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December 16, 2015- The WSJ reports, “The 10-story building, known as 456 Washington Street, …But 22 apartments set aside for low-income households will have rents starting at $800 a month for a studio, while the sprawling five-bedroom, market-rate apartments will be offered for as much as $50,000 a month.
The decision to turn one of the last remaining development sites on the river in north Tribeca into a mixed-income rental, rather than a condominium, shows the powerful lure of city property-tax abatements that underpin most rental development in Manhattan.
The abatement program, known as 421-a, was created in 1971 to encourage developers to build residential housing in New York City, and has since gone through many revisions, linking affordable-housing development to the program.
“421-a is the only viable structure in which the industry can build rentals in New York City because of the real-estate taxes,” he said.
Critics of the program say that in valuable, high-rent buildings like 456 Washington Street, the city relinquishes too much in property-tax revenue in exchange for the affordable apartments.
“The 421-a program is an extremely inefficient use of taxpayer resources, and this building is another depressing example of that,” said Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Development, a housing-advocacy group.
At 456 Washington Street, the city’s Independent Budget Office projected that the city would forgo $16.7 million in tax revenue from the building over 20 years, or an average of $837,000 a year, in exchange for creating and maintaining low-income housing.
The estimate, prepared at the request of The Wall Street Journal, found that was enough money to finance the construction of 93 apartments in the Bronx through a cash grant.
The decision to provide affordable units also triggered other benefits for the project. Related was able to borrow $7.5 million through tax-exempt bonds to pay for construction, and is in line to obtain federal tax credits it can sell to subsidize the cost of affordable housing. In addition, the zoning code allows the building to qualify for a zoning bonus for providing affordable housing that can be sold to other nearby developers.
When the apartments are ready in a few months, asking rents on 37 two-bedroom, market-rate units will start at $9,995 a month, according to Related. The 20 three-bedrooms will start at $17,995.
At those rents, average market rents are projected to be among the highest in the city, at about $100 a square foot a year.
Most of the other top rental buildings receive 421-a property-tax abatements, too. Some also provide on-site affordable housing. Others paid for off-site housing to qualify, or obtained benefits before the city imposed affordable housing requirements for their location.
The 11 low-income two-bedroom apartments at 456 Washington Street will rent for $1,041 for a family of four with an income between $37,132 and $51,780, while their next-door neighbors may pay close to 10 times that. There are also six one-bedroom apartment and five studio apartments.
People who get the less-expensive apartments have to meet stringent income requirements—and win a lottery.”