Brownfields are parcels that are complicated due to real or perceived environmental contamination. New York has a brownfield cleanup program (BCP) that encourages the private sector to clean up the contamination and promote redevelopment as a means of revitalizing economically blighted communities. Developers have been getting credits and incentives for brownfield cleanups since 2004. The New York State Brownfield Cleanup Program and Tax Credits Analysis of a Three Generation Program is a new type of analysis with current information on the process and effectiveness of the Brownfield Program. At its core, it is an environmental program that has provided substantial remediation benefits.
Over three generations, the NYS BCP has become a more targeted and effective tool across the state. Formerly contaminated industrial sites have been remediated and redeveloped, especially benefitting upstate communities. In NYC, the BCP has made a significant contribution to housing, including affordable housing. The BCP continues to grow; both the number of applications and the number of projects receiving Certificates of Completion (COC) continue to increase. The value of private development investment and the number of tax credits provided also continue to grow. The on-site rate of return consistently shows a ratio of $6.63 in private development for every $1 of tax credits. The BCP has resulted in $17.61 billion in private investment and $2.77 billion in tax credits statewide. In New York City, BCP projects have supported the development of 20,000 residential units, of which 6,400 are affordable housing units.
Brownfield Tax Credits have become more accepted and incorporated by banks as part of the financing. Also, a market for the syndication of brownfield tax credits has evolved, allowing the inclusion of credit proceeds to be used as equity, often as part of affordable housing projects also using federal Low Income Housing Tax Credits. Developers may be able to syndicate the brownfield tax credits (which are paid upon project completion) and be able to use that money as part of the project’s capital stack.
This study was conducted by the NYU SPS Schack Institute of Real Estate with support from the New York City Brownfield Partnership. Barry Hersh is a Clinical Associate Professor of Real Estate and Chair of the MS in Real Estate Development Program at New York University. Working alongside him is Viquar Chaudhry, a graduate student at NYU pursuing a degree in real estate development.
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