City Increases Incentives for Developers, Backslides in Affordable Housing 

Lately, the City of New Rochelle administration is showing off its accomplishments in promoting high-rise development of rental housing in Downtown New Rochelle.   According to the Development Highlights slideshow presented to City Council on April 11th, 26 projects with 5,133 rental apartments are at or near completion.  This is apparently a halfway mark towards the end goal of building 10,000 units.  It’s time to look at the benefits—and costs—to New Rochelleans, and to ask what comes next. 

According to the City administration’s Highlights, New Rochelle is benefiting greatly from cash payments and civic improvements.   Over $24 million has been collected in one-time permit and approval and transaction fees, and $12 million has been collected as Community Benefit Bonus and Fair Share Mitigation funds.  In all cases, the one-time payments can be used to fund city administration costs.  Several development projects are instead providing commercial space for civic, cultural, learning and art centers, and urban plazas.  The infrastructure is receiving an upgrade for sewer and water delivery as well.  Aside from the civic spaces and infrastructure improvements, $36 million sounds like a lot of cash money—or is it?   

In fact, $36 million is a very small fraction of the $2.5 billion–under 1.5%–that is being invested to build these rental apartment buildings. 

In the last five years, through its IDA (Industrial Development Authority), the City has approved significant financial incentives that far exceed 1.5% of this whopping $2.5 billion price tag for development.   City approval includes dispensing financial incentives to developers.  The IDA, co-chaired by City Manager Kathleen Gill and Councilman Ivar Hyden and staffed by the Development Department, is the body that recommends and approves these financial incentives.

The biggest financial incentive is the Payment In Lieu of Taxes (PILOT) program, which is roughly a 50% discount of annual property tax payments, a discount that can last for 10 to 20 or even 30 years.  Discounted property taxes enable lower operating costs, and presumably enable fair market rent levels.

Other, seemingly smaller financial IDA incentives, add up to big dollars in upfront “savings” for developers and are easier to compare to the cash benefits that the City is touting.  For instance, the sales tax abatement for purchases during construction could be between $40 and $84 million in savings for the 26 projects.  The waiver of the mortgage recording tax could represent $30 million or more in savings.   Compare just these two incentive totals of $70 to $114 million to the expected $22 million Community Benefit Bonus and Fair Share Mitigation payments plus the $30 million in approval fees mentioned in Highlights:  residents get the short end of the stick.

And yet, the City believes even these developer incentives are not enough. At its March 29, 2023 meeting, the IDA authorized a much deeper property tax discount for developers going forward:  instead of a 50% discount, developers will receive a 70% discount.   If the goal of discounted property taxes is to keep rents low and affordable, shouldn’t this pass-through of savings to property developers and owners be tied to providing more affordable housing?  

Affordable Housing? 

Thanks to three projects—11 Garden Street between the train tracks and I-95, The Renaissance at Lincoln Park (116 Guion Place), and the large project at 580 Main Street—over 700 units of Affordable Housing are under construction, and all will be rented to households earning low- to moderate-incomes.  Eight other projects have a total of 244 affordable units; this number does not include the 66 units that were provided “off-site”.   In total, this represents 18% of the 5,133 new rental units that are “affordable.”  This is good.  But is it sustainable? 

Apparently not.  There are four more, very large projects with a total of 1,159 rental apartments that have been approved, but with only 10%, or 115 units, that will be affordable to moderate income households.   

Although the City Council passed legislation in 2021 requiring developers to provide 10% affordable housing for moderate income households*, there is a cheap way out for them, and instead, developers can make a one-time payment to the Affordable Housing Fund.  This payment option is in fact a disincentive to build affordable housing, because the payment is just 30% of the cost of building a one-bedroom apartment, an apartment that would be affordable for many years.   And just like all the other funds collected from developers, the Affordable Housing Fund monies can be used for current administration, including city staff, overhead, marketing and consultants.   At the end of the day, how much money will be available to make housing affordable?  What are the programs that will be administered with these funds, and what is the projected impact?  

The Development Highlights presentation begs so many more questions, and it’s not clear who will provide answers.  Is it the City Council?  Is it the Finance department?  Is it the City Manager, the Development Department, the IDA?  How can residents take stock of the costs and the benefits of this massive infrastructure development in the city, and is there a way to steer it in the direction that benefits more New Rochelleans?   Would it be possible to pause the machine, in order to evaluate a better response to the market impact of COVID, rising prices especially in energy, and interest rate hikes, rather than increasing developer incentives at the taxpayers’ long term expense?  

It seems that providing more incentives to developers without negotiating a direct requirement to produce more than 10% affordable housing is just a give-away.  The low bar of 10% or less in Affordable Housing is a pretty good debate topic for this year’s election cycle..  

*Moderate income is defined as 80% of the median income in Westchester County, adjusted for family size.  For a family of three earning at the 80% level, income is capped at $100,000, and developers can set rents at $2,500 per month for a one-bedroom apartment.