GENTRIFICATION PAPER #1

When Public Land and Private Profit Clash:  Examining Don Capoccia’s “New” Brooklyn

 

OVERVIEW AND KEY FINDINGS
 

This is the first report of its kind to examine and scrutinize the real-estate dealings of Don Capoccia and show how for-profit developers like Capoccia have not developed housing that meets the needs of very low-income communities, like those living in public housing.

In fact, Capoccia’s development projects provide a good example for why the city should not give any public land owned by the New York City Housing Authority (NYCHA) to for-profit developers, and should instead work exclusively with non-profits who have proven to value deep affordability over the maximum return on investment.

Capoccia’s developments have produced harmful effects across the city, from the destruction of community gardens over neighborhood opposition to build luxury housing, to building housing in Downtown Brooklyn that is out-of-sync with the median income of the borough’s residents. And as Capoccia has put up unaffordable developments in Downtown Brooklyn, the neighborhood has transformed into an area catering to newcomers who are more white and more affluent than the residents of the neighborhood prior to Capoccia’s projects.

This year, city government chose BFC Partners to build on public land at the Ingersoll Houses in Fort Greene, Brooklyn. Ingersoll was one of three developments proposed for infill on NYCHA land, which will result in the construction of a total 500 units of affordable housing. At the Van Dyke houses, development rights were assigned to for-profit Dunn Development, and at Mill Brook Terrace, rights were awarded to non-profit West Side Federation of Senior and Support Housing (WSFSSH).

While Mill Brook will feature a project that is 100% affordable, with more than half of the building reserved for families below 40% of Area Median Income (AMI) – and more than a third for families below 30% of AMI – Capoccia’s Ingersoll is underwritten for seniors at 60% of AMI. Meanwhile, the median income in the Ingersoll Houses is only $24,000 – which is about 30% of AMI for a family of three.

The entire process that is leading to private housing development on public land has been criticized by key elected officials as being too secretive.[1]

When city government allows for-profit private developers like Capoccia to build on publicly owned land, it is not prioritizing neighborhood affordability, as shown in the recent projects that were approved.

This point is crystal clear when you compare for-profit developer Capoccia’s Ingersoll development with that of non-profit developer WSFSSH.

On all publicly owned land, but especially on NYCHA land, the City should be following the model set by the best non-profit developers. As a city, we should not be turning over the rights to build on such a valuable, non-renewable resource to for-profit developers who have proven to put their bottom-line over the good of the community. That is why we call on the de Blasio administration to establish a full ban on for-profit development on all NYCHA sites.

Earlier this month, HPD released a new Request for Proposal for two new NYCHA sites – Wyckoff Gardens and Holmes Towers.[2] And in June, it issued an RFP to develop on the Betances Houses in the South Bronx.[3]  As city government pursues new development on NYCHA land, deep affordability must remain the goal. The limited availability of public land makes it a precious resource that should not be wasted on developers who are not committed to building for true affordability. The development rights must go to nonprofit groups with a track record that proves they will put affordability of housing first.


 

INTRODUCTION:
DON CAPOCCIA AND THE REMAKING OF DOWNTOWN BROOKLYN

 

The Toren, a luxury building standing tall above Flatbush Avenue, can be seen as a symbol of downtown Brooklyn in the 21st Century: expensive, shiny, out of place in a historic civic center, and out of reach for the great majority of the borough. The 240-unit, 38-story project comes with amenities for potential owners and renters like a doorman-attended lobby, a large roof deck, and a library. And, of course, a 25-year tax abatement valued at nearly $1.7M annually.[4] The building, named after the Dutch word for tower, is clad in glazed spandrel and clear-glass panels arranged in a strange pattern. One architecture critic likened it to a ‘bar code.’[5]

But perhaps the crown jewel of the project is a pool that is intricately decorated with tiny blue and white tiles imported from Italy and China.[6] Donald Capoccia and his carpenter personally laid out the design of the pool to get the desired lighting and pattern.

