Multi-unit residential developers living large.

The shrinking housing market combined with the land crunch has caused residential developers to create larger multi family projects when they do secure a plot--which are more apt to include some form of affordable housing units in exchange for incentives offered through the city.

The advent of Mayor Michael Bloomberg's $7.5 billion New Housing, New Marketplace plan, promising 500,000 new affordable housing units has spurred incentive programs--such as inclusionary zoning, offering larger floor plates, and the 421-a program offering tax breaks--to tempt more developers to integrate affordable housing into their projects.

"With the scale of the housing plan, there clearly is a need to put some pretty big projects into the mix, to bring large-scale projects online to meet the targets that the mayor has set," said Neill Coleman, spokesperson for New York City Housing Preservation Department. Recent affordable housing multi-unit developments the city has helped jumpstart include the Coney Island housing and community center in Brooklyn, Arvenue by the Sea in Rockaway, Queens, and Hudson Yards on the West Side of Manhattan.

The Dermot Company's proposal to turn the abandoned Queens Family Court in Jamaica into a $200 million mixed-use housing project recently was approved through a public review process. The building will incorporate 60% low income and middle income housing with 40% market rate housing.

The developers responded when the city issued RFP because they believed the Jamaica market would be able to support the affordable housing component.

"A lot of that has to do with the economic analysis of the subsidies the city provides versus the lost rent you are going to have to stomach as an owner by foregoing the market rate rent," said Stephen N. Benjamin, principal of the Dermot Company.

"In some neighborhoods, the economics are going to make sense. In other places, like Manhattan and downtown Brooklyn, that is going to be a lot harder because the rents are higher and the subsidy is not really high enough."

The Dermot project will also incorporate 40,000 s/f of retail space to offset the high land prices and maximize profits. The developer only recently began branching out into the boroughs. Their first project, OPAL which was completed in 2004 in Queens, yielded enough interest to satisfy them that the boroughs were ripe for luxury housing, Benjamin said. They also see the benefit of building large.

"For the most part, it is the same amount of work to build a fairly large project as to build a fairly small one. It provides a little more economy of scale to do a project that is at least 200-300 units," said Benjamin.

Some mixed use developments are created to help preserve community resources as well. Earlier this month, the city designated a mixed-use development in the Brooklyn Art Museum Cultural District which will incorporate at least 150 new apartments, with one half set aside for low, moderate and middle income families. The development will also incorporate a 39,000 s/f cultural space.

Smaller developers are finding independent, creative ways to survive in the midst of the crunch. The Arker company has been building affordable family housing for the past 15 years. They always devote at least 50% of their rentals to apartments that contain two or more bedrooms. Lately they have been taking on larger and larger projects, off-setting high land prices by creating housing on top of large retail or office space. Their most recent project in the South Bronx is a mixed use building of containing 111 affordable apartments on top of 27,000 s/f of retail space and 27,000 s/f of community office space.

"Being able to rent the retail level at a market rate number helps make the air above it a little cheaper. We are able to finance the affordable housing," said Alex Arker, principal of Arker Companies. "With rising land prices, if we didn't do it this way we would never be able to make affordable housing work."

Even if they are not doing it for philanthropic purposes, or to pacify displaced families, larger developers who are offered substantial incentives from the city to include affordable housing are apt to do so.

"You want to build as big a development as you can. The incentive programs are created so that the developer wants to undertake the program. You have to fashion the numbers so that the developers will do it, while marginally making enough return by undertaking the affordable component. I think that everyone does do it when the option is available," said John McMillan, planning developer for the Rockrose Development Corporation, the developer responsible for building Hudson Yards.