Posted on April 20, 2017
Investors’ Guidebooks to Rezoning Areas Foresee Dramatic Change
A real estate company’s report on East Harlem arguably confirms the fears of some residents that investors interpret rezonings as major catalysts for development and gentrification.
GFI Reality’s March report “East Harlem: A.K.A. ‘The Neighborhood’” describes the investment potential of East Harlem and dedicates a full chapter to the potential implications of the de Blasio administration’s proposed rezoning.
“Investor interest in what some would call an under-served market has been buoyed by the confluence of factors such as the new subway station at Second
Avenue and 96th Street, the MTA’s plan for a future extension northward, and the East Harlem Rezoning Plan’s inevitable approval,” the report says.
The East Harlem report is one of a few reports or blogs produced by GFI Realty on the real-estate prospects of gentrifying neighborhoods, including Gowanus, another neighborhood targeted for a rezoning. The firm, an affiliate of GFI Capital Resources, provides a range of services including real-estate brokerage, realty financing, commercial retail leasing and investment sales. The neighborhood reports include information about recent sales that were negotiated by GFI Realty, as well as guidance about who to contact for more information about properties currently on sale.
“The reports are a reflection of what GFI’s research department is seeing in the real-estate market,” wrote a spokeperson for GFI Realty, when asked whether their reports had the potential to encourage the kind of speculation that leads to the rising rents and displacement residents fear. “They’re specifically designed to demonstrate to our clients that we have a good understanding of market dynamics. They’re not intended to encourage anything.”
Rents will keep rising in El Barrio
GFI’s report provides a guide to real estate clients who may not be familiar with East Harlem. “El Barrio, in English, translates to ‘the neighborhood,’” it says. And, the report continues, it’s a neighborhood with many appeals—”culturally eclectic,” with a “strong character” and murals “by the best of the best street artists from NYC and beyond.”
Catalysts like the proposed rezoning and the 2nd avenue subway, along with the current affordability of the neighborhood to people priced out from elsewhere means East Harlem has “emerge[d] as a hotbed for development, as investors begin the process of transforming the housing market and prices steadily rise,” it says.
The report sites a number of developments underway, including a plethora of market-rate and luxury buildings, and three large affordable housing developments. Prices are growing rapidly: From 2015 to 2016, median rents grew from $2,200 to $2,325, and median home sale prices grew from $725,000 to $810,000.
The neighborhood is also “poised to become a notable player in the city’s office market,” especially in the fields of technology, advertising, media and information. As for retail, “with the rezoning on the horizon … we believe that the entrance of high-end boutiques, trendy shops and specialty centers is not far off.”
Just how upscale does GFI Realty think East Harlem will become?
“It’s hard to say where the rising prices we see today will peak, but with all of the pieces in place for another NYC neighborhood to officially ‘take off,’ it’s safe to say that pricing will continue to climb,” the report says.
Preempting a process?
GFI Realty acknowledges that the impending rezoning is controversial, but provides a slightly erroneous description of the rezoning process. The report says that following opposition to the Department of City Planning (DCP)’s proposed rezoning, Speaker Melissa Mark-Viverito, Community Board 11 and Community Voices Heard “worked together to reshape the DCP’s rezoning plan. The result is the East Harlem Neighborhood Plan, which requires that investment in the community accompany real estate development.” Later, the report adds, “the revised rezoning proposal is going a long way toward assuaging the fears of some residents. Notably, while market-rate housing prices will continue to rise, the robust affordable housing pipeline will ensure there continues to be a growing number of affordable units for residents of all income levels.”
In actuality, the East Harlem Neighborhood Plan was created before DCP’s plan, and negotiations are ongoing to ensure DCP’s plan reflects more of the East Harlem Neighborhood Plan’s priorities. At a December public hearing on the DCP’s proposal, six people testified and at least 16 people protested against both plans.
Asked to respond to this error, a spokesperson to GFI Realty said in an e-mail to City Limits, “The East Harlem report should have made it clear that the East Harlem Neighborhood Plan was released prior to the Department of City Planning’s plan, and that Speaker Mark-Viverito’s group has subsequently worked with DCP to reshape the plan. But there was no intention to mislead. Nowhere in the report is GFI asserting that residents are assured their input into the East Harlem Neighborhood Plan will definitely be adopted.”
Asked to comment on the report and the evidence it provides that rezonings are a catalyst for investment activity, the Department of City Planning emphasized that the rezoning would require permanent affordable housing in all new developments under the city’s mandatory inclusionary housing policy and come with investments in tenant protections and affordable housing preservation.
