421a Tax Abatement Proposal Update
Saturday, January 21, 2017
By: Nancy Sheran
We have been hearing from communities and government officials about the affordable housing crisis in New York City. The insufficiency of affordable housing has happened because the City’s population has grown while existing affordable housing has been lost to re-development and rising rents. The most dire consequence of the loss of affordable housing is the increase in homelessness.
The City has several tools at its disposal to address the issue of affordable housing. The effects from last year’s Mandatory Inclusionary Housing law can already be seen, as some of the new developments in Murray Hill have already conducted lotteries for affordable units. The City has also instituted the Senior Citizen and the Disability Rent Increase Exemption programs to freeze rents for senior citizens and disabled individuals, while providing exemptions and tax abatements for their landlords. Another tool is tax breaks for developers, such as the 421a tax abatement, to provide incentives for developers to include affordable housing in their new developments.
However, the 421a tax abatement program expired in 2015. Governor Cuomo has worked to improve the bill, and a new version of the bill was included in his executive budget for 2017-2018. He negotiated with real estate developers and with building trades unions to require a higher wage for the workers who build new housing. The wage levels are from $40-$60 per hour, depending on the building’s location, and this would apply to buildings with 300 rental units or more. In addition, 20-30% of the building would be set aside as affordable housing, and this provision would last for 40 years. However, if a unit’s rent passes the $2,700 threshold, it would qualify for market rate rents and would be dropped from the affordable housing rolls. Landlords would have latitude about which levels of affordability to provide, and it is questionable whether they would provide apartments with low enough rents for people with low incomes. Mayor De Blasio is in favor of the 421a tax abatement, but questions whether this plan will be effective at providing affordable housing while being too costly for the City.
Critics of the 421a tax abatement program, including housing advocates and State Senator Liz Krueger, say that it was poorly enforced and that there are more effective and cost efficient ways to achieve affordable housing. In Murray Hill there was a luxury apartment building cited for taking the tax break but not providing any affordable housing units. It is estimated that the lost tax revenue to the City from the 421a program will be $2.4 billion. This money might be better spent expanding rent subsidies, working with nonprofit developers, and investing in more cost-effective housing development and preservation programs.
Legislative leaders in Albany have until April to negotiate the budget and the policy issues that are included in the budget. Many of them would like the 421a tax abatement program to be removed from the State’s budget, so that it can be discussed separately as a policy issue. We will keep you updated.
If you would like to express your comments or concerns about the 421a tax abatement proposal, contact Governor Cuomo and your State Legislators.
State Senator Liz Krueger’s December 2016 Community Bulletin.
And see Related Sites below
Photo by Nancy Sheran
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