Brooklyn-based Two Trees Management, which hasn’t built condos since the 1990s, has considered using its development sites to do just that.
When the company, run by Jed Walentas, dropped $185 million to buy the site of the former Domino Sugar factory from the Community Preservation Corp. in 2012, it intended to build more than 2,000 mixed-income rental apartments and office space.
The project, an 11-acre megadevelopment, was to be delivered in phases across several buildings using the 421-a tax abatement program.
Two of its buildings are already subject to using the tax program. Site D, a separate phase that will include 600 apartments across two towers, is already under construction and, because of this, will also qualify for the tax exemption when it’s complete.
But Site B, the 1 million-square-foot development that has yet to be constructed, is racing against the clock. Although its foundation was put in place before June, it is at risk of missing the 421-a program’s second requirement: a June 2026 completion deadline. It also might not be done by Hochul’s proposed deadline extension to 2030.
“Right now we’re in the clear for Site D, which is under construction, [but] it’s cloudy for B, and for the rest, it’s murky,” said David Lombino, Two Trees’ managing director of external affairs. “If things continue without … an incentive program that makes multifamily [construction] more economical, everything is on the table,” he added, hinting at possible condo construction.
But not every site can support condos, and the condo market tends to be more cyclical than rentals, said Mark Willis, senior policy fellow at the NYU Furman Center, a nonpartisan housing think tank. In the mid-1980s he helped shape a housing plan for Mayor Ed Koch that depended on 421-a.
The pie of subsidies for affordable housing is fixed in size, so all developers can’t suddenly switch gears and take a piece, said Hayley Raetz, a policy director at the NYU Furman Center.
“We are not likely to see an explosion of pure affordable development,” Raetz said.
And not all developers see condos as a way forward.
A $2 billion Astoria development site, Innovation QNS, was left in the lurch when 421-a expired. The project, slated to be completed in 10 years, which will fall after both the original and the possibly extended 421-a completion deadline, is expected to bring nearly 3,000 units of rental housing to the neighborhood, with around half of the units reserved as affordable housing.
It’s being developed by Silverstein Properties, BedRock Real Estate Partners and Kaufman Astoria Studios, and the lack of a replacement for the tax-abatement program is making them nervous.
“All I can tell you is we are in the same boat as everyone else,” said Tracey Appelbaum, BedRock’s co-founder. “The deal does not work without 421-a.”