Proposed property tax break legislation expands eligibility citywide
State legislation to revive a property tax break, whose expiration last year rocked New York’s real estate industry and halted new rental projects, contains a significant benefit for outer-borough developers.
A bill to bring back the 421-a exemption on new residential developments includes a provision that would allow buildings outside a previously designated zone to receive the tax break, so long as they satisfy other requirements in the legislation.
Mayor Bill de Blasio’s administration and the city’s Independent Budget Office were each analyzing the possible impact of the new bill as of late last week.
The addition of outer-borough rental buildings could have a significant impact on New York City’s budget, depending on how many developers opt to construct large enough buildings to take advantage of the tax exemption. Only buildings with at least 300 units would be eligible for the tax break under the new language.
They would have to comply with the same affordable housing and construction wage requirements as others in the previously established zone of Manhattan, south of 96th Street, and portions of Brooklyn and Queens where development has been exploding.
“In effect what they’re proposing is a new citywide program and the geographic area is a head fake,” said Benjamin Dulchin, head of the Association for Neighborhood and Housing Development, which represents builders of below-market-rate homes.
“This is immeasurably more profitable outside the geographic area, so this is a citywide program and the reason that matters is that makes it significantly more expensive,” he added in an interview Sunday.
He predicted the cost of the exemption would “really explode.”
In the 2016 fiscal year, 73,494 properties received the 421-a exemption, costing the city more than $1.2 billion in foregone revenue, according to a report prepared by the city’s finance department.
Dulchin and other affordable housing advocates have long been critical of 421-a, which is used primarily by market-rate developers. They argue it is too rich a benefit for the previous requirement that 20 percent of a new building in certain areas would have to be rent-regulated.
Builders insist 421-a is necessary to balance a lopsided property tax system that costs multi-family rentals proportionally more than co-ops, condos and one- to three-family homes.
The provision for buildings outside the established zone was a bullet-point in a press release from the governor’s office announcing the new 421-a legislation last week and listing the changes to the law, but Dulchin described it as “the key paragraph of the bill.”
A spokeswoman for the governor did not reply to an email about the bill, and the Real Estate Board of New York did not have a comment Sunday evening. The mayor’s office declined to discuss the bill’s impact.
The legislation, dubbed “Affordable New York,” resolves the biggest deterrent to the future of the exemption — a dispute between construction unions and developers over wages.
After a year of failed negotiations, the two sides agreed in November to a $60-an-hour wage requirement for 421-a projects in Manhattan and $45 per hour in parts of Brooklyn and Queens.