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Lawmakers Want to Punt on the Fate of the 421-a Tax Break

New York State

421-a tax break, affordable housing, co-ops and condos, state Legislature, property tax reform.
March 30, 2022

With a new state budget due on Friday, April 1, many legislators say they want to hold off on Gov. Kathy Hochul's plan to update the controversial 421-a tax break for developers, which spurs them to include affordable housing units in their developments, City & State reports. Rather than including the governor's proposal in the upcoming budget, these legislators prefer to punt the discussion to the second half of the legislative session in order to have a more comprehensive debate.

The tax break is due to expire in June. Hochul's proposal, known as Affordable Neighborhoods for New Yorkers (ANNY), would make higher earners ineligible for the tax breaks, and it would make all affordable units permanently subject to rent stabilization. To qualify, co-op shareholders and condo unit-owners would have to use the apartment as their primary residence for at least five years. The staffs in such buildings must be paid prevailing wages

The governor's proposal received a warm welcome from the real estate industry and building trade unions, but its numerous detractors say it's a tweak rather than an overhaul of a tax break they deride as a "handout for developers." Among the critics is city Comptroller Brad Lander, who recently issued a report that says the 421-a tax break will cost the city almost $1.8 billion in lost 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 it expire and instead set a deadline of Dec. 31 to enact more comprehensive property tax reform, a dream that has eluded New York mayors for decades.

The Legal Aid Society said in a statement: “We urge the Legislature to reject this (ANNY) 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.”

Days before the state budget is due, many Democratic lawmakers don’t seem eager to include ANNY in the budget or to hold discussions about replacing 421-a months before it expires. State Sen. Gustavo Rivera, a Bronx Democrat, summed up those sentiments: “It expires in June, relax. Let’s take a chill pill, or seven, and then talk about this after budget.”

State Sen. Julia Salazar, the Brooklyn Democrat who sponsored the controversial Good Cause Eviction bill now before the Legislature, echoed Rivera's sentiment. “I think it’s unlikely,” she said of the possibility the governor’s ANNY plan would make it into the final budget. “And it should be unlikely.”

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