“Doing nothing is not an option. Enabling new housing to be created is part of the solution to increasing affordability in East Harlem,” said DCP spokesperson Joe Marvilli in an e-mail to City Limits. “Without new development, and with rising demand for housing in the area, rent pressures would continue to increase. There is no mandatory policy or zoning incentive to create affordable housing in the neighborhood today.”
Mark-Viverito’s office emphasized that the East Harlem Neighborhood Plan was a community-based proposal that happened ahead of the rezoning process and that the speaker was continuing to work to ensure that the ultimate rezoning benefits local residents.
But as Tuesday night’s East Harlem community board meeting evidenced, there is much yet to be negotiated before residents, their representatives, and city agencies agree on a plan for the neighborhood.
Community Board 11 voted to approve a rezoning of the former MTA bus depot on East 126th street for the creation of an African Burial Ground memorial and mixed-use project, but on the condition that the housing be 100 percent affordable. The Economic Development Corporation, however, has not committed to 100 percent affordability on the site.
The board also voted against the proposed relocation of the East 99th street sanitation garage to the Potamkin Auto dealership between East 127th and East 128th, citing concerns about an oversaturation of waste facilities in the area, while Mark-Viverito spoke in support of the relocation site.
Gowanus to shed its industrial past
Like the East Harlem report, GFI Realty’s fall 2016 report, “Going Gowanus: The Gentrification of a Superfund Site” also emphasizes the importance of a rezoning to investors.
“The most important cause for Gowanus’ investment draw is the proposed residential and mixed-use rezoning that is now officially being considered,” it says, although the city had not yet, and still has not, officially proposed a rezoning strategy for the area.
“It appears that the many speculators who stated that City Hall intends to push for a rezoning of the area to promote more residential were right on track,” the report continues. “The now industrial landscape will surely transform alongside a cleaner waterway.”
The report said various improvements to the neighborhood are already being made with an influx of new residents in mind, including a $2.5 million makeover of Ennis playground “appear[ed]to be designed to cater to and attract a new wave of residents of the neighborhood.” The proposed Brooklyn Queens Connector streetcar, the report says, “has received strong support from many Brooklyn commercial power players, and, if implemented, would give Gowanus yet another transportation option.”
But as in East Harlem, the report assures readers that there should be few moral qualms about investing in the area. It mentions Bridging Gowanus, the neighborhood planning process initiated by Councilmember Brad Lander from 2013 through 2015, and notes that, “community outreach groups, as well as speculated affordable housing, should cause less residential displacement than other gentrifying areas in Brooklyn … The changes that are on the way for Gowanus will have more community influence than that which we’ve seen in the past.”
Councilmember Brad Lander has also argued in the past that the lack of residential housing in the neighborhood means there is less potential for residential displacement than in other neighborhoods, but in an e-mail to City Limits, he condemned the assumptions of the report.
The report, he wrote, “is a worthless and misleading piece of real-estate porn, that investors would be wise to ignore entirely. The community is working with City Planning to develop a plan for a balanced, mixed-use district, so investors are taking a big risk if they purchase sites assuming a residential rezoning. There will be no residential rezoning in the Gowanus industrial business zone (IBZ), and plenty of blocks outside the IBZ are likely to remain zoned for manufacturing as well. Where residential development is allowed, it will require not only mandatory affordable housing, but likely also light manufacturing/arts space, environmental cleanup, and other investments.”
He said Ennis Playground’s renovation has been in the making for years and is based on the feedback of current homeowners, tenants and businesses, and that no residential rezoning is planned for the blocks near the playground.
“We are working hard to strengthen Gowanus as a balanced, inclusive, mixed-use, creative community,” he wrote. “We’re eager to include everyone … except those seeking to profit by misleading others in speculation real-estate profits.”
Responding to Lander’s censure, a representative for GFI Realty wrote to City Limits that GFI Realty shares Lander’s interest in maintaining a high quality of life in Gowanus.
“We’re puzzled as to why he would say such inflammatory things. The peculiar, headline-grabbing language that he’s using to mischaracterize the research report we created last year for our clients makes it hard to give his statements serious consideration,” the representative said, pointing to the passages in which the report notes community efforts to respond to gentrification, and the potential for the area to continue to be an economically diverse community.
“There’s a need for attainably-priced, high-quality housing options in the neighborhood, which is being met. And while, as we state in the report, ‘it remains to be seen what the future of Gowanus will be,’ I think we can all agree that nobody wants to see the neighborhood lose its character,” the representative said. “The fact is, we have no intention to mislead. Many members of the GFI Realty team are longtime Brooklyn residents, and we sincerely applaud Council Member Lander for his commitment to smart development. We hope he will come to the realization that we’re on the same team.”