NYS 421a Plan: More $ for Developers … Again

June 26, 2016

NY Senate 421a Proposal: More $ for Developers, Less for Residents: New ANHD Analysis Shows Just How Much 421a Costs NYers

In the final days of this session, Albany elected, City officials, Real Estate and Labor continue to debate an agreement on the 421a developer tax exemption, which sunset earlier this year. Last night, at 11:58 PM, new 421a legislation was introduced in the Senate which gives away more to Real Estate, requires less affordability, and leaves tax payers footing an even bigger bill. Below is analysis of how the Senate’s proposal is an even worse deal for City residents. The enormous price tag for 421a, paid for by NYC taxpayers, received widespread attention last year as the program’s renewal was debated. In Fiscal Year 2015 alone, 421a cost $1.11 billion in foregone tax revenue. This is a 3% increase in the cost of 421a over last fiscal year and it’s a 47% increase since just 2010. The number of affordable apartments we get in return is shockingly low. In FY 2014, out of 153,121 apartments receiving the tax exemption only 12,748 apartments, or about 8%, had any level of affordability. But what is the cost of 421a to New York City’s future residents? Among other asks, the real estate lobby has been pushing to expand 421a to condos, which were not eligible under the Mayor’s version of the tax exemption. New analysis by ANHD finds that the cost of giving Manhattan condos a 421a tax break is an astonishing $646 Million dollars a year. With 13,836 Manhattan residential condos receiving a 421a tax, we would be giving a $47,000 a year to each luxury condo unit. Each luxury condo’s yearly tax break is enough to send 2 high school graduates to CUNY for a year – tuition, room and board – for free. Altogether that’s enough money to provide every high school graduate from the Bronx and Queens with a free year at CUNY! The Senate bill S8133, is an even worse deal for the City because it:

Repeals the authority of New York City government to shape the affordability requirements of 421a. This role for City has been an important counter-balance to the worst abuses of the program in previous years, and the loss of the City Council’s role weakens a crucial local voice to reform the exemption.
Decreases the percentage of affordable units required, while keeping affordability levels too high for many New Yorkers to actually afford. Decreases the affordability requirement for homeownership, raising the average assessed value to $75,000 per unit and reduces the percentage of units that have to be below the average cap from 100% to 50%.
Expands the number and type of buildings eligible for the “extended affordability period” by allowing buildings currently receiving 15-year abatements to apply to extend a partial exemption for another 15 years. Extending the abatement on existing buildings that have no affordability is inefficient and has no policy justification and is a pure real estate industry dip into the taxpayers’ pocket.
Keeps in place the Mayor’s proposed increase of the exemption length to 35 years, which will dramatically increase the cost the City in lost tax revenues.

Encouraging the development of large amounts of market-rate housing increases displacement pressure on the surrounding affordable housing stock. Furthermore, in many neighborhoods where on its own the market is weak enough to encourage developers to make use of the city’s programs to develop 100% affordable housing, 421a can tip the scales towards encouraging market rate development instead. So the local impact of incentivizing development under 421a, even where affordable units are required, may be a net loss of affordable housing in a neighborhood. 421a is New York City’s most expensive housing program. As an affordable housing program, it is highly inefficient. We will already give away $78.7 million dollars a year to new condos built since 2010, that would have almost certainly been built anyway and are not necessary to build these luxury units. We cannot afford to continue spending precious public resources to enrich developers. As Albany legislators head into the final days of negotiations, they must keep the true housing priorities of last June’s legislative session. We must strengthen Rent Regulation, prevent illegal hotels, fund NYCHA, agree to an MOU to balance housing spending needs, and improve State affordable housing programs to meet NYC’s deep affordability needs. Blogger: Barika Williams, Deputy Director, ANHD