The renewal of an arcane piece of housing policy with an esoteric name like 421-a seems like something that should fly pretty safely under the radar. But in New York City tenant advocates have taken to the streets to protest a 44-year-old property tax exemption program that they say is being used to subsidize luxury apartments for millionaires and billionaires. With the program up for renewal in the New York State Legislature this June, these advocates, along with some City Council members, are urging Mayor Bill de Blasio to push for its elimination. But developers are advocating for just the opposite, saying that 421-a is needed to keep the city building.
The 421-a tax exemption program was launched in 1971 to boost multi-family housing development in New York City by offering property tax abatements that could last up to 25 years. The program was subsequently tweaked to require developers building in highly desirable areas to set aside a certain amount of affordable units. In 2008, the program was updated again requiring that affordable housing in these high-demand areas was on-site. But as tenant advocates point out, these units are not required to be permanently affordable.
David Sundberg / Esto
Over the decades since 421-a went into effect, a lot has changed in the New York City real estate world and those opposed to the program say it is no longer necessary to incentivize development in this way. They see 421-a as an unnecessary tax break for the wealthy that is cutting off funds for the city. According to the Independent Budget Office, in 2013 alone 421-a tax exemptions cost New York City $1.1 billion in lost tax revenue. Adding to the overall controversy is the fact that many units receiving these huge tax breaks are in some of New York’s most expensive buildings. This includes the Christian de Portzamparc–designed One57, which has become a reluctant poster child for the program.
In early February, the New York Times reported that the unknown buyer of a $100.5 million penthouse in the building would get a 95-percent tax cut this year— shaving $360,000 off their yearly property tax bill. The Times noted that the building was technically ineligible for the 421-a program because it did not have on-site affordable housing, but it was granted an exemption, along with four other high-end Manhattan towers, by state legislators. (The New York Post subsequently reported that United States Attorney Preet Bharara is investigating why the developers behind these extremely expensive buildings were granted tax breaks in the first place.)
New York City developers contend that residents in 421-a buildings will ultimately pay their fair share of taxes, and that the program is absolutely essential to achieving the mayor’s housing agenda. “Without this critical tax incentive, the city would see a sharp drop off in the production of new housing units, a further skewing of the residential market toward condominium rather than rental production, and an accelerated tightening of housing costs for renters and buyers alike,” said Steven Spinola, president of the Real Estate Board of New York, in a statement.
This type of argument does not hold water with housing advocates like Ilana Maier, program director for the Metropolitan Council on Housing, a tenants’ rights group. “We need to stop considering 421-a an affordable housing program,” she told AN. “We need to start calling it what it is: a tax subsidy for billionaires.”
Maier said the idea that developers still need these subsidies is both “absurd” and “offensive” given the profits they are now able to earn from New York City real estate. Like many housing activists, Maier wants to see 421-a, “a horrible policy,” die out this June. Even if that does not happen, she is optimistic that Mayor de Blasio will champion reforms to the program that benefit lower-income New Yorkers. This could include expanding the area where developers must include on-site affordable housing and requiring new affordable units to permanently remain below market-rate.