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Thread: The Alchemy of a Zoning Bonus

  1. #1

    Default The Alchemy of a Zoning Bonus

    December 14, 2003

    The Alchemy of a Zoning Bonus


    At One Beacon Court, there are to be 24 floors of luxury condominiums. Roughly 13 of these floors represent bonus space awarded because lower-income housing was created elsewhere in Manhattan. The bottom of the tower and the base, spanning the block between Lexington and Third Avenues and 58th and 59th Streets, will hold the headquarters of Bloomberg L.P., other offices and stores. Two condominium floors are not reflected in this rendering, which shows the building from 59th Street with Lexington Avenue on the right.

    CESAR PELLI leaned his lanky frame over a model of his luminous glass 54-story tower, now rising one floor every three days or so over 59th Street and Lexington Avenue, topped by a miniature version of the multistory beacon he designed for its crown, just above 24 floors of luxury condominiums.

    As Mr. Pelli spoke, a xylophone and bass played in the background, and residential brokers sipped pale blue drinks from martini glasses. They were gathered for a suave upscale pep rally marketing the remaining apartments of the residential condominium, One Beacon Court, for sale for $2.1 million to $26 million.

    "We are only this high now," Mr. Pelli said, pointing toward the model's 46th floor, "and already I could see it from all across Central Park."

    Ruth Gardiner, a retired office worker, is somewhat less impressed. She is 85 years old, and a few years ago she and her husband gave up the three-bedroom apartment she had rented for nearly half a century in Queens and moved to a new apartment a few blocks away from Mr. Pelli's tower. "They keep building so much in Manhattan that one of these days Manhattan is going to sink," she told a visitor with a laugh.

    But Mr. Pelli's vision and Mrs. Gardiner's apartment are inextricably linked. More than half of the 105 condominium apartments under construction at One Beacon Court were made possible by a zoning provision that allows developers to make large buildings even larger, if they build or at least pay for housing for people with limited incomes like Mrs. Gardiner and her neighbors on East 61st Street.

    The little known provision was created in the late 1980's, just as housing development dried up. In the last few years it has produced a steady trickle of lower-income housing, close to 100 apartments a year, becoming a critical building block of many new luxury housing developments.

    Similar provisions, known collectively as "inclusionary zoning," have been used in New Jersey, Maryland, California and other states to coax, or in some cases require, the creation of housing affordable to less affluent residents.

    In Manhattan, inclusionary housing enables developers to increase the size of buildings allowed on many major avenues and streets in areas with high-density development by up to 20 percent in exchange for creating limited-income housing nearby.

    Because the program was specifically intended to address the borough's problem of gentrification, it requires developers to build limited-income housing in or around the same neighborhood, including some of the most affluent enclaves in the country. Builders receive up to four square feet of development rights for each square foot of lower-income housing.

    Within Manhattan
    Lower-Cost Housing in Prime Areas

    The new lower-income housing is in several dozen buildings in Manhattan's best neighborhoods. Many are crisp new buildings, sometimes only a few apartments, sometimes many, with large, bright, homey apartments. Most rent for $600 to $800 a month, and tenants must meet stringent income requirements and win a lottery.

    When the Related Companies built the Lyric, a 23-story rental project on Broadway and 95th Street, it also built 11 low-income apartments on West 105th Street. In exchange, the Lyric was able to add 40,000 square feet, enough room for 44 more apartments. When the Clarett Group decided to put up a 20-story condominium at 107th Street and Broadway, it spent $900,000 to purchase a 25-by-75-foot lot on 108th Street to build five apartments and add 20 percent to the Broadway building's bulk.

    When Izak Senbahar built the 32-story Grand Beekman, a condominium development on East 51st Street this year, he also built a 12-apartment building on East 54th Street. There, Flossie Dupaski, a retired travel agency owner who saw a notice about the building in her church bulletin, now pays a little more than $700 a month for a studio reserved for the elderly. She met the strict income requirements of at least $25,700 a year, but no more than $35,100.

    Mr. Senbahar said the East 54th Street building was expensive, costing about $4.5 million, nearly $380,000 an apartment, but it allowed him to add the last five stories to his 51st Street project at a cost of about $135 a square foot. Last month, he said, a three-bedroom apartment on the 29th floor of the Grand Beekman sold for $2.9 million, or nearly $1,500 a square foot.

    "The Grand Beekman was a huge success," said Mr. Senbahar, adding that he also felt good about doing some good. He eventually turned the lower-income project over to the Metropolitan Council on Jewish Poverty, which he said had meticulously worked over the details of the design.

    "We didn't cut corners," he said. "We were giving joy out of it, and if you don't cut corners, you can feel you are doing a good deed at the same time."

