Hope fades for 421a replacement in state budget

Missed deadline would complicate renewal of development tax break

New York /
Mar.March 31, 2022 02:15 PM

(New York State, MZMcBride at English Wikipedia, Public domain – via Wikimedia Commons, iStock)

The popular property tax break 421a may be sidelined in state budget negotiations, leaving developers with less leverage and time to fight for its renewal.

Gov. Kathy Hochul had pitched a new program, 485w, to promote development of multifamily buildings. It required deeper affordability but largely mirrored its predecessor. Advocates and some lawmakers have criticized the proposal and called for the end of the tax break, which expires June 15.

According to The City, 485w is off the table and likely won’t be included in the budget, despite a late-stage push from Mayor Eric Adams. The budget is due by midnight, but is expected to be late.

Negotiations are ongoing, and much could change by the time the budget bills are passed. Real estate and union groups are still pushing lawmakers to include the tax break, knowing that if it’s not folded into the budget, its chances of passing this session decrease.

“I feel pretty good, but Albany is unexpected,” said Housing Justice for All’s Cea Weaver, who calls 421a a giveaway to developers. “I wouldn’t count on anything until it’s done.”

As a Billy Crystal character once put it, “there’s a big difference between dead and mostly dead.

Developers argue that the program, renamed Affordable New York at its last renewal, is crucial to construction of rental buildings in New York City. City officials have warned that its expiration would imperil New York City’s affordable housing program, Mandatory Inclusionary Housing, which relies on the tax break to make new mixed-income housing economical.

“If the 421a program expires without a new program in its place, housing production — and the well-paying jobs that come with it — would fall off a cliff,” Mayor Eric Adams tweeted last week. The program’s tax breaks add up to $1.7 billion annually; exemptions awarded in the past will continue.

If a replacement is not included in the budget bills, lawmakers could still enact it as a standalone measure or in a legislative package before the session ends in late June. But a delay could give tenant advocates leverage to pass good cause eviction as a political trade-off in which progressives and real estate interests each get something they want — and something they don’t.

Lawmakers could also opt to extend 421a temporarily, and then hash out a new incentive. But doing so would likely be an uphill battle, as lawmakers face primary elections in June and a general election in November. Elected officials typically avoid controversial votes shortly before elections.

In the meantime, the volume of new construction permits is expected to slow as developers wait out the uncertainty of the tax break’s future.

The governor’s proposal has the backing of the Real Estate Board of New York, building service workers union 32BJ SEIU and the New York Building and Construction Trades Council, an umbrella group for construction unions.

“A broad coalition of labor unions, policy makers and elected officials all agree that 485w will be an important tool in tackling two pressing issues in New York City — the need to produce more rental housing, particularly units at deeper levels of affordability permanently, and create family-sustaining jobs,” REBNY President Jim Whelan said in a statement Thursday.

The last time the tax break expired, in 2016, REBNY and the Building Trades were on opposite sides of the table. The fight over 421a turned ugly at times as the labor group demanded that construction workers be paid prevailing wages on projects receiving the tax exemption. Lawmakers approved a replacement after about 15 months, during which time few plans for apartment projects were filed.

Since then, the building trades and REBNY have reached an agreement to support each other on policy issues where their interests align, such as 421a. Gary LaBarbera, president of the Building Trades, declined to comment.

This time around, 32BJ has been the more vocal of the union groups in support of the governor’s proposal.

The tax break’s inclusion in the state budget was never a sure thing, and the Senate and Assembly cast further doubt on its survival when they excluded 485w from their budget resolutions.





    Related Articles

    arrow_forward_ios
    John Banks
    High expectations: A look at John Banks’ 4 years at REBNY
    High expectations: A look at John Banks’ 4 years at REBNY
    John Banks
    John Banks to step down as REBNY president
    John Banks to step down as REBNY president
    REBNY Awards
    Newmark Knight Frank wins REBNY retail award for Alamo Drafthouse deal in FiDi
    Newmark Knight Frank wins REBNY retail award for Alamo Drafthouse deal in FiDi
    331 Elmora Avenue and 103 Ryan Street (Kislak Realty)
    Tri-state deal roundup: Multifamily, industrial still hot
    Tri-state deal roundup: Multifamily, industrial still hot
    From left: Assembly member Rodneyse Bichotte Hermelyn, Sen. James Sanders Jr. and REBNY's James Whelan (Getty, iStock, REBNY)
    REBNY calls for larger fines. Wait, what?
    REBNY calls for larger fines. Wait, what?
    Adam Leitman Bailey, Y. David Scharf, and Miki Naftali with 215 West 84th Street (Adam Leitman Bailey, Morrison Cohen, Getty)
    Naftali lays out project as holdout tenant plays new card
    Naftali lays out project as holdout tenant plays new card
    Seth Boyden Court in Newark NJ with Great Point Studios CEO Robert Halmi (Loopnet, Great Point Studios, iStock)
    Film studio to replace vacant public housing in Newark
    Film studio to replace vacant public housing in Newark
    Gary LaBarbera, James Whelan, Eric Adams, Tiffany Cabán and Kathy Hochul (Getty, iStock / illustration by Ilya Hourie for The Real Deal)
    Council backs off sabotage of 421a
    Council backs off sabotage of 421a
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...