On October 11, Mayor Michael R. Bloomberg announced that he would endorse recommendations to take a 35-year-old tax incentive program aimed at spurring residential development of all types and refocus it on encouraging affordable housing. The recommendations came after months of research on the part of a special task force convened in February. However, some of its members who supported modernizing the program, which is known as 421-a, now question whether the changes may actually hinder affordable housing construction.
It wasn`t like we didn`t agree there needed to be changes,, Real Estate Board of New York president Steven Spinola said, but he, along with many of the developers and some other task force members, worry that the pendulum has swung too far: You need the full package to make housing work in New York,, he said. If part of that package is emptied, some people won`t build..
421-a is an incentive program designed to encourage large-scale residential development by offering tax abatements for up to 20 years. As the program spurred development in Manhattan`s Midtown and Uptown and more recently Williamsburg/Greenpoint, those areas became exclusion zones wherein developers could not receive tax abatements unless they provided affordable housing on-site, or outside the zone through a certificate program.
Affordable housing advocates have seized upon this part of the program, seeking to expand the exclusion zone, increase eligibility from a three- to six-unit minimum, and cap abatements at units costing more than $1 million. These are measure that both for-and non-profit developers agree upon. One of the insanities of the current policy is the more expensive [the housing] you build, the more subsidy you get,, explained Ingrid Allen, a task force member and professor at the Furman Center for Real Estate and Urban Policy at New York University.
The point of contention is the certificate program within 421-a. It offers tax breaks if developers fund one dollar of affordable housing outside the zone for every five they spend within it, allowing them to fulfill their obligation without incorporating the affordable units in new developments. Under the current recommendations, the certificates are being abolished in favor of a program that requires developers build 80 percent market-rate, 20 percent affordable on-site. The extra tax revenue generated by this move will be placed in an isolated fund for affordable housing. Department of Housing Preservation and Development (HPD) spokesman Neill Coleman explained that this plan ensures units of relative value that encourage healthy social mixing because the ratio deals with units, not dollars, which scale more evenly. The biggest fear for developers is that the city is legislating from the top of the market,, as Allen put it. Everyone involved agrees the market was stronger a year ago, but now Community Preservation Corporation vice president John McCarthy, whose company provides loans to affordable housing developers, believes the recommendations may not be nimble enough to deal with a dip or turn in the market.
What really has both developers and affordable housing advocates concerned is that without certificates, there is one less way to subsidize housing outside the exclusion zone. Presumably, the newly created HPD affordable housing fund will support more affordable housing than the certificate program. But some, like Carol Lamberg of the housing advocacy group Settlement Housing Fund, believe the certificates, while inefficient, would be better than money that cannot be guaranteed as substantial and secure.. And then there`s politics as usual. Mayor Bloomberg`s been great on housing,, Spinola said, but what about the next administration??