23 June 2022
Harris Beach
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The 421-a tax exemption and rent stabilization program, also
known as the affordable housing tax break, which affords real
estate developers a tax break in developing affordable housing in
New York City, has expired as of June 15, 2022. If the 421-a
program is not renewed, it raises questions about the future
creation of affordable housing in New York City, and may pose
difficulties for tenants who have been protected from rent hikes
through rent stabilization.
The 421-a tax exemption program is a real property tax exemption
program accessible to developers who build new and affordable
multi-family residential buildings in New York City. It is aimed at
increasing affordable housing in the most densely populated areas
of the five boroughs. The program gives developers of multi-family
developments where at least 25% of the units are affordable up to
100% of tax exemption for the first 25 years after the house is
completed, and an exemption equal to the percentage of affordable
units during the next 10 years following the first 25 years. It
costs New York City about $1.77 billion yearly in lost tax revenue
to maintain this tax exemption program.
The 421-a program had critics such as Brad Lander, the New York
City Comptroller, who says that the 421-a is a flawed, overpriced
band-aid placed atop New York City’s broken and unequal
property tax system. But it also had prominent supporters such as
the Mayor Eric Adams of New York, who says the 421-a tax exemption
is a way of creating affordable apartments and producing
good-paying jobs for construction workers.
However, there is no single documented reason why the
legislature did not vote to extend the program — even though
Assemblyman Jeffrey Dinowitz, a Democrat representing some parts of
Bronx, noted that many people have very serious problems with the
421-a program. There are speculations that the legislature was
preoccupied with “more pressing issues” such as gun
rights following the racially motivated mass shooting in Buffalo
and abortion rights given the prospect of SCOTUS repealing
Roe v. Wade. Gov. Kathy Hochul is said to have
proposed an updated version of the program, called 485-w, but the
legislature did not act on that proposal because it is similar to
the old one.
What is the future like? Tenants who live in houses where the
developers accessed 421-a tax exemption are eligible for, and
usually enjoyed, rent stabilization. But with the expiration of the
program, one can only wonder about the fate of affordable housing
in New York City. Gov. Hochul expressed optimism that the program
may be restored in 2023, as she says she will continue to negotiate
behind the scenes to get it done. However, the bill has expired,
and uncertainty looms. If it never gets renewed in its present or
updated form, then affordable housing within the metropolis of New
York City is at risk and rent stabilization may soon become a thing
of the past. History. We will have to wait and see what
happens.
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