A leasing launch is not big news, but it’s worth mentioning at EMP Capital’s 1042 Atlantic Avenue because the 259-unit rental almost didn’t happen — and nothing like it will be built again.
Not in the foreseeable future, at least.
EMP nearly lost the Brooklyn project in January 2022 when Council member Crystal Hudson, in her first week on the job, demanded Elie Pariente’s firm withdraw its rezoning application.
She made the same request of Joel Teitelbaum’s Y&T Development, which needed new zoning for a similar project two blocks away at 888 Atlantic Avenue. EMP later bought that 246-unit project, which is also about to start leasing for August move-ins.
Hudson wanted to be consulted on rezonings before the public review, but it made no sense for Pariente and Teitelbaum to start over. (Pre-certification typically takes two or three years, followed by Ulurp, which takes five to seven months. This can cost developers millions of dollars.)
Eventually, Hudson realized this, dropped her demand, and negotiated a deal with the developers — as Council members have been doing since the early 1990s.
Hudson drove a hard bargain at 888 and 1042 Atlantic, requiring a supermarket and that 35 percent of the apartments be affordable. Each project had to donate $100,000 for anti-displacement efforts, even though the new buildings would absorb people, not displace them.
In announcing the deal, Hudson declared, “Our new floor is 35 percent. We can ask all developers, at a minimum, to do the same thing moving forward.”
No, she can’t. That high percentage of affordable units is no longer feasible because the 421a tax abatement — which both Atlantic Avenue developments got — has been replaced by 485x, which requires permanently affordable units and high pay for construction workers on large projects. It’s not even certain that rentals with more than 99 units are viable at the baseline 25 percent affordability.
These changes by the state legislature are why Hudson did not demand more affordability than required by 485x when she negotiated a sweeping Atlantic Avenue corridor rezoning in May.
Let’s back up. What lesson can we draw from this saga?
Spot rezonings have been criticized because they take time, add uncertainty and risk and create a mish-mash of uses. They require negotiations with a local Council member who might hold a good project hostage or kill it.
But the Atlantic Avenue projects achieved a better result than politics-free, as-of-right development would today.
Multifamily projects now require 485x, with its de facto cap of 99 units. Under 421a, developers could build much larger projects, and money-losing rent restrictions ended when the tax benefit did.
Critics called 421a too generous, but because projects more readily penciled out, Council members had an opportunity to demand more affordability when rezoning was needed. Now they can’t. Big projects aren’t even being proposed.
If any developers manage to get a loan to build 100 or more units, they won’t have the flexibility to provide more affordability than required, given the high wages 485x demands for construction workers.
“[The industry is] having an issue with 99-plus unit projects,” said Andrew Barrocas, whose brokerage, MNS, handles leasing at 888 and 1042 Atlantic. “We’re spending a lot of time separating sites to get around some of the restrictions with prevailing wages.”
Lawmakers should have done their homework when replacing 421a, he said.
“What people who are coming up with these rules don’t understand is ultimately it’s going to cost more money to build three buildings than one on a site,” said Barrocas. “For it to work, [developers] have got to rent it for more money.”
Big projects are good for the city. They provide more housing options, which means fewer bidding wars, keeping rents in check.
At 1042 Atlantic Avenue, 259 singles, couples and families can start moving in July 15 rather than compete for the few listings in older buildings. Because the project is so large, more amenities are possible. Pariente included a fitness center, sauna, pickleball, lounge, screening room, game room, pet spa, playroom, courtyard, business center and a roof deck with barbecues and a putting green.
Unless lawmakers act, this won’t happen again.
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