On July 18, 2023, Governor Hochul announced a narrowly-tailored replacement of the Affordable Housing New York program (“421-a(16)”) to address the affordable housing crisis and the frozen state of new residential developments in New York City. This action would incentivize housing in the Gowanus neighborhood in Brooklyn through a creative work-around that reinstates a modified 421-a(16) for a limited area (the “Gowanus 421-a”).
In the original 421-a(16) program, put simply, Owners would pay a reduced real property tax in exchange for building affordable housing units. The Gowanus J-51 presents a Payment in Lieu of Taxes (“PILOT”) agreement where proposals are submitted to Empire State Development (“ESD”), which would purchase privately owned property for a nominal fee. Thereafter, ESD would lease the property back to the original owners for a lease term that would equal the 421-a(16) benefit period, and thereafter deed the property back to the original owners. In effect, the Gowanus 421-a PILOT program would lease the property for the equivalent of the reduced taxes an owner would have receive under 421-a(16).
The Executive Order would require Gowanus 421-a proposals be (i) currently vested in the expired 421-a(16) program; (ii) capacities of at least 50 housing units; (iii) contains affordable housing in line with 421-a(16) with affordable housing units remaining permanently affordable; (iv) full entitlement under applicable regulatory codes and City zoning; and (v) the ability to comply with the contracting requirements set forth in the ESD’s Minority and Women-Owned Business Enterprise program.
ESD will review the program later this week, which would be subject to a public review process.
In November 2021, The Gowanus Neighborhood Plan (“GNP”) was approved by the City Council November 2021 to support the cleanup of the Gowanus Canal, introduce diverse job opportunities, support community resources, and create permanent affordable housing. The GNP covers eighty-two (82) blocks in the Gowanus neighborhood, and has a stated goal to “increase access to affordable housing.” To address these stated objectives, the Gowanus 421-a would require affordable housing units remain permanently affordable.
Of Governor Hochul’s original proposals in January 2023, only a narrowly-tailored renewal of J-51 managed to pass both chambers of the New York State Legislature, but has not yet been brought to the Governor’s desk. The Gowanus 421-a presents yet another incremental step towards addressing the affordable housing crisis and the current standstill in residential development.
Written by: Zachary Nathanson, Associate in the Firm’s Administrative Law Department.