More Evidence That 421-a Can Wait
The important debate around the 421-a tax exemption may come to a head in Albany by Friday, but an article in yesterday’s Crain’s New York makes clear that new development is moving ahead either way, a fact that should change the debate.
Getting the 421-a program right matters. We owe it to our taxpayers and our communities. Legislators who are supportive of tenants know that making decisions about 421-a within the budget process decouples the issue from the push to strengthen rent-regulation, undermining the leverage and importance of crucial tenant concerns. Getting the 421-a program right matters. We owe it to our taxpayers and our communities.
Getting the 421-a program right matters. We owe it to our taxpayers and our communities.
The Crain’s article reports on plans for a big, new $160 million privately-built market-rate rental development in the South Bronx, saying:
“[The developer] will wait until the end of the year before breaking ground on the projects in the hopes that the 421-a program…will be reinstated by then. [But the developer] was able to purchase the development sites inexpensively enough to allow them to build the projects without the benefit, as well.”
This makes it clear; 421-a is about increasing the projects profits, not about whether or not the project moves forward. And it further confirms ANHD’s recently released white paper, which found the surprising fact that new rental development has not slowed in the past year since the 421-a exemption was suspended. We could have saved ourselves the trouble. The Crain’s article illustrates our point just as succinctly and clearly as the charts in our white paper.
The big real estate lobby (REBNY) is trying to rush approval of an even more costly 421-a exemption through the Albany budget process by April 1st. The program is widely understood to be bloated and inefficient. Bloated because is costs taxpayers $1.4 billion a year. Inefficient because for every $1 spent on the program, only 11 cents supports affordable units while 79 cents subsidizes luxury units.
But REBNY is arguing that we must get the exemption back quickly because the market absolutely will not build new rental housing anywhere in the City without it, housing that our growing city needs.
The data clearly shows that the sky is not falling – new building construction permits are back up to their recent average, especially in the softer outer-borough markets, in part because the cost of development sites quickly came down without the artificial stimulation of the 421-a program.
An opinion piece in the New York Daily News last week by State Senator Parker and Assembly Woman Walker exposes the history that the worst elements of the 421-a program were created by Donald Trump when, as a real estate developer, he sued Mayor Koch because he didn’t want to pay taxes on Trump Tower. They argue we are now facing an unprecedented crisis because of President Trump’s Federal budget cuts, and make the case that Albany should not rush to include the 421-a program in the April 1st budget.
“It’s time for us to say no to Trump. His real estate tax exemption shouldn’t be rammed through the Albany budget process, but instead should be negotiated separately and apart from the budget, which is due April 1. We must take the time to get the details right.”
We agree with Senator Parker and Assembly Woman Walker. If you care about new housing development – if you care about construction jobs – it is not necessary to rush into a bad 421-a deal with REBNY that cost taxpayers even more and gives us even less.