By Helen Klein - Courier-Life Publications
Will boom-town Brooklyn see some relief from development in the near future?

At a recent round table focusing on real estate topics, developers expressed concern about changes to the city’s tax abatement policy for new construction, contending that proposed restrictions and the extension of the borough’s exclusionary zone will make it harder for them to do business, despite the hot real estate market across the borough.

Indeed, Sara Mirski, of Boymelgreen Developers, acknowledged to the group gathered at the Brooklyn Historical Society, 128 Pierrepont Street, that her company, concerned about the enlarged exclusionary zone in Brooklyn, had not purchased property for development for about two years.

B’klyn Developers Fear Exclusionary Zones & Tax Abatement Changes

By Helen Klein – Courier-Life Publications

Will boom-town Brooklyn see some relief from development in the near future?

At a recent round table focusing on real estate topics, developers expressed concern about changes to the city’s tax abatement policy for new construction, contending that proposed restrictions and the extension of the borough’s exclusionary zone will make it harder for them to do business, despite the hot real estate market across the borough.

Indeed, Sara Mirski, of Boymelgreen Developers, acknowledged to the group gathered at the Brooklyn Historical Society, 128 Pierrepont Street, that her company, concerned about the enlarged exclusionary zone in Brooklyn, had not purchased property for development for about two years.

Properties developed by Boymelgreen in different neighborhoods in downtown Brooklyn are currently selling for upwards of $600 per square foot, according to Mirski; a development the company is working on in Coney Island has begun selling for $487 per square foot, she said.

As other realtors at the event could attest, Boymelgreen is hardly alone in successfully marketing such high-priced apartments.

Other developers who spoke at the event recounted selling apartments in neighborhoods from Prospect Heights to Williamsburg for as much as $850 per square foot, with studios popular in some neighborhoods, and two-bedroom apartments in others that are seen as particularly family-oriented, and likely to draw Manhattanites who are priced out of their neighborhoods across the river.

For the moment, prices still seem to be going up. Eric Brody, of The Brody Group, said that he had learned from selling apartments in one Prospect Heights development that the market would bear higher costs.

Thus, at the second development in that neighborhood that he is marketing, the prices of apartments are up about 12 percent, Brody said. “We are learning from our past indiscretion,” he told his listeners.

In this context, it is clear that the proposed change in tax abatement policy comes as the real estate market in Brooklyn has been especially lively. As David Kramer, of the Hudson Companies, remarked. “There’s an enormous amount of activity happening throughout Brooklyn.”

This, Kramer stressed, is in great contrast to the comparatively sleepy borough of a decade ago. Ten years ago, “There were no new residential units in DUMBO, nothing selling in Williamsburg, the Brooklyn Navy Yard had hundreds of thousands of square feet to lease and nobody in their right mind was thinking about developing in Bushwick or Bedford-Stuyvesant,” Kramer recalled.

The situation surrounding new residential development replicates something of a “perfect storm,” suggested Steven Spinola, president of the Real Estate Board of New York, between the changes to the 421-A tax abatements and a sudden shift in interest from owned to rented apartments. And, he warned, it could, “Potentially damage the city’s effort to build affordable housing in all five boroughs.”

While, said Spinola, affordable housing advocates want governmental tax abatements such as 421-A tied to the construction of affordable housing on a particular site, “The truth of the matter is it’s much more expensive to build affordable housing that way.

“We have a situation citywide that we are faced with the possibility of the housing market stopping,” Spinola contended, though, he added, “I am optimistic we are going to figure out a way” to continue developing new residential construction.

A key issue is the expansion of exclusionary zones in the borough, in which developers must plan a mix of 20 percent affordable housing and 80 percent market-rate housing on one site in order to qualify for the tax abatement. This, said Spinola, happened because of elected officials, who, he said, engaged in “political one-upsmanship, in terms of, ‘I want my area in the exclusionary zone.’

“We weren’t happy with the administration’s boundaries (of exclusionary zones) to begin with,” Spinola added, “and the council felt it had to go beyond the administration’s boundaries to stand up to the affordable housing advocates.”

The replacement suggested by the city, $400 million in subsidies over 10 years, will lead to “very few affordable housing units,” Spinola predicted.

“Why does it all have to be on site?” Spinola asked of the affordable housing component of new development within the exclusionary zones. “Why can’t it be within half a mile or, our preference, within the borough?”

Besides restrictions to some incentives to develop, another complaint of realtors is the inequitable city real estate tax, whereby owners of new condos are hit much harder than the owners of old co-ops or condos or one, two and three-family homes.

This is a situation that Martha Stark, the city’s Finance Commissioner, is trying to tackle. “I’ve always believed you should pay the same tax for the same value house whether it’s horizontal or vertical,” she told the gathered realtors.

Nonetheless, she acknowledged, making substantive change is a tough row to hoe. Why? For one thing, said Stark, “Almost 30 percent of the homeowners in the city are seniors with a median income of $29,000.”