New York's Cooperative and Condominium Community
Critics call it a "handout" to developers. Supporters say it's the best way to provide affordable housing in this increasingly unaffordable city. Now city Comptroller Brad Lander has issued a new report that says the controversial 421-a tax break will cost the city almost $1.8 billion in tax revenues this year — and it's a waste of money.
In the report, "A Better Way Than 421-a: The High-Rising Costs of New York's Unaffordable Tax Exemption Program," Lander contends that the tax exemption is inefficient and too expensive, and that the state should let 421-a expire June 15 and instead enact more comprehensive property tax reform, Crain's reports.
Under the 421-a program, also known as Affordable New York, developers receive a tax break in exchange for making 30% of the housing units in their projects affordable. However, most of the affordable units are actually too expensive for the majority of New Yorkers, according to the report, particularly those who live where the developments tend to be built — in Upper Manhattan and he outer boroughs.
More than 60% of the affordable units built under the current version of the program through 2020 were for families earning 130% of the area’s median income, the report says. The figure was $155,090 for a family of four last year, according to the city.
Gov. Kathy Hochul has proposed changes of her own that could eliminate higher earners from being eligible and make all affordable units permanently subject to rent stabilization. Hochul also would extend condo and co-op tax breaks.
But Lander’s report slams Hochul’s ideas as too modest to make much of a difference. It finds that the program would stay essentially the same, and most developers would pick an option that would put monthly rent for a two-bedroom apartment at more than $2,300, “indicating that the proposed tweaks to the program would again fail to create truly affordable housing.”
Lander is not alone in being unenthusiastic about the governor's plan. In a statement, the Legal Aid Society said: “We urge the Legislature to reject this proposal outright so that the city can reallocate these tens of millions of dollars to expand already proven housing programs — including a highly successful voucher program that has already connected thousands of New Yorkers to safe and affordable housing. Continuing 421-A is bad policy, a colossal waste of tax dollars and a missed opportunity to invest in what actually works for our clients and the communities we serve.”
Lander calls on the state to set a deadline of Dec. 31 to pass more structural property tax reform rather than tinker around the edges of the affordable housing tax break. One of his main recommendations is to tax construction on new residential buildings equally going forward — which, he argues, would spur more development and eliminate the need for the 421-a program. The median tax rate on rental buildings with more than 10 units is currently about double that of condominiums — which helps explain why many developers build condos than affordable rental units.
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