Rudin, Rechler, Gilmartin, Burger Talk City Of Yes And What Comes Next

As the New York City Council met to decide the final fate of a citywide rezoning proposal dubbed City of Yes for Housing Opportunity, four of the most influential developers sat in front of a crowd of students at New York University’s Schack Institute of Real Estate discussing the legislation’s significance.

“It's very timely that we're in this room together talking,” Rudin co-Executive Chairman William Rudin said Thursday afternoon.

Rudin was speaking alongside RXR Realty Chairman and CEO Scott Rechler, MAG Partners CEO MaryAnne Gilmartin and Marty Burger, the CEO of Infinite Global Real Estate Partners and former CEO of Silverstein Properties.

The massive legislation lifts the floor area ratio cap across the five boroughs, eases restrictions on office-to-residential conversions and reduces parking requirements, among other things. Backed by $5B in city and state funding, City of Yes is expected to pave the way for 80,000 new housing units above what was previously possible.

The city council’s vote was set to start at 1:30 p.m. Thursday. The real estate powerhouses, who are itching to continue molding the structure of the city, sat onstage for a full hour starting at 1:10 p.m. The zoning overhaul did eventually pass, but not until hours later. 

But at the time, the speakers eagerly deliberated their potential future under the rezoning as they awaited any update.

“We are the city of no, and that's why we needed a program called the City of Yes. It has been, for a long time, very, very difficult to build in the city,” Gilmartin said. “This is one of the most consequential pieces of legislation that has been passed in this city in decades, and hopefully it will pass.”

By nature of their success and the power they hold, the developers are no strangers to working with government officials. That includes in advisory capacities and through lobbying. 

The real estate industry was the top client for lobbyists, representing 32% of all efforts, according to a city report released in March. The Real Estate Board of New York was the second-highest spender among groups that lobby directly on behalf of their employers, spending more than $230K. Developers, including Vornado Realty Trust and Related Cos., also spend significant amounts either through their employees or outside groups, according to the report.

Developers also face obstacles like the rising costs of construction and insurance, slow-to-fall interest rates and city laws that mandate reducing the carbon footprints of their buildings — all factors that limit the economics behind building affordable housing.

“You do your case study, you show the numbers, some people believe you, other people don't, but you have to create that coalition and work really, really hard,” said Rudin, who served as REBNY chairman from 2018 to 2021.

“I spend — I know Scott [Rechler] does — and everybody up here spends a lot of time not directly doing our business but talking to and working on how to solve the problems.” 

Burger, a former REBNY governor, said there has been a large push to get city and state representatives to understand the developer’s plight. Those efforts won’t stop with City of Yes’ passage.

“We have to keep doing it. Otherwise, the City of Yes is going to definitely be the city of no, and it's not going to ever change,” Burger said. “You can sit with our City Comptroller Brad Lander, and he won’t listen to the math, and he won’t understand why 421-a is not really just a dole-out to the developers. And that just hasn't changed in four years, and we need it to change.”

The 421-a affordable housing subsidy was replaced this year with a less generous 485-x tax incentive, which requires developers to pay higher construction wages for buildings with more than 99 units. 

As a result, even under City of Yes, the executives said that they will be forced to build smaller rental buildings or condominiums rather than the affordable housing the city so desperately needs.

“This is where public policy fails, because it's like the everything bagel,” Rechler said. “Instead of just trying to solve the housing problem, we’re going to try to solve the housing problem, but we also want to have this high level of wages for labor. And by the way, everything's got to be all-electric. And by the way, you have to have 60% of [area median income] versus what used to be 70% or 80%.”

“Then nothing gets done,” he added.

Each of the developers said they remain committed to building in New York City, with little interest in moving their business elsewhere. However, they said navigating the various requirements and obstacles has been trying. 

In Baltimore, alongside an expanded investment and development team, MAG Partners took over a $5.5B, 177-acre master-planned development the city helped fund in the hopes of a dramatic economic revival. 

​​“It's cathartic when you leave New York. The red carpet is rolled out,” Gilmartin said. “There's so much respect and so much appreciation that you would take the opportunity to look at their city. If you want to have dinner with the mayor tonight, it's a good shot you could get that done.”

In a room full of largely undergraduate and graduate NYU students, the developers ended the panel by addressing the youths, encouraging them to get civically engaged.

“We need smart young people who understand business, because everybody else on these community boards don't have any business experience or really don't care,” said Rudin, adding that he was on Midtown’s Community Board 5 in his 20s. “They want the things that they want. They don't understand that in order to create housing, you need the market rate to pay for the affordable.”