Developers will save $3.3 billion in taxes over 10 years — including an estimated $2 billion on high-end sales — under New York City’s recently revised 421a tax break for construction of affordable housing units, according to an analysis from the city’s Independent Budget Office.
The tax breaks will take effect when construction is underway, not necessarily in January 2016, when the revised law takes effect, the IBO told Capital New York. Developers will then receive the tax break for 35 years under the new program, which was approved in Albany last month.
The IBO, a nonpartisan budget watchdog group, based the estimate on recent history and adjusted to account for new rules regarding high-end condos, which will no longer receive the abatement come January. (All existing buildings receiving 421a will continue to; the bill only applies to new construction.)
“The final package includes mid-market condos, which carry additional costs over the 45-year life cycle of the program,” a City Hall spokesperson told Capital.
Developers had lobbied for the changes in the law, insisting that fewer buildings would be constructed without the tax break. The abatement began in the 1970s to spur growth during a period of economic turmoil in New York City.
The bill leaves up for debate whether builders will be required to pay construction workers a prevailing wage. Real estate interests and Mayor Bill de Blasio are at odds, but Gov. Andrew Cuomo has asked the parties to reach a compromise with labor unions later this year. [Capital New York] — TRD