In a big change for real estate plans in New York, Two Trees Management is worried about its River Ring project in Williamsburg.
This project got started with the help of a tax break called 421a, but now that it’s over, a new program called 485x is causing problems.
The main issue is that 485x has strict rules about wages and affordable housing that make parts of the project too expensive, according to Two Trees spokesperson David Lombino. Also, borrowing money is more expensive now than when they first planned the River Ring project.
The 485x Challenge
The new 485x program has changed the game for building apartments in New York, especially for big projects like the River Ring.
Under 485x, projects in the area where River Ring is located have to set aside 25% of the apartments for people who earn less money, with a cap on how much they can make.
This is different from the old 421a, which allowed for more flexibility in who could live there and how much they could earn.
Also, the wages that construction workers have to be paid under 485x are much higher than before, making it harder for River Ring’s second tower to meet the new rules since it doesn’t qualify for the old tax break.
The Ripple Effect
The River Ring project isn’t the only worry for Two Trees; they’re also working on fixing up the Domino Sugar refinery. One part of the Domino project is almost done, and they’re planning another tower with lots of apartments.
The first part of the Domino project got the old 421a tax break, showing how developers have to be smart to deal with changes in New York’s real estate rules.
However because the Domino project is taking longer, Two Trees might not be able to finish River Ring by the deadline in 2031, which makes things even more complicated for them financially.
A Bit of Hope Despite Challenges
Even though 485x and high interest rates are making things tough, there’s still some hope for the River Ring project.
Lombino says that if interest rates change or it becomes easier to get money for building from scratch, the project could still happen.
This feeling is shared by other developers in New York who are trying to figure out how to deal with the new tax break rules and thinking about different ways to lower risks, like selling land to someone else.
