The Real Deal New York

End of 421a could reduce land prices, freeze development

Tenant advocates have been calling for the termination of the 40-year-old tax break program
March 02, 2015 08:05AM

Eliminating the 421a tax program altogether — which is what tenant advocates are trying to accomplish — could result in a freeze of development and could lower the prices that developers are willing to pay for land.

Developers take subsidies into consideration when they buy land, Capital New York reported. Without 421a, they may not be willing to pay as much as before. As a result, the website reported, land owners may temporarily take their properties off the market.

Mark Willis, the executive director of New York University’s Furman Center, told the website that a “possible decrease in land values might affect the new development pipeline in the short run. The city must carefully consider this possible impact, especially in light of the need for more housing affordable to middle- and lower-income New Yorkers.”

Mayor Bill de Blasio, caught between tenant advocates and developers, has been hesitant to take a firm stance on the program’s future.

The Real Estate Board of New York has been a proponent of the program and recently lobbied for its continuation in Albany.

“A robust 421a program is one element in a menu of options that will be needed to make Mayor de Blasio’s affordable housing plan a reality,” REBNY President Steven Spinola told Capital. “Without this critical tax incentive, the city would see a sharp drop off in the production of new housing units, a further skewing of the residential market toward condominium rather than rental production, and an accelerated tightening of housing costs for renters and buyers alike.” [Capital NY] — Claire Moses