday Night Live named Stuart Smalley. Smalley tried numerous 12-step programs and was often seen staring into the mirror, chanting: "I'm good enough, I'm smart enough, and doggone it, people like me!" It's a mantra that New York City would do well to learn, and one that Mayor Bloomberg seems to be taking to heart when it comes to the City's dealings with developers.
For much of the last generation, the city has suffered from a well-deserved inferiority complex. All of the traditional urban ailments made New York the national poster-child for the dirty, unsafe city, even when it wasn't literally burning. The city was a place you wouldn't want to visit, never mind invest millions of dollars to build an office tower or a residential building - at least not without a massive subsidy.
And so New York's poor self-image became institutionalized as a parade of elected officials rolled out the red carpet for any development project willing to look twice at our once proud city. And until recently, even the massive turnaround of the past decade hadn't convinced us that, doggone it, people like us enough to invest here without massive concessions.
Enter Mayor Bloomberg and his recent revelation that the city's 421-a program needlessly gives tax abatements to developers of tremendously profitable residential development. The city is now considering radical changes to this program, which is also a mechanism for generating affordable housing.
In its current form, 421-a gives significant real estate tax abatements to all developers outside of the core Manhattan area (96th Street to 14th Street on the East Side and down to Houston on the West Side). The result is hundreds of millions in foregone real estate tax revenue for the City. Those developments within the core area may receive the abatement, too, if they include affordable housing (or, more often, provide some in central Brooklyn and the South Bronx where land is cheaper). Rental buildings receiving the abatement must follow the rent stabilization board's guidelines for rent increases, even if their apartments are over $2,000 per month. The Mayor is now considering removing the Manhattan core area distinction and requiring developers in any part of the city to include affordable housing if they want to receive the abatement. It is a welcome acknowledgment that neighborhoods like Wall Street, Harlem, Williamsburg and other communities throughout the five boroughs are hot residential markets in no need of subsidy.
How this new policy would affect the city's housing markets would be a good indicator of how much has changed. Doubters say that the abatement is still needed to lure developers to areas they wouldn't invest in otherwise, and weakening it will depress New York City's housing market. Underlying these arguments against the 421-a reforms is the fear of what will happen when the air goes out of the housing market. Even accounting for the inevitable ups and downs of the housing cycle, the long-term fundamentals of the market are far stronger than when the subsidy program was designed. However the market reacts, the Mayor's decision to proceed over protests from developers would be an assertion that the city is no longer a red-headed stepchild desperate for any attention it can get.
This positive step by the Bloomberg administration makes one wonder why our inferiority complex still seems to dictate negotiations with developers on big projects. In fact, almost all of the administration's most favorite projects - the Atlantic Yards mega-development, the new Yankee Stadium, Bronx Terminal Market, and even Governors Island - allow developers tremendous leeway without demanding substantial concessions in the public interest.
Take the proposed new Yankee Stadium, currently steaming its way through the approval processes. Putting aside the pros and cons of building a new stadium, there are a number of reasonable conditions that the city could have requested of the development team to show good faith and an interest in the good of the surrounding community. The plan calls for a whopping 75% increase in the stadium's parking, despite a decrease in seating at the new facility. These new parking spots are responsible for much of the loss in park space that will plague the community, especially during the several years of construction. A proposed solution that would reduce the need for parking and pollution in the asthma-scarred Bronx is the construction of a new Metro-North station at the stadium. Everyone seems to agree that it is a good idea, but without a push from the City the Yankees have not stepped up to the plate to pay for at least a share of the $80 million station. Anyone who really thinks Mr. Steinbrenner will take his team to New Jersey is stuck in 1985. He isn't going anywhere, and should do a better job for the community that the team calls home.
Similar examples can be found for all of the other aforementioned projects. The underlying theme is that the City - and New York State as well - seems to believe that the only way to get these projects built is to work as a junior partner of the developer, even if the developer's goals are not entirely in tune with City goals for affordable housing, open space or general quality of life. This is not to minimize the importance of cooperation between public and private sectors on mega-projects, but the process is often backwards. Rather than taking the initiative by facilitating a public discussion, setting guidelines and then encouraging competitive proposals, the City and State frequently limit the possibilities by waiting for developers to generate the ideas for city-shaping projects.
To be sure, the city is not an easy place in which to build. Land and construction are expensive and getting more so. There is more that needs to be done to make more land available and reduce costs, particularly the uncertainty and delay that cost money. But the demand, at least for residential development, retail and many mixed-use projects, has far outstripped these costs.
Perhaps the Mayor's aggressive push to get Larry Silverstein to renegotiate the World Trade Center lease is another sign that things are changing. We shouldn't be naïve enough to think that developers will ever have no sway over the officials they schmooze with and help elect, but overcoming the deep-seated inferiority complex that still seems to drive many of these deals could at least lead to better public outcomes.
So everyone should be watching the 421-a process closely, because if changes are successfully made it could be the first step toward a more rational approach to development in New York City. Hopefully, it will be one that is both developer- and community-friendly. If the city is going to add another million people and jobs over the next two decades, we'll need a lot of new development. But the developers need New York just as much as we need them, so our elected officials are positioned to demand that projects make sense for the city, not just the bottom line. New York is once again a very desirable place to live and work, and it's time that the City's policies reflect our newfound self-respect.