Capoccia, though, is not a hard-working pool contractor, “tile guy”, or even an architect: he is the head of BFC Partners, an affordable housing developer whose impact on Downtown Brooklyn has contributed to shaping the Brooklyn Skyline. Capoccia has been at the forefront of building housing in Brooklyn that the local community cannot afford – reshaping the neighborhood for new people moving in at the expense of current residents. In short: gentrification.

Appropriately, an image of the Toren figures prominently in the documentary ‘My Brooklyn,’ which studies the end of the old Downtown Brooklyn, specifically Fulton Mall.[7] But the Toren is far from Capoccia’s only development in the neighborhood that is driving gentrification in the borough. The film also examines City Point, a 1.8 million square foot project so massive that it required multiple developers – one building is jointly developed by BFC Partners and two additional developers – and two different architects to complete.[8] ArchDaily praised it as “establishing a critical mass of new growth, that the new development would bring to the once affordable neighborhood."[9]

BFC Partners – through its subsidiary brokerage Great Jones Realty – is currently finishing marketing for 7 DeKalb Ave, the first residential building to open at City Point.[10] They make no attempt to hide the fact that the project is targeted for people who don’t currently live in Brooklyn. Capoccia’s co-developer told the Brooklyn Daily Eagle this March that prospective tenants are from Manhattan neighborhoods and Jersey City — and a handful live abroad.[11]

And while the City and developers celebrate this project for flipping the Bloomberg model on its head[12] – rather than 20% affordable, 80% market rate, it is the reverse – the “affordability” levels are much higher than the average household’s income in Brooklyn. Only 20% of the project is affordable at 40% of AMI, while 60% is affordable at 130% of AMI – that is, affordable for families whose incomes start at $142,395 for a 4-person household. [13] [14]

These rent levels are not close to the reality of the housing need in Brooklyn. Given the widely accepted definition of rent burden, that households would pay 30% of their income in rent, only 50 units in this 250 unit building are affordable for families who make less than $56,000 a year. For comparison, 58% of the households in Brooklyn made less than $60,000 annually in 2014.[15]

The story is the same down the street at Ingersoll. The first round of development on NYCHA land will result in nearly 500 units of housing on three sites of publicly owned property.[16] Of these, 145 will be at Capoccia’s Ingersoll development, which local residents suspect will not be affordable for them. When news of the project broke this spring, Ingersoll tenant Gertrude Moore told the New York Times “their low is not my low.”[17] Another told the Times she worried that Capoccia and partners were trying to make the Downtown Brooklyn area a “Little Manhattan.”[18]

They’re not wrong. Though Capoccia’s Ingersoll development will include a portion of units for homeless individuals, it is largely underwritten to be affordable for seniors who earn around $48,000. The average gross income at Ingersoll is less than half of that – just shy of $24,000.[19]

While not benefiting the local community, the NYCHA infill development will certainly serve to increase Capoccia’s grip on downtown Brooklyn. It is part of the dramatic changes in Brooklyn – from the Williamsburg waterfront to downtown Brooklyn – that have come hand-in-hand with the work of Capoccia and other developers. It is large-scale gentrification: a downtown area that is nearly unrecognizable, and out of reach for many of the borough’s existing residents. Capoccia has been at the center of remaking the downtown Brooklyn, and the local residents have not been the beneficiaries of the new housing that has been created.

The Toren, City Point, and Ingersoll Houses are all in Brooklyn Community Board 2. This community board saw a 15-percentage point decline in its share of the population that is Black between 2000 and 2014; during the same period, the White population share increased by a corresponding 14-percentage points.[20] Census data shows that the area immediately around The Toren and City Point saw a 55.3% increase in its White population between 2000 and 2010, with a corresponding decline of nearly 20% in its Black population and 11.6% decline in its Hispanic population.[21]

 

