In January, amid wage squabbles between real estate companies and construction unions, the city’s infamous 421-a tax exemption expired. But the city will still miss out on a huge amount of property tax revenue in the current fiscal year — $1.4 billion, according to an Independent Budget Office report out today.
Under the 421-a exemption, which was established in 1971 to lure builders to badly underdeveloped parts of the city, developers received multi-year tax abatements. But for decades 421-a has been handed out to housing developers who incorporate unimpressive numbers of “affordable” units into their buildings (and sometimes overcharge tenants).
According to the report, the vast majority of tax exemptions in most years go to legacy 421-a properties, some going back as far as twenty years. Since 1998, just 16 percent of the tax awards went to newly designated 421-a housing developments. In 2008, a cap was established to control how large the tax exemptions could grow as the property appreciated in value. But for buildings that went up before that, the exemptions continue to grow unfettered.
Properties awarded 421-a benefits before the program’s suspension in January will not return to the property tax roll until 2044 (at which point New York will be well on its way to an excessively hot and flood prone future).
In 2014, housing developers collected $1.1 billion in tax subsidies. Sixty percent of them were in Manhattan.
In 2015, as part of his plan to increase affordable housing across the city, Mayor de Blasio tried to save 421-a by disqualifying luxury condos and co-opsJill Eisenhard from the tax breaks, and mandating that 25–30 percent of apartment units be made “affordable.” The mayor’s plan languished in Albany, though Governor Andrew Cuomo is vowing to resurrect his own version of 421-a. Cuomo’s separate $2 billion affordable housing plan earmarked in the budget last Spring has been delayed for months, with no agreement on how the money will be spent.
Meanwhile, the city’s affordable housing crisis rages on, one “glass-walled broscape” at a time.