A ‘DOMINO’ EFFECT?

Published in City & State

What a difference a new administration makes. At the end of last year developer Jed Walentas had a deal in place to turn the waterfront Domino Sugar Refinery into high-end Williamsburg apartments, including 660 units of affordable housing— roughly 30 percent of the building’s capacity.

Walentas’ company, Two Trees, had already played an integral role in transforming formerly down-and-out Brooklyn neighborhoods like DUMBO into glossy, expensive new locales for the rich and hip—and the Domino project appeared set to be the next outpost in Walentas’ empire.

Then Mayor Bill de Blasio coasted into office in January touting his campaign promise to create or preserve 200,000 units of affordable housing. Rather than abiding by the deal Walentas had struck with the Bloomberg administration, de Blasio let the developer know that Two Trees’ plans for Domino were in jeopardy because its affordable housing allocation was insufficient.

In March the de Blasio administration announced that Two Trees had essentially bowed to its demands, agreeing to add 110,000 square feet of affordable housing to reach a total of 537,000 square feet. The revised Domino project is slated to create 700 affordable apartments covering a range of incomes, and there will be a significant number of two-and three-bedroom units sized for families. The affordable apartments will be integrated throughout the complex with the aim of creating a dynamic mixed-income community— and unlike in prior proposals, all of those units will remain at affordable rates in perpetuity.

In return, Two Trees was allowed to increase the height of the project to 55 stories, which, according to The New York Times is “20 stories higher than the current regulations permit.”

Despite the new agreement, at a City Council hearing on April 1 focusing on the latest version of the Domino project, some advocates and elected officials expressed concerns.

“Many times these kinds of [inclusionary zoning] deals [have been] done on negotiated understandings with developers that were not necessarily legally binding. It’s important to have it actually legally codified,” said Moses Gates of the Association for Neighborhood and Housing Development (ANHD). “To Two Trees’ credit, they were always open to that paradigm. The next step is to really write these affordability restrictions into the zoning code across the board, and not have to rely on ad hoc negotiations on affordability for each new development.”

The fungibility of affordable housing requirements was reinforced when Steve Levin, one of two Council members who represent Williamsburg, pressed Walentas about the specific number of affordable housing units the project would ultimately include. Walentas admitted that the number might actually end up being fewer than the 700 units agreed to with the de Blasio administration.

“We’ll be building a guaranteed minimum … As a developer with a billion and a half [dollar] project over many years before us, there’s a good chance that we build fewer than we build more,” Walentas said. “My best guess would be somewhere between 660 and 700 affordable units.”

The vagueness of that number highlights a deficiency in what has become one of the city’s chief tools to create new affordable housing: “inclusionary zoning”—the requirement that a developer include a certain percentage of affordable housing units in exchange for being allowed to build. The percentage of affordable housing is measured in square feet, not by the number of units, meaning that housing advocates’ push for larger apartments could wind up bringing about a diminution in the total number of units ultimately made available when the project is completed.

In his testimony before the Council, Walentas made clear his displeasure about the sudden left turn the Domino deal had taken after the de Blasio administration got involved.

“We have spent the better part of one and a half years listening to our and your community and their concerns, and until six weeks ago, we believed that we were headed down a road where on that first building there would be a significant amount of city subsidy made available, and when we got to this point in the process … there would be a three-party agreement that would lock in the amount of city subsidy, the specific AMIs [Average Median Incomes] on that project, and it would be benchmarked to certain unit size,” Walentas said. “It made economic sense to us, or at least made for a project that we know we could finance … The administration went in a different direction, so we had a whole economic framework in place for this entire project that basically went out of the window. Our internal financial assumptions have been reeling since then.”

Developers like Walentas should expect that the de Blasio administration and City Council’s increased demands for affordable housing will constitute a new normal for the industry. At the Domino hearing Councilwoman Elizabeth Crowley, addressing Walentas, seemed to sum up the general feeling among her Council colleagues.

“This is a different Council today than it was a few months back. We have much more progressive leaders that care about workers and families. And your project is going to set a precedent for the rest of the city,” said Crowley. “You’re going to receive a significant amount of funding through tax abatements and government bonds … and overall it looks like it could be a gain for our city, [but] we need to be sure. So us acting for an MOU [Memorandum of Understanding], even though it may not be binding, we’re going to trust that agreement, because you’re going to be back here asking for zoning changes in the future.”

If the affordable housing goals promised by Two Trees are met— and met in a timely fashion—the Domino project could provide a shot at redemption for de Blasio, who has endured criticism for his support as public advocate of the Atlantic Yards project, where the agreed-upon units of affordable housing have been built at a much slower pace than promised.

After talking tough about enforcing the affordable housing agreement struck between ACORN and Forest City Ratner, the developer of the project, de Blasio’s commitment to holding Forest City’s feet to the fire came into question when Bruce Ratner, the company’s CEO, co-chaired the mayor’s 50th birthday fundraiser.

When she was still the City Council member representing Atlantic Yards, Public Advocate Letitia James said of Forest City’s failure to meet the affordable housing goal on schedule, “New Yorkers and taxpayers were basically duped.”

To guard against a scenario like the one playing out at Atlantic Yards, Benjamin Dulchin, the executive director of the ANHD, suggested in his testimony before the Council that the city mandate inclusionary zoning to give it better leverage in the future.

“Domino is a good start, but just a start,” Dulchin said. “The last administration gave away the store. This administration should do better. That probably starts with a baseline of a strong and mandatory inclusionary zoning policy so the city starts from a strong position in every negotiation like Domino.”

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Filed under Housing, Mayor Bill de Blasio

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