REBNY proposal boosts 421-a certificate value

June 15, 2009 04:48PM

Extell’s Gary Barnett (left) and broker Robert Shapiro are in favor of REBNY’s 421-a proposal.

By Adam Pincus

The city is mulling over a proposal from the Real Estate Board of New York that would increase the value of 421-a negotiable certificates that are part of an affordable housing incentive program that gives 10-year tax abatements to owners and developers of residential apartments.

The industry group wants to base the tax deduction on the full assessed value of the property — as the state law was originally written in the 1980s — not on a narrower limit that was imposed two years ago.

In 2007, the state law capped the amount that could be deducted at an assessed valuation of $65,000. Once the limit was in place, the certificates with it sold for prices about half those of the certificates that were not capped.

Gary Barnett, president of Extell Development, a developer which has used 421-a certificates in a number of city projects, said he supported REBNY’s concept.

“Excellent idea,” he wrote in a text message.

REBNY estimated that earlier this year there were about 5,000 negotiable certificates owned by affordable or market-rate developers that could be used on new market-rate units.

The city’s Department of Housing Preservation and Development is reviewing the proposal, which would remove the assessed valuation cap placed on 421-a certificates, city sources said.

“We believe the $65,000 cap on assessments is a mistake in this climate,” REBNY President Steven Spinola said.

A spokesman for HPD declined to comment.

The 421-a certificates are sold by affordable housing developers to market-rate developers who then get a real estate tax break for 10 years or pass the tax break on to condo unit owners. The certificates once commanded prices as high as $35,000 each, but have recently traded at about $12,000 each. Currently the market is all but frozen, experts said.

HPD granted 3,586 certificates with affordable housing developers between January 1 and December 27, 2006 that were not capped and an additional 10,585 certificates with the $65,000 cap, before the program’s deadline of December 27, 2007, after which no new certificates were issued, the agency said.

The original certificates did not have the $65,000 assessed valuation cap, but following criticism that the 421-a certificate program was a giveaway to developers, the state law was changed in 2007.

Any change to the current law would also need to be passed by the state legislature and signed by the governor.

Commercial broker Robert Shapiro, president of City Center Real Estate, who has arranged the sale of thousands of certificates, said such a proposal was positive, but the market remains stalled.

“It is something that is important and that will help, but it is not going to jumpstart real estate development,” he said.