QUEENS — The $1.5 billion Hallets Point project broke ground last month promising Astoria a new mini-neighborhood with 2,000 apartments — 483 of them affordable — along with a supermarket, school and waterfront esplanade to rise over the next 7 years.
A day later, key pieces of the project stalled.
“Without a new 421-a or a replacement program, we can't continue with the project. Nothing can be done,” Durst Organization spokesman Jordan Barowitz said. “Without the abatement, the economics for the project collapse and we couldn’t get a construction loan.”
The first building in the multi-phase project started construction before the tax abatement program expired, so that component — which will include roughly 400 units with more than 80 affordable units, as well as the supermarket — will move forward as planned, Barowitz said.
As for the rest, it remains unclear.
Under the development’s agreement with the city, the project must deliver at least 20 percent of units affordable. But these terms were created under the assumption that Hallets Point would qualify for a 421-a tax break.
Without those breaks, Barowitz said: “The taxes are just crushing.”
The 421-a program was first implemented in the 1970s to spur housing development during a fiscal crisis.
Nowadays many developers believe that without the break, it won’t be financially feasible for them to build rental housing in the city, whether affordable or not, and will have to turn to condos because of land prices and construction costs.
Real estate experts say it would not have been possible for certain neighborhoods, including Downtown Brooklyn and Long Island City, to see the hundreds of affordable units that are now popping up without the abatement.
But affordable housing advocates welcomed the expiration of the 421-a program last month, following their stinging criticism of the incentive as tax giveaway program to developers who did relatively little to create affordable housing for low- and moderate-income New Yorkers.
They hope the program’s end will force the city and state to develop a new program where there’s more public benefit in return for the developers' incentives.
Mayor Bill de Blasio touted the Hallets Point project at the Jan. 14 groundbreaking, hailing it as a site that would help him reach his goals of building or preserving 200,000 affordable units over 10 years.
“I am particularly moved by the fact that in the very first building there will be 100 affordable apartments for low-income families and hundreds more affordable apartments in the years to come,” he said at the time.
On Jan. 15, the 421-a tax abatement expired when the Real Estate Board of New York and the Buildings and Construction Trades Council — the two groups Gov. Andrew Cuomo charged with hashing out a deal — failed to agree on paying construction workers a prevailing wage for buildings with 15 or more units.
While the state gave these two groups more time after 421-a expired to continue negotiating, nothing has happened since.
“It is clear that 421-a as we know it is dead and will not be revived,” Gary LaBarbera, president of the Building Trades said in a statement last week.
The city believes that for the time being, at least, it has other tax break programs that developers can — and already do — take advantage of to create affordable housing.
Last year roughly 2,400 — or about 11 percent — of the roughly 21,000 affordable units financed by the city were eligible for 421-a tax breaks.
“There’s no question we’ll see an impact on projects previously planned around 421-a,” mayoral spokesman Wiley Norvell said.
But, he added, “The city believes, in the near term, we can make do with the tools we have.”
Of buildings that received 421-a benefits last year, roughly 60 percent of them also met qualifications for alternate tax abatements, like 420-c and Article 11, according to an analysis of its portfolio by city’s Housing Preservation and Development, Norvell said.
And many of the remaining 40 percent could have met those programs’ specifications “with some modest alteration” which would have meant making more of the housing affordable, he added.
Still, the alternative tax break options wouldn’t likely help Hallets Point, Barowitz said.
“They are only for low-income housing, not market-rate,” he said. “The city needs both."
Still, the Durst Organization is taking the long view on Hallets Point and plans to sit on the land until it can figure out what to do next.
“It is a problem for us, but this is a 10-year build-out to begin with. We’re looking at a 30- or 40-year horizon,” Barowitz said. “We think about things in the very long term.”