Bill to audit 421a gets hearing as pols put subsidy in crosshairs

Proposal comes a year ahead of Affordable New York’s expiration

REBNY's James Whelan, Sen. Brad Hoylman and Assemblymember Emily Gallagher (Getty, Whelan via Anuja Shakya)
REBNY's James Whelan, Sen. Brad Hoylman and Assemblymember Emily Gallagher (Getty, Whelan via Anuja Shakya)

With the Affordable New York housing program, better known as 421a, expiring next year, lawmakers are targeting the controversial tax break — and racing to pass legislation that would audit projects that get it.

The program offers developers a 35-year property tax break on new residential projects in exchange for making 25 percent to 30 percent of units affordable rentals.

In April, Assembly member Emily Gallagher and Sen. Brad Hoylman introduced a bill to require an annual audit of the program. That legislation is scheduled for a hearing Tuesday morning, and Hoylman expects it will be released for a vote.

The inaugural audit, to be completed by Dec. 31, would examine projects currently receiving or that previously benefited from 421a abatements, including earlier iterations of the program. Subsequent audits will cover only projects receiving the tax break in the prior year.

The 421a program is New York’s primary subsidy for construction of new apartments, which developers say would virtually stop if no tax breaks were offered. They cite inequitable property taxes and other factors.

But the audit bill comes as a number of lawmakers have committed to abolishing the program, which critics say costs New York City $1.7 billion a year in forsaken property taxes and is an inefficient way of providing affordable housing.

Moreover, eight lawsuits filed by tenants in recent months accuse developers of improperly setting base rents at 421a projects.

One of the complaints targets the landlord of 544 Union Avenue in Williamsburg, in Gallagher’s district. The Assembly member has since met with Housing Rights Initiative, the watchdog group whose investigations led to the lawsuits, and believes that these instances of alleged overcharging are “the tip of the iceberg.”

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“My gut is that the system is broken but I want real evidence,” she said. “We want to be able to have an informed debate about what’s going on in 421a.”

Gallagher began drafting the legislation last summer and then approached Hoylman about sponsoring a Senate version of the bill.

Holyman said auditing 421a and holding “bad actors accountable” should happen before the legislature “even thinks about renewing this program.”

Both Gallagher and Hoylman said they are hopeful the bill will pass in both houses by the end of the legislative session, June 10.

“I think there is an opportunity to potentially pass it because I think many share the urgency of it,” said Gallagher. “You can’t really argue with information gathering… especially around fraud with our taxpayers’ money.”

Surprisingly, the real estate industry might also be on board. James Whelan, president of the Real Estate Board of New York, said his group supports an annual 421a audit.

“Anyone utilizing the Affordable New York program must adhere to its requirements,” he said in a statement. He added that lawmakers should remember that “virtually all below-market-rate housing construction” in the city relies on some form of property tax benefit.

Gallagher said the difficulty in building affordable housing was one of the motivating factors for the proposal.

“I want to see what is going on so that we can make better systems in the future — whether that’s a change in 421a or whether that’s a completely new way to build affordable housing,” she said.