TACTICS AND REPUTATION AMONG RESIDENTS + WORKERS
 

In 2012, low-income homeowners at 1831 Madison Ave – a city-subsidized co-op developed by Madison Park Development Associates and headed by Capoccia – complained to the City’s Department of Housing Preservation and Development about the shoddy work done in their building.[22] Madison Park had agreed in an earlier settlement to fix problems with the building’s construction.[23] Residents claimed that Madison Park was in violation of this settlement and called on HPD to cease business with Madison Park. The company shot back with a $4.25 million defamation lawsuit, fearing the complaints would hurt his ability to continue to win City contracts.[24] After 12 years of poor living conditions and two years of litigation, the defendants won a motion to dismiss the case, with the judge calling the case frivolous and ordering Madison Park to pay the defendants’ legal costs.[25]

This was not the first time that Capoccia had run afoul of residents or prospective residents of his projects. At the Toren, several condo owners banded together and sued BFC Partners to get out of their contracts.[26] Nor was it the first time courts were involved: Construction at the City Point was stalled numerous times due to lawsuits involving the project’s concrete contractor and ironworkers.[27] [28]

But BFC Partners’ most notorious clash with neighborhood residents was in the East Village in 2000. By the late 1980s and early 1990s, Mayor Edward Koch was calling for the rehabilitation of neighborhoods like the East Village, and began courting ‘urban pioneers’ and real estate developers to carry out his neoliberal agenda.[29] BFC Partners jumped into the fray in what has been described as “a two-decades-long development binge in the East Village.”[30] But by the late 1990s the East Village was falling short on cheap land and Mayor Rudy Giuliani turned to community gardens as a source for new development sites. Don Capoccia was selected to develop a 20% affordable building on the site of the Esperanza Garden.

Dismayed community gardeners filed a lawsuit to make their territory part of the City’s parks system.[31] The gardeners held out for months, until one morning a police-protected crane and bulldozer destroyed the majority of the garden. Hundreds of community members showed up to protect the garden and clashed with police – but it was too late.

Giuliani was later criticized by all corners for the police’s actions, including by then-State Attorney General Elliot Spitzer who said that Giuliani was “subverting the legal process.”[32] After contributing almost $50,000 to Guiliani’s campaigns between 1997 and 2000,[33] Capoccia eventually got his way.[34]

 

LOBBYING FOR LANDLORDS AND EXPLOITING CONNECTIONS
 

In 1997, Ron Moelis and Don Capoccia founded New York State Association for Affordable Housing (NYSAFAH) to help its members – largely for-profit housing developers building middle-income housing – win the generous City subsides that had typically been reserved for very low-income households. They hoped to create an environment where affordable housing development would target higher incomes and change the meaning of affordable housing development in New York City.

Since then, it has grown from a small organization of a few developers and lawyers into a force within the ‘Affordable Housing Industry.’ Today, the organization represents and lobbies for hundreds of businesses and regularly has city[35] and state[36] politicians[37] and administrators[38] attend its events.

In addition to NYSAFAH, Don Capoccia sits on the board of the Rent Stabilization Association (RSA).[39] The RSA actively mobilizes its members to fight against rent stabilization and for larger annual rent increases.[40] [41]

In his role at the RSA, Capoccia personally donated thousands of dollars to Pedro Espada, a state senator who led a coup to hijack a Democratic majority and stopped millions of tenants from winning stronger rent laws in 2011.[42] Campaign disclosure reports reveal that in the years leading up to the 2015 rent law renewals, two PACs affiliated with the RSA – Neighborhood Stabilization PAC and Rent Stabilization PAC – donated nearly $1.3 million to state level candidates.[43] Meanwhile, after Capoccia and other developers gave $85,000 to the governor’s campaign, Andrew Cuomo’s administration steered an extra $47M in continuing subsidy to the Empire Outlets project on Staten Island in which Capoccia is a partner.[44]

Despite giving East River ferries the green light, Mayor Bloomberg was reluctant to subsidize the costly water taxi service directly, so developers like Capoccia used profit (albeit generated by City subsidy and re-zonings) to pay for boats on the East River.[45] Under Mayor de Blasio, however, Capoccia is faring better – he will no longer have to subsidize the boats himself, as the City is expanding East River Ferry service at its own cost.[46]

 

END FOR-PROFIT DEVELOPMENT ON PUBLIC LAND
 

Throughout his career, Capoccia has used city subsidies to build luxury housing and finance a lavish lifestyle – of marble-tiled pools, privately funded water taxi systems, and exclusive NoHo condos. He’s used his money and his influence to direct some of the City’s most powerful landlord lobby groups – groups that have worked to erode tenant protections and direct City, State, and Federal subsidies to more wealthy households.

