REBNY Warns of 421-a Proposal Danger

NEW YORK CITY-Mayor Michael Bloomberg is expected to sign 421-a, tax exemption legislation, into law on Dec. 28. The city council passed the bill on Wednesday. And while the mayor has lauded the bill that revises an out-dated 1971 law, the Real Estate Board of New York says the law would endanger future jobs, tax income and housing.

“The statistics make it clear that the 421a program needs to be tweaked, but the new bills being considered will severely stifle the construction of new housing units instead of encourage it,” say REBNY president Steven Spinola in a release. “Is the city saying the housing crisis is behind us?”

The new bill is part of the city’s effort to build or preserve 165,000 units of affordable housing by 2013, which the mayor outlined earlier this year in his New Housing Marketplace Plan. “With this bill, the administration and the council struck a balance between maximizing affordable housing for low-income New Yorkers while also continuing our recent housing boom for the middle class that is closing the housing gap.” says Deputy Mayor Dan Doctoroff, in a statement.

Under the new proposed law, 421-a will enlarge the geographic exclusion area from the current Manhattan parameters to areas including Lower Manhattan, Dumbo, Brooklyn Heights and Williamsburg. Developers working within the GEA are offered tax abatement if 20% of the project is for those residents who make up to 80% of the area’s medium income.

The new legislation also calls for the elimination of the negotiable certificates program and the creation of an Affordable Housing Trust Fund that will aim at the city’s 15 poorest areas. The certificates program will require developers to have affordable housing as part of the existing project in order to receive tax abatement, and will not allow them to buy certificates sold by other developers outside the GEA. According to a release from the major’s office, “The result would increase tax revenue to be used for a dedicated $400-million Affordable Housing Trust Fund and generate $300 million for the mayor’s New Housing Marketplace Plan.”

But REBNY officials say in a release, “Construction of affordable housing also is being put at risk by current proposals. The certificate program, a provision of 421a, was responsible for the construction of 5,400 units of affordable housing since its inception. The bills being considered would do away with this effective affordable housing production program.”

The bill also sets a ‘luxury cap,’ which will limit the total 421-a tax benefits a market-rate unit can receive. The current law sets no limit to the amount, but the new version calls tax abatement for only the first $65,000 of the apartment’s assessed value. Additionally, only developers who provide affordable housing will be eligible for 25 years of tax benefits.

REBNY officials say, the revised law would hinder the $10 to $15 billion in tax revenues the New York City has received over the last decade. “421a projects generate nearly $1 billion in tax revenues per year today and will generate an additional 50%–a total of $1.5 billion per year–as the exemption for these projects expire.”