Analysis of Task Force recommendations
Summary
The Bloomberg Administration has rightly recognized the need to reform the 421-a property tax exemption program. For too long, this program has wasted hundreds of millions of taxpayer dollars, created very little affordable housing, over-subsidized luxury developments, and fueled gentrification.
However, the recommendations of the 421a task force do not go nearly far enough to fixing this broken program. They modify the program in a few neighborhoods, but make no difference for the vast majority of the city. Unless the program is more thoroughly reformed, the City will continue to give away millions of dollars to subsidize the development of luxury housing and the gentrification of many neighborhoods.
Key problems with the recommendations:
The biggest problem with the Bloomberg Administration recommendations is the small extension of the "exclusion zone," in which developers must include affordable housing. Outside of this zone -- in most of the city -- developers would still receive a substantial tax break for building only market-rate housing.
Included are only Lower Manhattan (TriBeCa and Wall Street, which should have been added long ago), the Upper West Side/West Harlem (up to 125th Street), a few blocks of East and Central Harlem, DUMBO, and Brooklyn Heights, and some waterfront parcels in Queens and Brooklyn.
Not included are most of Harlem, Washington Heights/Inwood, Downtown Brooklyn, Park Slope, Fort Greene, Williamsburg, Greenpoint, Brighton Beach, Bedford-Stuyvesant, Bushwick, Long Island City, Astoria, Forest Hills, Flushing, Riverdale, etc. Million-dollar condos in all of these neighborhoods would continue to receive subsidies. The City's own financial analysis shows that the tax break is not needed in many more neighborhoods.
There is no increase in affordability requirements. The program currently only requires 20% of the units affordable to families earning up to 80% of AMI ($56,720 for a family of 4). Legislation introduced in the State Legislature calls for the requirement to be expanded to 30% of the units affordable to families earning no more than 60% of AMI ($42,500).
This is especially true in hot-market, high-density areas being rezoned with inclusionary zoning -- where right now developers can get both a large density bonus and a large tax break, vastly increasing the profitability of their development, all for the same small 20% affordable units.
Another good idea is the creation of a "100% moderate-income option," so developers in softer-market neighborhoods who are building new housing that is affordable to the average New Yorker would be eligible for a tax break.
- There are no provisions for long-term preservation of the affordable units. Low-income families are at risk of being pushed out of their homes in a few short years, when the tax breaks expire. The tax breaks should require permanent -- or at least much longer term -- affordability. In exchange, developers should be eligible to receive some ongoing tax relief (on the affordable units).
Recommendations we support:
We agree with the proposed elimination of "negotiable certificates." This off-site program is so inefficient (worth only 12 to 15 cents on our tax dollar) that it cannot be fixed. Affordable units should be provided on-site, or else developers should pay their taxes.
A significant portion of the new revenue that the City will collect as a result of these reforms must be truly dedicated to affordable housing. Quick estimates of the new tax revenue from the reforms over the next 20 years range from 2 to 5 billion dollars in "net present value" (lifetime value could be nearly double that). At least half of the new revenue should be dedicated to affordable housing.
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