Comptroller Lander presented new analysis of $1.8 billion boondoggle and recommended comprehensive property tax reform. Cabán + Sanchez announced co-sponsored resolution urging state legislators to let 421-a expire.
New York City Comptroller Brad Lander and Council Members Tiffany Cabán and Pierina Sanchez rallied with advocates and other elected officials to call for the end of the 421-A tax break. Council Members Cabán and Sanchez introduced a City Council resolution (Res 0064-2022) urging the state legislature and the Governor to allow the program to expire, rather than enact a revised version proposed in the Governor’s budget. Comptroller Lander concurrently released A Better Way Than 421-a: The High-Rising Costs of New York City’s Most Unaffordable Tax Exemption, an analysis of the cost of the program and its proposed changes, the impact on housing production, and the nexus between 421-a and structural property tax reform.
Read the resolution here. Read the report here. The press conference was livestreamed here.
“The 421-a program is a towering boondoggle – costing our city $1.77 billion this year in foregone taxes and delivering only a small handful of actually affordable units in return,” said Comptroller Brad Lander. “Rearranging the number and letters is tantamount to slapping a gold-plated bandaid on to hold together a deeply inequitable and opaque property tax system, and then pretending we’ve fixed our affordable housing crisis. Tinkering around the edges may be what developers want, but it’s not what New York City needs. It’s time to let 421-a sunset — and take our best shot to build a fair and stable property tax system that eliminates disparities, facilitates rental development, and focuses our scarce affordable housing resources on genuinely affordable housing. Today, we are laying out the path to do it.”
“421-a is not an affordable housing strategy, it’s Free Billions for Developers. At a time when we have so many people desperately in need of vital assistance, we have absolutely got to stop this massive give-away to the wealthy real estate interests who need it least. New York City real estate is one of the most valuable, most profitable asset forms in the world. It’s time we stopped focusing on pleasing the profiteers, and started focusing on meeting the needs of the everyday New Yorkers who make this city such a desirable place to live,” said NYC Council Member Tiffany Cabán.
“In its 51 years of existence, 421-a has yet to provide the adequate number of affordable homes for low-income New Yorkers. Instead, this program has given developers the biggest tax break in our city for their profit. In a city where 75% of New Yorkers cannot afford the units set aside through this program, 421-a does not provide low income New Yorkers with the affordable homes they need. We need a true affordable housing plan for New Yorkers, not another opportunity for developers to profit. It is time we make New York City affordable for New York City residents,” said Council Member Pierina Sanchez.
Over the years, New York’s property tax system has become a patchwork of exemptions and abatements responding to changes in the housing market, the largest of which is 421-a. Established in 1971, the 421-a tax exemption was designed to spur housing development at a time of disinvestment. The Department of Finance estimates that the 421-a program will cost New York City $1.77 billion in foregone tax revenue for roughly 64,000 exemptions this year. Both the Comptroller’s report and Council Resolution call on state legislators to allow the current program to expire as scheduled on June 15, 2022.
In “A Better Way Than 421-a,” the Comptroller’s office estimates that more than 60% of the income-restricted units created by the 2017 version of the program were built for families earning well over $100,000 a year, making those units unaffordable to nearly 75% of New Yorkers. For example, a family of three would have to earn up to $139,620 and pay about $3,400 a month for a two-bedroom apartment. The rally on Wednesday was held at The Willoughby in downtown Brooklyn, which will receive this tax break and has an open affordable housing lottery. The least expensive unit is $2,500 per month for a studio apartment, advertised to an individual or couple making between $86,500 and $124,150.
Governor Hochul has proposed a reformed version of the tax break called 485-w, which offers developers three options in order to qualify for a decades-long tax break. Based on an analysis of the impacts of the 2017 program, the Comptroller’s office anticipates that most developments would likely choose 485-w’s new Option B or Option C (see page 15 of A Better Way Than 421-a), creating units with monthly rent for a two-bedroom at over $2,300 or estimated monthly homeownership costs over $3,800, still out of reach for the majority of New Yorkers.