    Ms. Dupaski moved in last spring and has installed wallpaper with matching pillows, in an apartment that includes a dishwasher, parquet tile floors and an air-conditioner. She said getting into the building was "like winning the lottery." Her rent on a rent-controlled apartment on West 52nd Street was about to go up to $1,300 a month. "It was a blessing," she said.

    The program is unusual in that unlike most housing programs for lower-income people in the city, it creates most of its lower-income housing without large and continuing government subsidies. And unlike most other housing programs from the federal Section 8 rent subsidies to the state's Mitchell-Lama program the lower rents continue indefinitely, or at least as long as the luxury building still stands.

    But the program remains under pressure. As Manhattan below 110th Street becomes increasingly affluent and homogeneous, sites for small indirectly subsidized developments are becoming scarce and more and more expensive. Some housing planners complain about the unfairness of forcing builders to make indirect subsidies and the logic of putting up lower-income housing on expensive land. And community activists complain that it often creates buildings that are too bulky.

    Beyond Manhattan
    A Call to Expand in Gentrifying Areas

    Yet as the city has begun rezoning neighborhoods and manufacturing areas outside Manhattan for denser residential development, particularly near the waterfront in Brooklyn, community leaders want to expand the program to the other boroughs to provide more affordable housing in rapidly gentrifying areas.

    Councilman David Yassky of Williamsburg wants to change the code to mandate that developers build inclusionary housing in the same site or same neighborhood, when zoning rules are changed to permit higher residential development. The Manhattan program is voluntary.

    "When there is a change from manufacturing to residential, their property values will increase 500 or 600 percent," Mr. Yassky said. "When you have that kind of wealth created by a government action, it is only fair to use some of that wealth for the public good. I want to make sure a good portion of that housing is affordable."

    City planning officials are studying the proposal, according to Daniel L. Doctoroff, the deputy mayor for economic development. But he said any plan would have to make economic sense to developers and deal with the concerns of communities wary of increasing building height and density.

    "It barely worked in Manhattan for a number of years," he said. "The economics in Brooklyn for developers are more difficult, and the sensitivity to density in the outer boroughs is even greater."

    The inclusionary housing bonus creates only an incremental change in residential buildings, permitting the maximum square footage, in a typical application, to go from 10 times the footprint of the building to 12.

    But by adding a residential tower to a large office building, Mr. Pelli's project at One Beacon Court was able to leverage the zoning bonus to increase the allowable size of the entire building. The use of inclusionary housing was larger, more complex and more critical there than at other projects.

    One Beacon Court, developed by Steven Roth, head of Vornado Realty Trust, covers a square block bounded by Lexington and Third Avenues and 58th and 59th Streets, across the street from Bloomingdale's. It is an unusually large Midtown development site, covering 84,300 square feet, and would under the regular zoning rules be eligible for an 843,000-square-foot building, not including retail space below street level or mechanical space on upper floors, including the space shared with the beacon.

    Most of the building will be office space, and most of that has been leased by Bloomberg L.P. for its headquarters. But when the developers penciled even a small residential project in the building, they became eligible for the housing bonus. As a result they were able to increase the size of the entire project by 20 percent, to more than 1 million square feet, according to company officials.

    All that extra space is included in the residential tower; in the end 55 percent of the residential space roughly 13 of the 24 residential floors was made possible by the bonus program, according to figures provided by Vornado officials and the New York City Department of Buildings.

    One Beacon Court
    Three Sites Provide Zoning Bonuses

    But to make this possible, Vornado needed to build or find lower-income housing either within the same Community Board district or within a half a mile of the site. Long before Vornado began construction on Mr. Pelli's tower, it found Mrs. Gardiner's building. Built by another developer, the property had extra zoning rights for sale.

    Ms Gardiner lives in a 15-story building for the elderly with 53 apartments, a library, community rooms and a backyard garden. It was built several years ago by Trevor Davis to get extra development rights on his own Upper East Side developments.

    Mr. Davis then turned the $14.3 million building over to the Metropolitan Council on Jewish Poverty, for $10, free of any debt, according to Gary Gutterman, the agency's director of housing. The council operates 4 of the 26 occupied projects in the inclusionary housing program.

    Mr. Davis said he used rights from the building on a succession of projects that rose across the Upper East Side, including the Century Tower on East 91st Street, the Empire on East 78th Street, the Impala on East 76th Street and First Avenue and the Seville at Second Avenue and 77th Street.