As Capoccia has shown in Downtown Brooklyn, for-profit developers rarely build housing that is helpful for the majority of current residents in the neighborhood or borough they are building in. From the Toren to City Point and now the NYCHA infill, these projects are out-of-step with the needs and income levels of the surrounding community.

As Capoccia searches for city-owned property to take over and develop unaffordable housing for the neighborhoods he’s building in, he has thrown his lot in with at least one shady actor. BFC Partners was recently awarded a multi-million dollar RFP to develop the Bedford-Union Armory in Crown Heights.[47] Capoccia’s co-developer at the site is Slate Property Group, whose attempts to game the City real estate system were recently uncovered by a Department of Investigation report on the Rivington House scandal.

At Rivington, Capoccia’s armory partner sent an e-mail to staff saying “do not discuss this deal…the seller is very concerned that the city and union will find out that [the seller] is in contract to sell at the price that we are buying it which will directly impact his ability to have the deed restriction removed. Once he has it removed we can do whatever we want.”[48] This is not the kind of group New York City should trust to steward its most precious resource: public land.

There are non-profit developers with a proven track record of putting real affordability first. Indeed, the one non-profit developer recently selected to build on NYCHA land will create deeply affordable housing at income tiers as low as 20% of AMI. At Mill Brook Terrace in the Bronx, Westside Federation for Senior and Supportive Housing will develop a project that is 100% affordable, with more than half of the building reserved for families below 40% of AMI – and more than a third for families below 30% of AMI.[49] In contrast, Capoccia’s Ingersoll development, though it will include a set aside for homeless families, is targeted to 60% of AMI.[50]

The only model that is acceptable for New York City’s dwindling public land is using non-profits who maximize affordability. 


 

FOOTNOTES:

[1] http://www.nydailynews.com/news/politics/nyc-pol-accuses-nycha-secretive-article-1.2509451
[2] http://www1.nyc.gov/site/hpd/developers/request-for-proposals/NextGen-Neighborhoods-Sites-Brooklyn-Manhattan.page
[3] https://www1.nyc.gov/site/hpd/about/press-releases/2016/06/06-27-16.page
[4] http://www.mas.org/urbanplanning/421a/
[5] http://www.brownstoner.com/development/toren-hits-the/
[6] https://youtu.be/LJJ-2xbV_KE?t=2m28s
[7] See 0:57: http://www.mybrooklynmovie.com/?page_id=12  
[8] http://www.6sqft.com/skyline-wars-brooklyn-enters-the-supertall-race/
[9] http://www.archdaily.com/356758/city-point-cookfox
[10] http://bfcnyc.com/downtown-brooklyn-welcomes-new-high-rise-above-city-point/
[11] http://www.brooklyneagle.com/articles/2016/3/16/first-tenants-are-moving-7-dekalb-ave-city-point-downtown-brooklyn
[12] http://www.brooklyneagle.com/articles/2015/6/10/developers-increase-affordable-apartment-tally-city-points-tower-1
[13] https://a806-housingconnect.nyc.gov/nyclottery/AdvertisementPdf/183.pdf
[14] http://www.brooklyneagle.com/articles/2015/6/10/developers-increase-affordable-apartment-tally-city-points-tower-1
[15] See page 2: http://furmancenter.org/files/sotc/Brooklyn_Section3_SOCin_2015_4MAY2016-2.pdf
[16] http://therealdeal.com/2016/05/05/nycha-picks-three-private-developers-to-build-on-public-land/
[17] http://www.nytimes.com/2016/05/05/nyregion/500-affordable-units-to-rise-on-housing-authority-land-in-bronx-and-brooklyn.html
[18] Ibid
[19] https://www1.nyc.gov/assets/nycha/downloads/pdf/nextgen-rfp.pdf
[20] http://furmancenter.org/files/sotc/Brooklyn_Section3_SOCin_2015_4MAY2016-2.pdf
[21] 2000 to 2010 Demographic Change Profile, DUMBO-Vinegar Hill-Downtown Brooklyn-Boerum Hill Neighborhood Tabulation Area. Available at maps.nyc.gov/census
[22] http://cases.justia.com/new-york/other-courts/2014-2014-ny-slip-op-32932-u.pdf?ts=1416612558
[23] Ibid
[24] http://www.nydailynews.com/new-york/manhattan/exclusive-harlem-homeowners-hit-back-developer-4-5m-suit-article-1.1753057
[25] http://www.prnewswire.com/news-releases/judge-dismisses-frivolous-defamation-lawsuit-283252261.html
[26] http://therealdeal.com/2009/12/04/toren-seeks-fha-financing-closings-expected-soon-according-to-halstead-property-and-roberta-benzilio/
[27] http://newyorkyimby.com/2013/11/legal-issues-halt-progress-on-city-points-phase-ii.html
[28] http://www.nydailynews.com/new-york/brooklyn/coalition-sues-city-developers-halt-city-point-construction-charging-poverty-level-wages-paid-article-1.1333411
[29] http://www.thenation.com/article/burning-down-house-ed-koch/
[30] http://therealdeal.com/issues_articles/making-nice-with-mike-developers-with-closes-ties-to-city-hall-and-whos-out-of-favor/
[31] http://nvdatabase.swarthmore.edu/content/new-yorkers-attempt-prevent-garden-demolition-el-jardin-de-la-esperanza-1999-2000
[32] Ibid
[33] http://www.nydailynews.com/archives/news/garden-razed-rudy-contributor-article-1.874172
[34] http://nvdatabase.swarthmore.edu/content/new-yorkers-attempt-prevent-garden-demolition-el-jardin-de-la-esperanza-1999-2000
[35] http://www1.nyc.gov/office-of-the-mayor/news/448-16/transcript-mayor-de-blasio-delivers-remarks-nysafah-housing-all-conference
[36] http://rew-online.com/2015/10/02/around-town-nysafah-conference-at-turning-stone-archtober-in-full-swing/
[37] http://www1.nyc.gov/office-of-the-mayor/news/222-14/transcript-mayor-de-blasio-delivers-keynote-speech-new-york-state-association-affordable#/0
[38] https://twitter.com/tweetbenmax/status/730391629853536256
[39] http://www.guidestar.org/ViewPdf.aspx?PdfSource=0&ein=13-2634120
[40] http://rsanyc.net/about-us.html
[41] http://qns.com/story/2015/05/18/op-ed-rent-rules-hurt-everyone/
[42] http://www.villagevoice.com/news/pedro-espadas-enablers-6393327
[43] http://www.elections.ny.gov/CFViewReports.html
[44] http://www.politico.com/states/new-york/albany/story/2016/02/state-pours-subsidies-into-staten-island-outlet-mall-031292
[45] http://www.brooklynpaper.com/stories/31/1/31_01ferry.html
[46] http://www.nytimes.com/2016/03/17/nyregion/operator-for-new-yorks-growing-ferry-service-is-picked.html
[47] https://commercialobserver.com/2015/12/bfc-slate-to-redevelop-bedford-armory-into-mixed-use-complex/
[48] http://www.nyc.gov/html/doi/downloads/pdf/2016/July%202016/pr22rivington_7142016.pdf
[49] https://www1.nyc.gov/assets/nycha/downloads/pdf/Mill-Brook-Terrace-Fact-Sheet.pdf
[50] https://www1.nyc.gov/assets/nycha/downloads/pdf/Ingersoll-Ingersoll-Senior-Fact-Sheet.pdf