Back when he was just a comedian, Al Franken played a self-help obsessed character on Saturday Night Live named Stuart Smalley. Smalley tried numerous 12-step programs and was often seen staring into the mirror, chanting: "I'm good enough, I'm smart enough, and doggone it, people like me!" It's a mantra that New York City would do well to learn, and one that Mayor Bloomberg seems to be taking to heart when it comes to the City's dealings with developers.
For much of the last generation, the city has suffered from a well-deserved inferiority complex. All of the traditional urban ailments made New York the national poster-child for the dirty, unsafe city, even when it wasn't literally burning. The city was a place you wouldn't want to visit, never mind invest millions of dollars to build an office tower or a residential building - at least not without a massive subsidy.
And so New York's poor self-image became institutionalized as a parade of elected officials rolled out the red carpet for any development project willing to look twice at our once proud city. And until recently, even the massive turnaround of the past decade hadn't convinced us that, doggone it, people like us enough to invest here without massive concessions.
Enter Mayor Bloomberg and his recent revelation that the city's 421-a program needlessly gives tax abatements to developers of tremendously profitable residential development. The city is now considering radical changes to this program, which is also a mechanism for generating affordable housing.
In its current form, 421-a gives significant real estate tax abatements to all developers outside of the core Manhattan area (96th Street to 14th Street on the East Side and down to Houston on the West Side). The result is hundreds of millions in foregone real estate tax revenue for the City. Those developments within the core area may receive the abatement, too, if they include affordable housing (or, more often, provide some in central Brooklyn and the South Bronx where land is cheaper). Rental buildings receiving the abatement must follow the rent stabilization board's guidelines for rent increases, even if their apartments are over $2,000 per month. The Mayor is now considering removing the Manhattan core area distinction and requiring developers in any part of the city to include affordable housing if they want to receive the abatement. It is a welcome acknowledgment that neighborhoods like Wall Street, Harlem, Williamsburg and other communities throughout the five boroughs are hot residential markets in no need of subsidy.
How this new policy would affect the city's housing markets would be a good indicator of how much has changed. Doubters say that the abatement is still needed to lure developers to areas they wouldn't invest in otherwise, and weakening it will depress New York City's housing market. Underlying these arguments against the 421-a reforms is the fear of what will happen when the air goes out of the housing market. Even accounting for the inevitable ups and downs of the housing cycle, the long-term fundamentals of the market are far stronger than when the subsidy program was designed. However the market reacts, the Mayor's decision to proceed over protests from developers would be an assertion that the city is no longer a red-headed stepchild desperate for any attention it can get.
This positive step by the Bloomberg administration makes one wonder why our inferiority complex still seems to dictate negotiations with developers on big projects. In fact, almost all of the administration's most favorite projects - the Atlantic Yards mega-development, the new Yankee Stadium, Bronx Terminal Market, and even Governors Island - allow developers tremendous leeway without demanding substantial concessions in the public interest.
Take the proposed new Yankee Stadium, currently steaming its way through the approval processes. Putting aside the pros and cons of building a new stadium, there are a number of reasonable conditions that the city could have requested of the development team to show good faith and an interest in the good of the surrounding community. The plan calls for a whopping 75% increase in the stadium's parking, despite a decrease in seating at the new facility. These new parking spots are responsible for much of the loss in park space that will plague the community, especially during the several years of construction. A proposed solution that would reduce the need for parking and pollution in the asthma-scarred Bronx is the construction of a new Metro-North station at the stadium. Everyone seems to agree that it is a good idea, but without a push from the City the Yankees have not stepped up to the plate to pay for at least a share of the $80 million station. Anyone who really thinks Mr. Steinbrenner will take his team to New Jersey is stuck in 1985. He isn't going anywhere, and should do a better job for the community that the team calls home.
Similar examples can be found for all of the other aforementioned projects. The underlying theme is that the City - and New York State as well - seems to believe that the only way to get these projects built is to work as a junior partner of the developer, even if the developer's goals are not entirely in tune with City goals for affordable housing, open space or general quality of life. This is not to minimize the importance of cooperation between public and private sectors on mega-projects, but the process is often backwards. Rather than taking the initiative by facilitating a public discussion, setting guidelines and then encouraging competitive proposals, the City and State frequently limit the possibilities by waiting for developers to generate the ideas for city-shaping projects.
To be sure, the city is not an easy place in which to build. Land and construction are expensive and getting more so. There is more that needs to be done to make more land available and reduce costs, particularly the uncertainty and delay that cost money. But the demand, at least for residential development, retail and many mixed-use projects, has far outstripped these costs.
Perhaps the Mayor's aggressive push to get Larry Silverstein to renegotiate the World Trade Center lease is another sign that things are changing. We shouldn't be naïve enough to think that developers will ever have no sway over the officials they schmooze with and help elect, but overcoming the deep-seated inferiority complex that still seems to drive many of these deals could at least lead to better public outcomes.
So everyone should be watching the 421-a process closely, because if changes are successfully made it could be the first step toward a more rational approach to development in New York City. Hopefully, it will be one that is both developer- and community-friendly. If the city is going to add another million people and jobs over the next two decades, we'll need a lot of new development. But the developers need New York just as much as we need them, so our elected officials are positioned to demand that projects make sense for the city, not just the bottom line. New York is once again a very desirable place to live and work, and it's time that the City's policies reflect our newfound self-respect.
@RegionalPlan