Rather than small reforms that achieve little affordability—like 485-w—the Comptroller’s office proposes structural changes to the property tax system that would address the disparity in taxation between condominium and rental buildings that constrains the development of multifamily rental housing. The New York City Advisory Commission on Property Tax Reform found that the median effective tax rate on rental buildings is roughly double than a condo building, a strong disincentive to developing rental housing. The Comptroller’s report finds that the lower, uniformly, and broadly applied tax rates proposed by the New York City Advisory Commission on Property Tax Reform could largely eliminate the need for 421-a as a development incentive.
The report recommends that State legislators should let 421-a expire on June 15, 2022 and should set a deadline of December 31, 2022 to achieve structural property tax reform. The report finds that allowing 421-a to lapse in June, with a deadline of achieving comprehensive property tax reform, is not likely to impair housing production in the short term. The Comptroller’s office analyzed permitting data from when 421-a lapsed in 2015, finding that developers rushed to begin projects before the deadline, yielding roughly three times as many permitted units in that year as in the years prior. The data shows that the number of permits jumped to over 25,000 units in May and June 2015 just before the program was initially set to expire; more permits were filed in those two months than in all of 2014. The analysis found more than 50,000 units permitted in 2015 have been built, with large increases in the number of units receiving 421-a exemptions.
A Better Way than 421-a lays out recommendations on how to reform the City’s property tax system to bring both parity horizontally between homeowners across the city, as well as vertically between new rentals and new condos/co-ops. Building on the principles and recommendations in the Commission’s Final Report in December, the Comptroller’s office urges comprehensive property tax reform that would include the following elements:
- Introduce a uniform sales-based valuation methodology and a single revenue-neutral tax rate for 1-3 family homes, co-ops and condominiums, and small rental buildings. Tax relief programs should favor primary and low-income residents and replace the current assessed value growth caps.
- Make tax treatment equal between new residential constructions to provide a broad, strong, fair incentive for new construction going forward. This would largely eliminate the need for a 421a-style development incentive program.
- Establish a new, targeted affordable housing tax incentive that would match the level needed to achieve genuine affordability, rather than provide a tax exemption that underwrites both market-rate and income restricted units. This new incentive should also come along with strong labor standards to provide good jobs for New Yorkers.
“421-a has always been a boondoggle, generating very little truly affordable housing for the communities we represent,” said Judith Goldiner, Attorney-In-Charge of the Civil Law Reform Unit at The Legal Aid Society. “Governor Hochul’s proposed ‘reform’ to 421-a, 485-w, is just another version of the fundamentally flawed tax break and is in many ways much worse. We laud the Senate and Assembly for taking this costly tax break out of the budget, saving New York City hundreds of millions of dollars each year, and call on the City to use these funds to expand already proven housing programs – including CityFHEPS, a highly successful voucher initiative that has so far connected thousands of New Yorkers to safe and affordable housing.”
“With affordability at record lows and rents at record highs the last thing we can afford is to continue to waste billions of dollars on the failed 421-A program or the Governors proposal for its doppelgänger 485-w,” said Charles Khan, Organizing Director at the Strong Economy for All Coalition. “The program has proven, similar to NY’s other economic development programs, to be excellent at padding the profits of wealthy developers and an abject failure at creating actually affordable housing or sustainable good jobs.”
“Churches United for Fair Housing is thankful for the strong leadership of Comptroller Brad Lander, Council Member Tiffany Caban, and Council Member Pierina Sanchez as they elevate calls on the City level to our State Legislature to finally end the broken and flawed 421A program,” said Whitney Hu, Director of Civic Engagement and Research for Churches United for Fair Housing (CUFFH). “After 50 years, multiple attempts at reform, 421A has only increased displacement, rent prices, gentrification, and has failed to provide true affordable housing for New Yorkers while giving giant tax giveaways to corporate developers. It’s time to end that program and make space for investments and legislation that will actually protect New Yorkers and keep them in their homes including social housing and passing Good Cause.”
“It’s long past time that we end 421a. We cannot afford to give tax breaks to new luxury developments with high priced rents that push residents out. The urgency of our housing crisis is clear. We must end 421a and use our precious public benefits to support the truly affordable housing our neighborhoods need, not the private profit interests of real estate developers,” said Barika X Williams, Executive Director of Association for Neighborhood & Housing Development (ANHD).
Read more about the analysis in A Better Way than 421-a here.
No comments:
Post a Comment