Mayor Faces Pitched Battle Over Breaks for Developers

Vito Lopez, the powerful Brooklyn Democratic Party chairman, is spoiling for a fight with Mayor Michael Bloomberg and some of New York’s most powerful development interests.

The Assemblyman, who represents the Bushwick and Williamsburg neighborhoods of Brooklyn, is pressuring the Mayor to abandon a program that gives tax breaks to developers of pricey Manhattan apartments—breaks that were initially conceived to spur the development of affordable housing in the outer boroughs.

“I will be lobbying the city,” Mr. Lopez said in an interview. “I have met with the H.P.D. commissioner twice or three times. Next week, I meet with advocates to have a collective strategy to advance the bill.”

But insiders say that if he doesn’t get traction there, he’ll start beating the war drums within the earshot of the profoundly Democratic City Council.

He is pushing Shaun Donovan, the commissioner of the city’s Department of Housing Preservation and Development, to drop one of the city’s most lucrative real-estate tax incentives in a showdown that will have profound ramifications for developers and low-income tenants alike.

The 421-a certificates are a pervasive—some would say perverse—motor in financing of much of Manhattan’s luxury market. Richard Meier’s Perry Street towers used them in order to lower tax bills, as did Trump World Tower.

Outer-borough builders earn four or five certificates for each unit of affordable housing they produce, and then sell the paper for $12,000 to $20,000 each to Manhattan developers to qualify for 10-year tax abatements on market-rate condos and rentals. At a hearing in June, Jon Furlong, an advocacy associate at Habitat for Humanity, testified that a building at Trump Place on the West Side would receive $12 million in tax breaks for paying $2 million in certificates.

Mr. Lopez is an old-fashioned politician who caters to bread-and-butter issues while trading horses on the side. (This week he was attacked for supporting his girlfriend’s brother in his pursuit of a judgeship.) In the rapidly gentrifying North Brooklyn area that he represents, his constituents fear getting priced out of the neighborhood where they grew up. In the 1990’s, he convinced the Giuliani administration to sell an abandoned brewery along the East River to developers who devoted 40 percent of the units to low-income households—half of them to people who live in or near Mr. Lopez’s district.

Last year, the city decided to expand the 421-a exclusion zone, once relegated to core Manhattan, to the rest of the Williamsburg-Greenpoint waterfront, which meant that developers needed to provide affordable housing to qualify for tax breaks, either through certificates or apartments within the same building. Mr. Lopez persuaded Commissioner Donovan to eliminate the certificate option, thereby requiring that the affordable housing be located on the same very expensive waterfront property on which the luxury condos would go. He also made sure that the buildings will hire union maintenance workers—a nod to Local 32BJ, a powerful union—and is seeking to require the same with the 421-a reform.

Mr. Lopez called the certificate program “very disillusioning.”

“To do the certificate program, what they are doing is building in high-market areas like Williamsburg, and then they are going to ask people to go to the Bronx or East New York to live, where the cost for them to build is cheaper.”

He said there was such tremendous support from voters and legislators that he didn’t think it would be hard to prevail. City Councilman John Liu plans to introduce the city version of his state legislation—and was about to last week before abruptly changing his mind, according to one source.

“I get calls—one or two a day—from the local priest: ‘What do I do about Mrs. Jones? She can’t pay $1,800. She only has $1,200,’” Mr. Lopez said. “In these changing neighborhoods, you’ve got religious and community leaders saying, ‘Where are people going to live?’”

The top ranks of New York’s developers want to hold on to the certificates, however, and warn that to do otherwise will stifle both market-rate and affordable housing production.

“If they are going to get rid of the certificate program, I would have serious problems with that,” said Steven Spinola, the president of the Real Estate Board of New York and a member of the 421-a task force, speaking to The Observer. “I think it creates affordable housing, and I think it provides a mechanism to provide apartments in the city of New York.”

“It’s less costly to build the affordable units outside of the exclusion zone,” said an expert in the affordable-housing field. “If we can fix the certificate program and increase the value of the certificates, then I think that continuing with the option of providing affordable housing off-site will result in more affordable housing being built throughout the city.”

Mr. Donovan, the city’s housing commissioner, has also argued that the 421-a certificate program needs to be fixed, not abandoned.

The showdown is becoming more intense as Mr. Donovan attempts to wrap up a 26-member task force on the 421-a tax-abatement program in the next few weeks. A final meeting, originally scheduled for Sept. 18, was postponed, apparently because Mr. Donovan is still trying to craft a package that will meet with the least resistance. He spoke with Mr. Lopez the next day, according to a source, although the outcome was inconclusive.

Although Mr. Lopez doesn’t sit on the task force, he is the constant shadow over its meeting room, the person who will determine whether the recommendations have any chance of becoming law.

He chairs the Assembly’s Housing and Buildings Committee, which needs to reauthorize the tax abatements by the end of 2007.

What’s more, he carries enormous influence over two members of the City Council who will also play a role: Christine Quinn, who became Speaker in January with Mr. Lopez’s support, and Erik Dilan, a 32-year-old protégé of the Brooklyn boss, whom Ms. Quinn appointed head of the Council’s housing committee—as a reward, his detractors contend, for Mr. Lopez’s backing.

This month, Mr. Donovan has met with several of the major players, lobbying them to accept the task force’s recommendations as the best possible outcome, according to one individual close to housing groups.

Mr. Donovan believes that City Council members and real-estate developers both may be tempted to grandstand, delaying passage and jeopardizing a key issue for his boss, the individual said. Mayor Bloomberg is counting on $200 million in revenue from the reforms to meet his goal of creating or maintaining 165,000 affordable-housing apartments citywide by 2013.

Brad Lander, the director of the Pratt Center for Community Development and one of the housing advocates on the task force, said that he was originally in favor of reforming the certificates instead of eliminating them, but that he has come around to Mr. Lopez’s point of view.

“The estimates we got were that we get 12 to 15 cents on the dollar for affordable housing from our taxes,” he said. “I have been convinced as part of this process that it should be eliminated, and that market-rate developers should pay full taxes and H.P.D. should use those dollars to build affordable housing.”