These “green” buildings exist in part because the Battery Park City Authority (BPCA), charged in 1968 with redeveloping the dilapidated former Port of New York area into a mixed-use neighborhood with public space, adopted a policy in 2000 that requires developers to build environmentally sustainable apartments. Under the BPCA policy, structures in the area must address indoor air quality, water conservation and purification, energy efficiency, recycling of construction waste, the use of recycled building materials and building commissioning to enhance building performance. BPCA even created a user-friendly best practices document that details the ways in which sustainable measures have been successfully integrated into neighborhood residential buildings.
Despite being marketed only to the affluent, a substantial portion of the financing for the project came from public bonds and government tax breaks. The building was built, in part, with $203.9 million in tax-free financing from the New York Liberty Bond Program, a pool of funding administered jointly by the New York State Housing Finance Agency (HFA) and the New York City Housing and Urban Development Council (HDC) that was made available after September 11, 2001 to help rebuild lower Manhattan.
Under the Liberty Bond Program, developers need only pay a three percent affordable housing fee (approximately $6 million in the case of New York by Gehry) rather than setting aside affordable units within the building itself. This is a departure from the HFA’s traditional program which requires 20% of units within buildings financed with tax exempt bonds to be set aside for affordable housing.
Although the goal of rebuilding lower Manhattan is a noble one, if one were really concerned with maximizing affordable housing, the 3% fee option achieves significantly less desirable results than the traditional 20% affordable housing rule imposed by the HFA. According to HDC, it “constructed 467 affordable housing units using approximately $31.4 million in fees derived from previous Liberty Bond transactions.” This equates to a cost of $67,237 per unit of affordable housing. Using these figures, the $6 million fee paid by Ratner for New York by Gehry bankrolls 89 affordable housing units outside of the building. By contrast, twenty percent of 903 units would have made 180 affordable housing units available within the building.
Additionally, although no affordable housing units were included within the building, all apartments in New York by Gehry will ironically be rent stabilized for the next 20 years. Because the building was financed in part by government dollars, it was also eligible for a 421-a 20-year tax exemption (which Ratner applied for just before amended requirements came into effect in June 2008 that included compulsory on-site affordable housing requirements). A requirement of properties included within the 421-a tax exemption is that the building’s units are reviewed by the Rent Guidelines Board, and generally subject only to periodic rent increases of 2-3 percent. Thus, while tenants of New York by Gehry are clearly willing and able to pay top dollar for their luxury apartments, they will enjoy modest incremental rent increases—a policy intended to keep middle and working class citizens from being priced out of their neighborhoods. Rent stabilization applied in this way seems a far cry from what the program was initially intended to accomplish.