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“421-a or any alternative’s inclusion in our toolbox to tackle the housing crisis is by no means a silver bullet, but its absence has already and will continue to hamstring our ability to respond. We cannot accept this if we want to solve our housing crisis.”
Adi Talwar
The 421-a tax abatement was implemented in 1971 as a means to spur housing production at a time when New York City was falling apart. Deteriorating housing stock, white flight, and overall decay gripped the five boroughs, and this was their pitch to developers: Come back and rebuild the greatest city on Earth, and have some of your property taxes shaved off. Over the years, as people, money, and builders slowly started returning to New York, it underwent several tweaks, extensions, and adjustments, with changes centered around affordable housing. In 2016, it became the foundation for former Mayor Bill de Blasio’s Mandatory Inclusionary Housing program.
More than 50 years after its implementation, and a year after its demise, 421-a remains in the spotlight of policy debates. Opponents of the tax break often criticized the program’s effectiveness in delivering affordable housing, and they have good reason to be critical. The program was quite lenient regarding what constituted “affordable housing,” allowing developers to reap the benefits of the tax break while providing units for people earning as 130 percent of the area median income, sometimes even higher.
Not to mention the collection of loopholes left unchecked in the program that developers regularly abused. One of those loopholes allowed developers to benefit from the program while putting the affordable housing on a separate site, sometimes several miles away. Politicians had no interest in supporting any kind of tax break, even when Gov. Kathy Hochul proposed a replacement program in 485-w. With the tax abatement on its deathbed, many lawmakers essentially recreated this clip from The Lorax in response.
But a year removed from 421-a’s death, we are starting to get a picture of what housing production will look like without the tax break, and it’s not a pretty one. Permit applications have significantly slowed in the last year. According to Manhattan Borough President Mark Levine, only six multi-family permits were approved last month, totaling only 539 units. And there are signs indicating that this trend is only going to worsen.
The absence of the tax break is not the only reason for the decline in new construction—that has been ongoing for a few years now—but it is worsening this dire trend. At a time when we are already struggling with housing supply and are building at an anemic pace, anything that amplifies this slowdown should be treated as an abject policy failure.
But that only deals with housing in general, and affordable housing is the key variable here. The crux of the opposition against 421-a was that it enabled developers to take advantage of the tax break without truly delivering the affordable housing the city needs. This assessment is partially true—421-a did enable developers to take advantage of the tax break without providing meaningfully affordable housing.
At the same time, the tax break made many projects that did include deeply affordable housing financially feasible. Projects like Hunter’s Point South that provide the deeply affordable units the city desperately needs were possible because of 421-a. Without it, they would have never been built, and the already small number of projects that provide affordable housing will thin out even further.
We are already starting to see this play out. In November, the City Council approved Innovation QNS, a 3200-unit mega project slated for Astoria. Several months of lengthy debate between community stakeholders, Councilmember Julie Won, and the development team resulted in the inclusion of over 1,400 affordable units.
But there was a catch: The inclusion of the extra affordable housing and the depth of affordability was contingent on the presence of 421-a, with the developers admitting that they accepted the compromise hoping the tax break would return. But with no movement towards a revival, the prospect of Innovation QNS, along with thousands of units of housing ever being produced is grim.
Recent rezonings like those in SoHo/NoHo and Gowanus could also be threatened, a prospect that is much worse than it appears at face value. Both rezonings circumvented the glaring flaws in the 421-a and the Mandatory Inclusionary Housing programs, requiring developers to rent affordable units to people in much lower income brackets. These two rezonings are also in wealthier areas with higher land and construction costs, the additional hurdle of a mandatory Landmarks Preservation Commission review in most of the SoHo rezoning that further inflates building costs. Development must be as feasible as possible in these areas, and if that means having a tax break to make these developments financially feasible, so be it.
These worsening trends, juxtaposed with the collapse of Gov. Hochul’s housing compact, have led some leaders to consider an extension of the 421-a deadline at the tail end of the legislative session, to no avail. But while an extension might be a fine short-term fix, critics are right to argue that there are too many fatal flaws for a revival to be an adequate long-term solution. An extension is only appropriate for legislators to come up with a replacement program—one that does not apply to developers who build their affordable housing offsite, and has more appropriate requirements regarding eligible income brackets.
Area Median Income is a flawed metric, inflated by our wealthier suburbs looped into the data. But while Albany doesn’t have control over this measurement, we can determine what income brackets could qualify for a potential tax break. Using the United States Department of Housing and Urban Development’s chart, Albany could decide only units at or below 80 percent AMI qualify for the tax break. Middle-income units are still needed, and the zoning bonus could still apply for units between 80 and 165 percent AMI, but without the tax break. If state legislators wanted to, they could lower the eligible income brackets even more and offer additional benefits to developers who provide housing for homeless individuals. If a tax break is to exist for developers, the city and the state need to get something meaningful out of it, with no room to circumvent the requirements.
Catering to wealthy developers sounds counterintuitive, and it’s not hard to see why many see 421-a as nothing more than a developer giveaway. Solving our housing crisis also cannot be solely contingent on developers—government agencies, community land trusts, and other nonprofits should also be given the means to deliver on our housing needs.
However, if developers cannot build any housing whatsoever, we can say goodbye to any chance of us tackling our housing crisis. Whether we like it or not, they are a key component in our ability to tackle the housing crisis, and we need it to be as feasible as possible for them to provide the affordable housing we need. 421-a or any alternative’s inclusion in our toolbox to tackle the housing crisis is by no means a silver bullet, but its absence has already and will continue to hamstring our ability to respond. We cannot accept this if we want to solve our housing crisis.
But 421-a is just one piece of one of the most corrupted and inequitable property tax schemes in the country, something politicians frequently invoke but never take action on. Our seemingly untouchable property tax framework further complicates our ability to solve our housing crisis and reinforces the same trends hurting the state.
Whatever the fate is on 421-a, this should jump-start tangible action on property tax reform that our representatives have talked about for so long, so we can have an equitable system for all New Yorkers and a clear pathway to solving our housing crisis.
Austin Celestin is a rising senior at New York University.
