Property tax breaks under the 421a program will cut into the New York’s tax revenue until 2044, according to a report by the city’s Independent Budget Office.
The 421a program, which offered property tax abatements for new apartment projects, expired at the end of last year, but because of its long-term discounts, the city will forgo nearly $1.4 billion in tax revenue in fiscal year 2017, the IBO calculates, up $100 million from the previous year.
That’s because the value of the properties that benefited under 421a are increasing, and the city’s foregone tax revenue along with it. The majority of the forgone revenue comes from projects that were awarded 421a status in the last five years, according to the report, and some of the properties will continue to receive the discount until 2044.
Some in the real estate industry caution against calculating the lost revenue this way, since many of those projects likely would have been built without the tax incentive. In fact, a large number of projects scrambled to get stakes in the ground so they would be eligible for the program before it expired in January, and many developers remain concerned about the effects of allowing the program to lapse.
The death of the tax abatement has been heavily linked to the sleepy investment sales market and led big-time developers such as the Durst Organization to shelve projects.
The program lapsed when the Real Estate Board of New York and the city’s labor groups couldn’t reach an agreement on wages before the January deadline. In August, Cuomo tried to revive the program in August with a new proposal that offered wage subsidies for large projects south of 96th Street in Manhattan and along the waterfronts in Brooklyn and Queens, TRD previously reported. [Crain’s] — Chava Gourarie