Months after the death of the contentious 421-a tax abatement, lawmakers in Albany can’t agree on how to replace it.
The 421-a property tax exemption program, which gives New York City developers tax exemption for building a multi-unit residential project on vacant land, expired in January. It was created in 1971 to spark development when many residents were leaving the city for the suburbs.
The program is controversial because luxury condo developers use it to avoid paying taxes on expensive housing. For rental properties built under 421-a, the units must be rent-stabilized, but for condos and coops, developers can charge as much as they want.
Advocates for the program have long argued that 421-a — named for a section of the tax law — is essential to build affordable housing due to the city’s high prices for land. However, a 2003 study by the Independent Budget Office found that from 1985 to 2002, only 7 percent of the 69,000 units subsidized through this program were affordable to low or moderate-income families, much to the disdain of city legislators.
Last year Gov. Andrew Cuomo asked real estate developers and construction unions to reach a deal on the tax relief program. If they came to an agreement on construction worker’s wages, 421-a would be renewed with new reforms, but negotiations fell apart as the two groups could not come to a compromise, and the program expired.
New York City Mayor Bill de Blasio planned to use 421-a to achieve his goal of building or preserving 200,000 units of affordable housing in a decade. De Blasio wanted the tax credit to be renewed with reforms that required developers to include affordable housing in their projects.
Without the tax credit in place, de Blasio’s current plan to create affordable housing is on shaky ground. A 2015 report from The Furman Center for Real Estate and Urban Policy stated that the tax exemption was necessary for rental projects to be financially viable in areas of the city.
The tax exemption is fiercely opposed by tenant rights groups and construction worker unions, for very different reasons.
Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, opposes the program because it does not mandate that construction workers are paid a “prevailing wage.”
At an April 19 press conference held by the North America Building Trades Union, Gov. Cuomo announced he would not support a replacement unless it was “accepted as a fair deal by organized labor and by the building trades.”
Tenant’s rights groups see the absence of 421-a as an opportunity to reform a number of issues with rent laws that they say hurt low-income tenants.
Accompanied by New York City legislators, the Alliance for Tenant Power held a press conference on April 5 in Albany to celebrate the death of 421-a, arguing that the tax credit helped contribute to what they call an “affordable housing crisis” and is not necessary to build low-income apartments.
“I’d like to have a moment of silence for 421-a,” Assemblyman Brian Kavanaugh, D-East Side, said sarcastically, evoking cheers from the crowded room of legislators and advocates.
Assemblyman Walter Mosley, D-Clinton Hill, said he would only be willing to pass a program similar to 421-a if rent regulation laws were strengthened.
“We don’t want nothin’ like 421-a to resurface,” Mosley said. “But ultimately we have to understand if anything like 421-a comes to the floor then we reopen the rent laws. Without that we have no discussion.”
Delsenia Glover, campaign manager for the Alliance for Tenant Power agreed with Mosley, calling 421-a “a giveaway to luxury developers.”
“Our demand,” Glover said, “is this: If 421-a or anything that looks like 421-a is revived or created then the rent laws must be reopened, we have to get rid of vacancy bonus, fix preferential rents, and then maybe we can have a conversation.”
The “vacancy bonus” allows landlords to increase rent by up to 20 percent for units that become vacant after a long-term tenant has moved out.
“Preferential rent” is when the landlord charges less than a rent-controlled apartment’s maximum legal regulated rent, but can decide to increase the rate at the end of the lease.
Assemblyman Keith Wright, D-Harlem, spoke out against landlords abusing preferential rent, citing the practice as one of the major reasons low-income residents become displaced or homeless.
“Preferential rent is nothing but a bait and switch,” said the Housing Committee Chair. “You move into an apartment thinking the rent is low, but when that lease runs out, your landlord will jack it up.”
Senator Liz Krueger, D-Upper East Side, spoke about a lack of affordable housing for seniors, saying “we’re 30 years behind where we need to be.”
“We know there’s a 200,000 person waiting list for senior housing in the city of New York,” Krueger said. “We know seniors aren’t going to live long enough to get that housing they need.”
A report from nonprofit advocacy group LiveOn NY found 101,936 people age 62 and older are waiting an average of seven years for slots in rent-regulated apartment buildings across the city.
The solution to the affordable housing crisis, according to the Alliance for Tenant Power is simple: have the city build it themselves.
“The city should be building affordable housing, not paying people to build it,” Assemblyman Jeffrey Dinowitz, D-Bronx, said.
Assemblyman Wright proposed a bill (A.09537) last month that would provide rental developers with a $100,000 subsidy per affordable housing unit and establish a $25 million fund for senior housing at the cost of $200 million a year. It’s estimated that 421-a cost the city over $1 billion in tax revenue every year.
Wright said it is not a direct replacement for 421-a, rather it was filling the void left by the expired tax credit with a “different philosophical slant.” Wright admitted the response to his idea was not overly enthusiastic, but said people were “intrigued.”
“Listen, anything in Albany takes a minute to work up to,” he said. “But we are still pushing that plan.”
Gov. Cuomo said he was hopeful for a successor to 421-a before the end of the legislative session, as a slate of development projects approved before the tax credit’s expiration are now suspended until a replacement is introduced.