Tenant Advocates Unsatisfied with De Blasio’s 421-a Proposal

After months of calls by tenant advocates, labor unions and policy wonks for sweeping change to a tax benefit that costs New York City some $1 billion a year, Mayor de Blasio on Thursday unveiled the changes he wants to see to 421-a. Coming just two days after the mayor showed his hand on the rent-regulations debate, yesterday’s announcement cleared up questions about City Hall’s negotiating position on the two key housing policy issues on the table in Albany this spring.

The mayor’s proposed changes, which would have to be approved by the state legislature, call for all developments receiving 421-a to build affordable housing; right now, only developments in a small portion of the city are required to do so. De Blasio would also increase the share of affordable apartments in each development from the current 20 percent to 25 or 30 percent. He’d also eliminate 421-a benefits for condos, devote some of the affordable units to lower incomes than are currently served (pushing the income floor from the current $46,600 to $31,000) and eliminate “poor door” separate entrances.

Another element in the de Blasio plan would provide 421-a benefits for longer: It would lengthen the benefit term from the current 20 or 25 years to 35 years to align with the length of time the apartments must remain affordable.

Separately, the mayor proposed a “mansion tax” on sales of property of $1.75 million or more, which City Hall estimates could raise up to $200 million per year.

De Blasio said the 421-a changes would permit over the next 10 years the creation of 25,000 units of affordable housing–twice what the current program would produce–and lower the average subsidy per unit by a third to $391,000.

According to published accounts, the new 421-a would offer three options to developers:

• One would couple the 421-a tax benefits with bond financing and set 25 percent of the units aside as affordable–10 percent serving 40 percent of Area Median Income (or AMI, equal to $31,000 for a family of three), 10 percent for 60 percent AMI ($46,600 for a family of three) and 5 percent serving 130 percent of AMI ($101,000 for a family of three).
• Another would bundle the 421-a tax break with other housing subsidies and require 30 percent affordability–10 percent of the units for families making 70 percent of AMI ($54,390 for a family of three) and 20 percent of them for families making 130 percent of AMI.
• The third option would only involve the 421-a tax break. It would require 30 percent affordability but all those units would be targeted toward the 130 percent AMI tier.

The development community, represented by the Real Estate Board of New York, hailed the plan. In a statement, REBNY president Steve Spinola said it “will result in the creation of much more affordable and market rate, multi-family rental housing in New York City.”

Tenant advocates were less impressed. The idea that drew the greatest skepticism was de Blasio’s proposal to serve not only lower-income renters but also those making significantly more than average New Yorkers.

“[T]he mayor’s 421a reform proposal doesn’t resolve the core problem with the current 421a program – that it gives away a lot of money to developers in exchange for very little affordability, at levels unaffordable to most New Yorkers,” Moses Gates, blogging for ANHD, wrote. “Specifically, the mayor’s 421a reform proposal would give developers the option of a tax break for units that primarily serve residents earning 130 percent of Area Median Income. This means under this proposal NYC would be giving tax breaks to create ‘affordable housing’ to households earning approximately $110,000 a year, or paying approximately $2,700 a month in rent for a 2-bedroom apartment.”

“Let’s be clear: that isn’t affordable housing,” he continued.

Gates, who did praise elements of de Blasio’s plan, contended that the mayor also missed a chance to assure affordability for longer than 35 years–a major concern, since part of New York’s current housing crisis stems from the expiration of affordability requirements covering tens of thousands of apartments.

At Tenants & Neighbors, executive director Katie Goldstein vowed to keep pushing Albany for deeper reform than the mayor seeks. “We still view 421a as a failed and wasteful program, and elected officials have settled for modest reforms before, when they should have ended it and started over to create affordable housing for low income New Yorkers,” she wrote in an email. In a reference to the indictment this week of Senate Majority Leader Dean Skelos for alleged corruption that included shaping 421-a to meet the needs of a developer, Goldstein added: “The scandals we’re seeing in Albany now, which are clearly linked to 421a, will continue to create controversy and will mean increased scrutiny on its renewal this June.”

The Community Service Society of New York (a former parent company of City Limits and a current funder) released a report Thursday calling for 421-a to be scrapped and replaced with a subsidy targeted to creating affordable housing for the New Yorkers least able to afford units on the private market. The mayor’s plan, according to CSS analyst Tom Waters, “will probably result in the creation of more ‘affordable’ units but does nothing to address the gross inefficiencies of the program.”

Debate about whether “affordable” housing is actually affordable to the communities around it, and how subsidies should be divvied up among income groups, is not new. The argument for aiming above AMI is that many middle-class families–typically thought of as cops, firefighters and teachers–earn around that level and that their disappearance from the city exacerbates the “tale of two cities” problem by hollowing out New York’s middle. The argument against it is that, with more than 50,000 people in homeless shelters, New York’s housing crisis is most severe at the bottom of the income ladder and that’s where public resources should go.

Analysts have long noted that de Blasio faced competing pressures: His focus on inequality and affordability pitted him against most developers, but his plan to address those issues by building more market-rate and affordable housing required the participation of those same builders and investors. The question had been where de Blasio planned to draw the line, and he largely answered it on Thursday.

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