Movin’ on up? Not so likely if developers get their way

A rendering of the Caledonia, under construction on W. 17th St. between Ninth and Tenth Aves.

By Lawrence Lerner

The city’s Department of Housing Preservation and Development has told Community Board 4 that the affordable housing plan for West Chelsea’s upscale Caledonia development is aboveboard after all; but community board members close to the issue are not entirely satisfied with that assessment.

In a letter addressed recently to C.B. 4’s Affordable Housing Task Force, the agency attempted to dispel any notions that mega-developer The Related Companies is violating inclusionary zoning laws as it builds low-income apartment units into its 24-story Caledonia condo project, the first development in the Special West Chelsea District to opt into the city’s Inclusionary Housing Program.

H.P.D. was responding to concerns C.B. 4 expressed back in early November — namely, that Related may be segregating its affordable units from its luxury condos and, therefore, violating the letter and spirit of the city’s inclusionary housing zoning regulations, which stipulate that low-income units built on site be distributed throughout a development. The rules are being applied as part of the Special West Chelsea District’s zoning plan, which was passed by the City Council in June 2005 to help keep the neighborhood economically integrated.

In her letter to C.B. 4, Arden Sokolow, H.P.D.’s director of inclusionary housing, stressed that the Caledonia is “structurally one building” and “has one set of mechanical systems” and shared amenities. In that sense, the letter implied, the Caledonia is fully integrated.

But Sokolow’s letter also confirmed C.B. 4’s greatest concern: that the Caledonia’s market-rate and affordable rental units are being confined to floors three through nine of the development, leaving the upper floors solely for posh condominiums.

That contradiction has left Joe Restuccia, chairperson of C.B. 4’s Affordable Housing Task Force, scratching his head.

“The big question is whether the intent of the new zoning regulations is being served. Clearly, it is not,” he said.

The Caledonia, at 450 West 17th St. between Ninth and Tenth Aves., will feature 185 luxury condominiums along with 288 market-rate and affordable rental units that fall under the state’s 80/20 program, which provides tax-exempt financing for developers who provide at least 20 percent of their apartments to low-income households. These apartments stay affordable for the life of the mortgage — usually between 15 and 30 years — before becoming market rate.

Related is making these units permanently affordable under the city’s Inclusionary Housing Program, however.

As a result, the company will receive a floor-area bonus it can use to build additional market-rate units. Typically, developers have a choice of building these on site or transferring them off site; but since the Caledonia occupies a special zoning sub-area within the West Chelsea District that abuts the High Line and, therefore, has height caps, Related must use the bonus off site, either by transferring the extra floor area to another one of its developments or selling it to another party. In either case, the receiving site must also be within West Chelsea district or within Board 4.

But as private developers opting into I.H.P. in the Special West Chelsea and Hudson Yards Districts move forward with their projects, Restuccia and others on C.B. 4’s Affordable Housing Task Force are seeing a disturbing pattern emerge.

In cases where 80/20 units are combined with condominiums in one building, developers are attempting to define these portions as separate legal entities, or buildings, in order to confine affordable units to the lower floors, thereby maximizing profit for the condos while still reaping the I.H.P. zoning bonus, as with the Caledonia.

In other cases where they are putting low-income units in a separate building within what is clearly the same development, developers are claiming those units as “off site” in order to gain a better floor-to-area ratio, or F.A.R., for market-rate units generated by the I.H.P. bonus.

Such is the case with the Riverplace development by Silverstein Properties, on 11th Ave. between 41st and 42nd Sts. There, the developer has not only placed the low-income building on the least desirable part of the property (near an M.T.A. bus garage on 41st St) but has situated the entrance to face the garage rather than on the other side of the building, where a courtyard is shared by two other large structures in the development, both of which combine 80/20 units and luxury condos.

The entrance has come to be known as the “maids’ quarters” within C.B. 4 and the New York real estate media.

“The community board wants to know, is this the deal we struck for our neighborhoods — poor people on the lower floors and out of sight?” asked Restuccia, who also points to another project, the Rockrose development, on Tenth Ave. between 37th and 38th Sts., where 56 percent of the affordable units have been earmarked for floors one through four.

“Every other development proposed so far has raised the same issue for C.B. 4: whether inclusionary units are being distributed throughout the building or being pushed to the bottom floors,” he said.

The Caledonia plan takes this logic one step further, not only confining its affordable units to the lower floors but graduating the distribution of those units within the 80/20 portion of the project, starting with 11 affordable units on floor three and ending with a total of six on the ninth floor. Related Companies spokesperson Alisha Goldstein refused to comment on the issue, saying only, “It is a matter between us and the various agencies.”
While Restuccia and other task force members are not surprised by developers bending the inclusionary housing rules to their advantage, they are careful to point out that combining 80/20 and condo units within the same building — along with the F.A.R.-bonus issue — represents new territory for community boards and H.P.D.

In the days of Mitchell-Lama and other government-run affordable housing programs, low-income units were built entirely in buildings dedicated to these programs, according to Walter Mankoff, a member of C.B. 4’s Affordable Housing Task Force.

“Today, affordable housing comes from private developers taking advantage of rules to maximize profit while creating affordable housing,” he said.

Restuccia echoes that sentiment, saying that everyone — especially H.P.D. — needs to figure out the landscape. He added that neither C.B. 4 nor H.P.D. expected Related to do an affordable housing project as part condo/part rental and then use part of the I.H.P. bonus off site.

“No one envisioned this. The problem was, nobody sat down and said, ‘O.K., this is what’s been proposed by the developer, but what are the impacts?’” he said. “H.P.D. just took this prima facie from Related, and then they were surprised we made a stink. Well, it’s important to realize that this is only policy we’re dealing with and that questions will be asked along the way as everyone moves through this uncharted territory.”

Back in early November, when C.B. 4 first made its argument for more equitable apartment distribution, it cited the city’s zoning regulation, which says that low-income units built on site be distributed throughout a development. But in her response to C.B. 4’s initial concerns, H.P.D.’s Sokolow said in her letter that because the Caledonia development is not using its I.H.P. bonus on site, this particular city regulation does not apply but is superceded by rules set by the state’s Housing Finance Authority, which oversees 80/20 projects.

H.F.A. stipulates that affordable rental units must be distributed evenly throughout at least the lower 60 percent of a development. According to Sokolow’s letter, that means the Caledonia is in compliance with the law.

But Restuccia does not buy that conclusion.

“First of all, nothing in that H.F.A. rule precludes developers from distributing units throughout more of the building, as the city code calls for. Second, the distinction that H.P.D. is making between on-site and off-site application of the I.H.P. bonus is irrelevant — it’s not a factor here,” said Restuccia.

He added that the H.F.A. rule in question is, in his words, “internal policy, not a regulation,” and that 80/20 policy is superceded by the city’s inclusionary housing code, which is more restrictive.

“Whenever there’s a conflict of jurisdiction, the more restrictive rule applies. This is the standard way the city operates in these matters,” he said.

H.P.D.’s Sokolow and her spokesperson, Amanda Pitman, failed to respond to repeated requests for comment on the matter.

Whether this on-site/off-site distinction is a false one will be left up to H.P.D. lawyers and C.B. 4 to fight out. But one thing is for certain. The battle over this latest chapter of affordable housing is only starting to heat up.