Developers notched a major victory Thursday when they reached a deal to allow their Innovation QNS project in Astoria. But amid the celebrations, there was an elephant in the room: A tax break that the industry has deemed essential to such projects has expired.
The pachyderm peering over the negotiating table as officials carefully balanced the project’s affordable housing component against its financial feasibility was 421a.
Developers have long argued that it is virtually impossible to build rental buildings in the city without the incentive to offset the high costs of land, construction and especially property taxes on rentals.
“I would be very surprised if the developers were not assuming some kind of 421a or a mechanism like 421a, given the economics of building rental housing in New York,” said Matthew Murphy, executive director of New York University’s Furman Center.
In fact, the developers — Silverstein Properties, Bedrock Real Estate Partners and Kaufman Astoria Studios — acknowledged last month that they were banking on the tax break’s return. Silverstein’s director of development said at a Bisnow event that the project was being pursued as a “leap of faith” given 421a’s uncertain future.
City officials have also acknowledged that the Mandatory Inclusionary Housing program relies on 421a, because the program’s affordability requirements were based on an assumption that property taxes will not increase from the pre-project level for 25 years. The program is a city law, but 421a was a state law and can only be reinstated by Albany.
Its absence raises questions about the viability of the Astoria project as well as other rezonings aimed at adding affordable units to the city’s building stock.
Innovation QNS promises to create 3,200 apartments, 45 percent of them affordable. The inclusionary program’s minimum is 25 percent. It is not clear how much of the added affordability will be subsidized by the city; details of the deal are still being hammered out ahead of next week’s vote by the full City Council.
Read more
Development
New York
Innovation QNS grilled at hearing as pols spar over megaproject
Development
New York
Silverstein’s Astoria megaproject ups affordable housing commitment
Commercial
Tri-State
Jersey City approves Kushner, Silverstein’s 1,200-unit megaproject
The industry and the Adams administration could use the Astoria project and others to pressure lawmakers to act on the tax break this session. Gov. Kathy Hochul had proposed a replacement program, dubbed 485w, but legislators showed little appetite for taking up the proposal. With the Silverstein project alone promising 1,436 affordable units, backers now have a tangible benefit to offer.
“The approval of Innovation QNS shows that the City Council and mayor are taking the housing crisis seriously, but without a viable program to spur rental housing development by the private sector, many of the apartments in this and other similar projects will not be built,” James Whelan, president of the Real Estate Board of New York, said in a statement.
He said it is up to the Senate and Assembly to prioritize “common-sense policies” that will lead to more housing, noting that “the state legislature has taken several actions in recent years purportedly in response to the housing crisis, and that crisis has only gotten worse.”
Rather than tweak 421a, which targets apartment development in New York City, tenant advocates and progressive lawmakers want to reform the city’s entire property tax system. They fear that a revised tax break would not fundamentally change a program that forgives $1.8 billion in annual tax revenue to primarily create homes unaffordable to the vast majority of city residents.
A March 2022 report by the Community Service Society argues that the extent to which 421a is responsible for affordable housing creation is muddied by the use of other subsidies.
The Innovation QNS development team would not comment on whether the project hinges on a property tax break being restored, nor if it has a contingency plan if it isn’t.
The city has other property tax exemptions, including Article XI, which is used by projects owned by Housing Development Fund Corporations, and 420-c for those financed by low-income housing tax credits. But city subsidies available for rental projects are limited.
The de Blasio administration’s $41 billion, five-year housing plan provides a snapshot of how housing is financed: It included $8.2 billion from city sources and $30 billion from the private sector.
The Adams administration has made a point of wading into debates over controversial housing projects. The renewal of 421a was a priority for the mayor during the last legislative session, and will likely be high on his list next year, especially with projects like Innovation QNS on the line.