Condo Filings Down But Definitely Not Out

While there appears to be an overall downward trend in co-op and condo offering plans filed with the state, production still remains relatively high here despite worsening market conditions. Offering plans are required to sell condos or co-ops, including in a conversion. According to information provided by the Attorney General’s office, since 2004 Brooklyn developers have filed 1,393 offering plans for 28,499 units. Since the start of the year until mid-May, 28 offering plans for 1,771 units were filed. We asked a few developers what they think about the numbers. They predicted production would soon plummet as developers hesitate to add more condos or co-ops to an already saturated market, especially in places where it’s uncertain if prices will hold. Also, they said recent numbers are likely higher than they would be without the new 421-a law, which after June 30 requires developers to include affordable housing within their buildings to receive tax exemptions. While an offering plan is not required to receive 421-a benefits, some developers do their paperwork all at once (most file during construction) and are racing to get everything in before that deadline, said Justin Stern, principal of Manatus Development Group. From the figures above it’s apparent Manhattan has already experienced its prime this market cycle, but recent figures are still higher than in Brooklyn: Since the start of the year, 57 plans for 2,403 units in Manhattan were filed. Hear more from developers after the jump…

The developers we spoke to all had basically the same assessment of the numbers, and 421-a, not a favorite among the bunch, figured prominently. Marshall Sohne, developer of a number of projects along Columbia Street, said the tax exemption is more likely to weigh heavily on Brooklyn market-rate buyers than those in Manhattan. Despite being upper or upper-middle class, Sohne said those buyers still watch their finances closely. Condos coming on the market without the tax exemption would have a much tougher time competing with the tens of thousands that do, a significant portion of which would still be sharing the market with taxed units. He also thinks developers will choose to hold off on projects rather than go rental. “The yeilds from the rentals are usually much lower than for a condominium,” not making the project worth the effort in many places, he said. Justin Stern, principal of Manatus Development Group, which has worked on inclusionary housing projects like 15 Quincy Street and 91 Carlton Avenue, agreed. He added, “The reasons for less apps are definitely related to the downturn in market conditions and lenders’ hesitence/ unwillingness to finance for-sale product … This is, and I expect will continue to be, a very difficult time of change, the likes of which NYC has not seen in the past 15-plus years.”
421-a Revamp: A Lose-Lose Proposition? [Brownstoner]
Developer of Affordable Housing Faces New Challenge [NY Times]