Date: March 2015
Originally Published: NY Daily News
Why should New Yorkers cover the property taxes of the exceedingly rich individual who just paid $100 million for the most expensive penthouse in the Western Hemisphere?
They shouldn’t. Which is why we must work to fix a broken law called 421-a, which gives property tax breaks to new housing developments in New York City. It’s supposed to be an affordable housing program, but over the years it has become a raw deal for middle-class New Yorkers.
Many New Yorkers have never heard of the 421-a tax exemption, but given its outsized impact, they sure should have. The program cost the city $1.1 billion in lost tax revenue in 2014, a figure that climbs higher every year — all for a relatively small number of affordable units.
The abatement was created in the 1970s to encourage residential development at a time when New York was on the brink of fiscal collapse. Back then, building new housing in the city was seen as an inherently risky investment.
Times have changed dramatically. The global elite are now more than eager to park their cash in Manhattan real estate, and the market for ultra-luxury condos is hotter than it’s ever been.
It seems that every month, another record is broken for the most expensive condo sale in our city’s history. Most recently, the penthouse at One57 in Manhattan’s billionaire’s row was sold for $100.5 million.
As a result of the 421-a program, the owner of this penthouse will get a $360,000 property tax cut this year, a cut that could continue every year for the next decade, then phase out every two years over the remaining eight.
The current law only requires 20% of housing units to be “affordable” for those making 80% of median income. A little over 17,000 such units, specifically provided for low to moderate-income households, were designated in 2014. Requiring a sizeable increase would be more than economically feasible.
Furthermore, 421-a only impacts 14% of affordable housing construction.
Meanwhile, millions of middle-class New Yorkers will see their property tax bills go up, millions more will be squeezed by escalating rents and a growing number of families will be pushed into homeless shelters. This is unconscionable and unacceptable.
421-a is supposed to be an affordable housing program, but at a recent City Council hearing it was hard for anyone to determine how many affordable units it has created. We could be building or directly subsidizing a lot of affordable housing for that $1.1 billion in lost revenue — or start a citywide Section 8 voucher program to help struggling families on the edge of homelessness.
This exemption is growing at an exponential rate. Tax abatements have increased from just $1.3 million in 2003 to the current $1.1 billion — a staggering jump. That’s more than six times the growth in the city’s property tax collections over that same period, according to the Fiscal Policy Institute.
Geographically, some of the largest low- to middle-income populations in Brooklyn and Queens are excluded. Additionally, the area in Manhattan above 110th St. is completely excluded.
In short, this program is encouraging neighborhood destabilization and displacement, especially in communities of color, at a time when more and more renters are being priced out of their apartments and neighborhoods.
Our city government and our state legislators pledged to make affordable housing a priority. However, as it now stands, 421-a presents major economic loss for our city and is not meeting its intended goals.
In June, the abatement will expire unless our state Legislature takes action to renew it. This is our opportunity to craft a program that can create more affordable units than ever before and maintain prices that New Yorkers can actually afford. In its current form, 421-a is more of a handout for the rich than a tool to create affordability.