Can new affordable housing programs fill the 421a void?

Developers, experts and politicians say: Nope

TRD New York /
Mar.March 18, 2016 08:00 AM

Though a handful of programs are on the table, New York City is still waiting for its affordable housing silver bullet — or, at least, something to fill the void left by 421a.

The lapse of 421a in January left developers bemoaning prohibitively high property taxes, saying that the tax abatement’s expiration would threaten the construction of new mixed-income rentals. In its absence, other initiatives — like Mayor Bill de Blasio’s mandatory inclusionary housing program — have forged on, but the general consensus among politicians, experts and developers seems to be that nothing yet proposed will bridge the gap left by 421a.

Assemblyman Keith Wright proposed a bill on Wednesday that he said was a response to the lack of 421a, but isn’t intended as a replacement. The bill, dubbed the “Emergency Affordable Housing Construction Act,” would provide upfront subsidies to developers whose entire projects were reserved for people making at or below 70 percent of the area median income (AMI), with one third of the units designated for residents earning at or below 40 percent AMI. Developers of such projects would receive $100,000 per unit.

“New York City developers do not need to be lured to Times Square or Harlem to invest and build apartment buildings that largely cater to residents of greater means rather than the average New Yorker,” Wright said in a statement. “To counteract the housing crisis, we in state government need to take bold action and do everything we can to encourage affordable development in our cities.”

After talks collapsed between labor and development groups over the future of 421a — which hinged on the two groups agreeing on whether developers must pay prevailing wages — Wright formed a panel, which included the Building and Construction Trades Council president Gary LaBarbera, to address the affordable housing crisis. What came out of those meetings was not a replacement for the tax abatement but a subsidy program powered by an estimated $200 million from the state.

The two groups at the center of the 421a debate — the building and trades council and the Real Estate Board of New York — have been tepid in their response to the proposed legislation. A representative for the building and trades council said the group is reviewing the legislation but currently can’t formally support the measure. Jamie McShane, a spokesman for REBNY, said that Wright’s proposal is “laudable” but that “it would not provide the amount of affordable housing, across different income bands and throughout the five boroughs” that 421a could have.

The impact of the program’s expiration is already being felt in the city. In February, the Durst Organization said that the future of its massive 2.5 million-square-foot mixed-use development Hallets Point — beyond the first phase — was uncertain without the abatement. The project would add seven new residential buildings to Astoria’s waterfront, two of which are slated to be affordable. New construction permits dropped significantly in January, following a rush by developers seeking to meet the cutoff date for the tax break.

Daniel Bernstein, an attorney with Venable who has represented developers applying for 421a exemption, said that the bill raises some questions and doesn’t even begin to match the incentives offered under 421a.

“I don’t think this fills the gap,” he said. “This is well-intentioned and an attempt to fill some of the gap, but it’s unclear what new construction costs would be involved in this program, and it’s very likely that the one-time subsidy will be significantly less generous than a long-term tax exemption that 421a was presumed to have provided.”

Similarly, he said that De Blasio’s mandatory inclusionary housing won’t be able to pack the same punch in 421a’s absence. The zoning change is inching closer to becoming a reality, a shift the mayor has called “the strongest, most progressive affordable housing policies in the nation.” But Bernstein said that MIH was designed to work alongside 421a. Councilman David Greenfield told the New York Times that “M.I.H. still works without it, but it doesn’t work as well.”

When asked about Wright’s proposed bill, de Blasio spokesman Austin Finan said that the city welcomes “any proposals that direct more state funding” to construct affordable housing. But, he said, a tax abatement is what is ultimately needed.

“Until we have a smart, effective tax abatement program designed to incentivize affordable housing across the entire city, we’ll see more luxury condos being built instead of the rental housing we so badly need,” he said. “That is something we urgently have to correct.”


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