Saturday, April 13, 2019

Hudson Yards was made possible with pilfered EB-5 funding that was meant for public housing developments through enabled cirvumvention and crooked gerrymandering

City Lab

Since its official unveiling last month, critics have been teeing off on Hudson Yards, the $25 billion office-and-apartment megaproject on Manhattan’s West Side. The Guardian’s Oliver Wainwright calls it “bargain-basement building-by-the-yard stuff that would feel more at home in the second-tier city of a developing economy.” In Curbed, Alexandra Lange writes that it suffers from “no contrast. No weirdness, no wildness, nothing off book.” The New York Times’ Michael Kimmelman describes it as a “vast neoliberal Zion.”

“New York politics and real estate are notoriously akin to Rashomon,” reads Kimmelman’s review. 

“Any verdict on an undertaking as costly and complex as Hudson Yards depends on one’s perspective.”

Views abound, sure, but so far, nobody seems to like what they see when they look at Hudson Yards. 

The project has managed to do something unique: unite all New Yorkers in a vernal equinox of acid contempt. Early reviews offer a litany of contrasts, with the development’s garish geometry and dull placelessness earning rebuke in equal measure. That’s before considering how certain features, particularly Thomas Heatherwick’s oft-derided shawarma-shaped bucket, square with other projects as “bellwethers pointing to exactly where our cities are going awry.”

However, among all the many reasons to feel salty about Hudson Yards, one perspective may deserve a place of privilege: the view from Harlem. Without their knowledge, the residents of a number of public housing developments helped to make Hudson Yards possible. The mega-luxury of this mini-Dubai was financed in part through a program that was supposed to help alleviate urban poverty. Hudson Yards ate Harlem’s lunch.

Specifically, the project raised at least $1.2 billion of its financing through a controversial investor visa program known as EB-5. This program enables immigrants to secure visas in exchange for real estate investments. Foreigners who pump between $500,000 and $1 million into U.S. real estate projects can purchase visas for their families, making it a favorite for wealthy families abroad, namely in China. EB-5 is supposed to be a way to jumpstart investment in remote rural areas, or distressed urban ones.

Hudson Yards, of course, is nobody’s idea of distressed. Located at the source of New York’s High Line, it’s the most expensive real-estate project in U.S. history. It could not possibly qualify as distressed under the terms of the program, or any understanding of the word. In order to buy EB-5 visas at the lower rate ($500,000), immigrant investors must put their money behind projects in areas with high unemployment—a proxy for need.

 Manhattan’s West Side may not suffer for lack of opportunity, but, as Kimmelman notes, New York real estate is a realm for Kurosawa-esque visionaries. The Related Companies, the developer behind Hudson Yards, raked in at least $1.2 billion in EB-5 funds for this project. To qualify, Related needed a work-around to bypass the distressed-area requirements—a pass that New York authorities were happy to issue.

Here’s how these requirement works: EB-5 visa applicants must invest a minimum of $500,000 in a project within a designated geographic area called a targeted employment area, or TEA. To be eligible for this financing, a project needs to qualify as falling within a TEA—which is going to be either a rural area or a distressed urban area. For an urban area to count as a TEA, it has to meet a certain unemployment threshold (150 percent of national unemployment).

 Lower Manhattan doesn’t meet this unemployment threshold, so Hudson Yards, on its own, can’t qualify as a distressed urban area. However, when Congress created the EB-5 visa as a part of immigration reform legislation in 1990, lawmakers did not specify how states should draw up the geographic boundaries for a TEA.

New York takes a rather liberal approach to drawing these lines. Empire State Development, the economic development agency for the New York state government, determines the boundaries for qualifying TEAs. Under state law, the agency has the authority to string together an unlimited number of census tracts in order to achieve the desired aggregate unemployment standard. Think of it as a form of creative financial gerrymandering.  

As I reported back in 2017, records obtained by CityLab under the Freedom of Information Act reveal the gerrymandered map that Empire State used to qualify Hudson Yards for EB-5 financing. This particular TEA snakes up from the West Side and includes Central Park. (Think about that: a map of Manhattan that claims Central Park as an economically troubled area.) Beyond the park, the qualifying zone for Hudson Yards captures several census tracts in Harlem, where public housing projects boost the overall unemployment figure.   

 These funds might have financed alternative developments in Harlem directly. Other developers have successfully raised EB-5 funds for projects in actually distressed areas of New York. For example, Asian Americans for Equality, a nonprofit organization, once pursued EB-5 funding to finance a food hub and university project in northeast Kansas City, a grocery store destroyed by Hurricane Sandy in the Far Rockaways, and an affordable housing complex in Queens’ Flushing neighborhood.  

Instead, Related sopped up hundreds of millions in funds never intended to finance luxury projects. 

The developer has successfully leveraged Harlem unemployment to raise more in EB-5 financing than any other developer in the nation. Related recently sought a third tranche of EB-5 funds for Hudson Yards, targeting $380 million—bringing the total as high as $1.6 billion, according to New York University’s Stern Center for Real Estate Finance Research.


Anonymous said...

I'm proud to have done my part by contributing my tax and city development money so they could have their very own shiny new subway stop over there. Hooray me!

ron s said...

Where's the surprise here?

JQ LLC said...

Actually, the surprise here is the fact that Central Park was included as a distressed area. This is not only obscene, it's quite evil.

Since Central Park was considered a distressed area for development, I think all 60,000 plus that are homeless should set up a tent village there and occupy it so it can be suitably renamed "Relatedville"

Rob in Manhattan said...

"Since Central Park was considered a distressed area for development, I think all 60,000 plus that are homeless should set up a tent village there and occupy it so it can be suitably renamed "Relatedville"".

Let them set up down there in the real "Relatedville".

Capitalism only works with adult supervision.

Rob in Manhattan

Anonymous said...

haha let's see what will be sunnyside yards, you'd think affordable units would be installed there, truly affordable and rent stabilized apartments that the city desperately needs. Everything being build is for the super rich and foreign money.
While we gentrify neighborhoods to make room.

ron s said...

Re JQ LLC above:
I totally agree with you re both Harlem and Central Park. Including them both is a ridiculous attempt to justify taxpayer aid to a real estate deal in midtown. My question was "Why would anyone be surprised that this was done?" I think this manipulation is probably routine.

Anonymous said...

Build the second platform over the remaining open area and move the homeless in!!

Anonymous said...

So gross. Thank you for highlighting this.

I still haven't seen the Hudson Yards 7 train station - it just made me so angry when they opened it, meaning more chances for 7 train delays. And the fact that they could open that new stop, just for this development, while the Flushing Main Street stop is disgustingly overcrowded and dirty and hasn't expanded at all to accommodate for all of the people who go through there each day. Or honestly, any other outdated subway stop in this city!!