Most newly-constructed housing developments in New York City are currently eligible for a 10-15 year property tax exemption under the City’s 421-a program, even if no affordable housing is provided. There was a study on this program was conducted in 2003 that found from 1985 – 2002, as few as 7% or 4,905 of the 69,000 units were actually subsidized and made affordable to low or moderate income families.
This property tax exemption is available for new housing developments consisting of three or more units, located on sites that were vacant, underutilized or had a “nonconforming” zoning use. This program allows owners to save money when the value of their property increases after the new construction. For example, if an owner pays $2 million and after construction the new property is worth $10 million, the property owner will not be taxed for the $8 million increase in value during the exemption period.
Mayor Bill de Blasio wants to revise the 421-a program to include the construction of tens of thousands of affordable apartments for the working class New Yorker, who increasingly find themselves priced out of a booming real estate market and rapidly gentrifying neighborhoods. Primarily teachers, firefighters and the construction workers who build these developments but then can’t afford to live in them. Construction is a very dangerous industry with workers injuring themselves and/or dying every month for the rich to live in these glamourous luxury Manhattan apartments while the construction workers themselves struggle to make ends meet. This topic ties into one of last week’s blogs about the prevailing wage rate for construction workers.
“No more tax breaks without building affordable housing in return,” Mayor de Blasio said in a statement. “This can’t be a city of just penthouses and luxury condos. We are turning the page, and making sure the same pressures that have pushed New Yorkers out of their neighborhoods are harnessed to build the next generation of affordable housing.”
Mayor de Blasio’s new program calls for developers throughout New York City to make about 3o percent of the projects apartments for poor and working class residents in order to receive city tax benefits for 35 years. This is a significant change from the current tax abatement of 421-a. According to the NY Times, in 2014, about 150,000 apartments qualified for the tax break, which cost $1.06 billion in forgiven taxes. But of that amount, less than 15 percent of those units were affordable for low and moderate income tenants.