    In December 1999, Vornado bought 97,372 square feet of the remaining development rights that Mr. Davis received for erecting Mrs. Gardiner's building. The price was not disclosed, but on average Vornado said it paid $102 a square foot for rights purchased from a number of developers. In the spring of 2000, Mrs. Gardiner and her husband, Jules, moved into a roomy one-bedroom apartment. Her husband died the next year.

    The apartments are large by Manhattan standards because under the program, the developer's bonus is based on square footage rather than the number of rooms or apartments, so developers have no financial incentive to create the undersized apartments so common in Manhattan.

    For more than half a century, Mrs. Gardiner had lived in a three-bedroom apartment in a development in Fresh Meadows, Queens, built by New York Life. When she moved in in 1947, she said, she was embarrassed to tell friends and relatives how much money she paid $75 a month. When she moved out, her rent was close to the $714 charged on East 61st Street.

    Living in Manhattan makes it easier to get around, without a car, and the apartment is close to her daughter's home.

    William Rapfogel, executive director of the Metropolitan Council on Jewish Poverty, said the residents of the inclusionary housing have higher incomes than some of the other groups his organization has traditionally served. At one such project, he said, the council removed a banner with the organization's name on it because they objected to the word "Poverty."

    But the council decided to get involved in the program after it received nearly 5,000 applicants for 121 apartments for very-low-income older adults, including 800 from people with incomes just too high to qualify. "People there may not be poor," he said. "But they are lower middle class, the near poor and the working poor."

    A few days after obtaining zoning bonus certificates from Mrs. Gardiner's building, Vornado notified the city's buildings department that it had purchased another 42,507 square feet of inclusionary housing space from a project on East 21st Street from BFC Partners, which specializes in building government-assisted housing.

    In this case, Donald Cappoccia, a BFC partner, said the company had persuaded the city's Department of Housing Preservation and Development to sell it an occupied six-story tenement that had long been in the city's portfolio of tax foreclosed properties. BFC renovated the building for $5 million and turned over the 30 apartments to a not-for-profit sponsor, the Cooper Square Mutual Housing Association. It kept the commercial space, including the original Ess-a-Bagel store, and sold all its inclusionary rights to Vornado.

    Finally, to complete the deal, Vornado put up its own inclusionary building, a 41-unit project for the elderly that it built with Jeffrey E. Levine, a developer who had found a site at 171 Lexington Avenue on the corner of 31st Street.

    That project, according to Vornado filings, cost $16.3 million and produced 39,000 square feet of lower-income housing and 155,300 square feet of bonus space, at a cost of $105 a square foot. Vornado sold most of the rights to its own project and to other developers for $120 a square foot, a profit of $15 per square foot.

    The development rights used by Vornado translated into extra sales of luxury condominum units, with asking prices ranging from about $1,500 a square foot for apartments on lower floors to $2,600 a square foot for large apartments on upper floors and nearly $3,000 a square foot for the 8,600-square-foot penthouse.

    According to financial filings, the project paid $17.4 million for the rights used at the One Beacon Court project. But the apartments made possible by this purchase will probably sell for more than $200 million, an estimate confirmed by the company. And in the end Vornado had more development rights than it needed, so it resold some of the rights it had purchased as well as most of the development rights earned at the Lexington Avenue building.

    Melvyn H. Blum, executive vice president for development at Vornado, said the inclusionary housing project produced much needed housing and helped his development too. "The fact is people are now living in Manhattan who couldn't afford to be here otherwise," he said. "It is a good program."

    But some developers and planners say it makes more sense to use the developer-provided subsidies on lower-income housing in areas where it is less costly to build. Adam Weinstein, the president and chief executive of Phipps Houses, a not-for-profit housing group involved with several inclusionary projects, said the city may no longer be able to afford the luxury of building lower-income housing in Manhattan.

    But Councilwoman Gale Brewer of the Upper West Side said her neighborhood needed lower-income housing precisely because prices were so high and gentrification so advanced. "We are so desperate for every unit," she said. "Every single day people pour into our offices with major, major housing problems."

    On the other hand, she said she was also concerned about "the large and often not particularly attractive buildings, created by the program."

    And with land costs so high, the future for similar inclusionary projects is clouded. Mr. Levine bought the 171 Lexington Avenue building with the idea of building lower-income housing. Today, he said, given the high cost of land, the site would be far more valuable as luxury housing.

    346 East 21st Street, one of the rental developments with housing for people with limited incomes.

    Copyright 2003 The New York Times Company

  2. #2


    Wow, honestly, I must admit that this is one of the best buildings, and definition that I have ever seen. Right now, I am actually Googl'ing some architectures that has the same as this.. I'll be back after a few minutes, and share a link..

  3. #3


    Daniella you are bringing up threads that are years old... in this case nearly 7 years old.... the forum might not be interested.

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