Time is running out for state lawmakers to decide the fate of a controversial tax incentive for developers to build affordable housing in New York City. As they debate the pros and cons of the 421a program and a potential successor, the Citizens Budget Commission is out with a new report on what it says is missing from those conversations – cold hard numbers.
The 421a program, which gives developers a tax break for including affordable units in otherwise market rate developments, is set to expire in June. Lawmakers must decide whether to renew it, replace it with something else or simply let it lapse. The program costs about $1.8 billion in lost property tax revenue for New York City. Housing advocates have often campaigned against the incentive of touting that number and asserting that the city would benefit more from those tax dollars than from what they consider a paltry amount of affordable housing.
But according to the new report from the budget watchdog, ending 421a this year would still mean that the city wouldn’t see that $1.8 billion in foregone revenue for decades. That’s because buildings already part of the program will continue to receive tax benefits, with the longest period of tax abatement for recent projects being 35 years. The Citizens Budget Commission said that until fiscal year 2029, the city would have less than an additional $100 million a year in property taxes if 421a lapsed, and that it would take until fiscal year 2043 to hit even $1 billion in foregone revenue. “Even if it goes away, these exemptions will still be enforced,” report author Sean Campion told City & State. “There’s no going back and taking it away, it’s not going to generate money that would be available for other uses.”
What’s more, the analysis found that many of the projects built as part of the 421a program may never have been built in the first place because they would not have been financially feasible without the tax break. In other words, the city would not have buildings to collect property taxes on in many cases, making the idea of lost revenue now overall moot. Although the Citizens Budget Commission supports a successor to 421a that addresses the existing flaws in the program, Campion said the point of this new report is meant more to add a missing component to the ongoing discussion, adding that considerations about the current cost of the tax exemptions really should not be reason not to renew the program.
However, Rebecca Garrard, legislative director for the leftwing advocacy group Citizen Action of New York, said that the numbers in the report ignore the broader economics surrounding New York City’s housing crisis. She said that big real estate developers have turned larger and larger profits in recent years as the cost of housing continues to soar. “If incentivizing development was good for a city, was good for a state, was good for our country, we would not see the numbers of those who are unhoused skyrocketing,” Garrard told City & State. “To look at things through the very myopic lens of revenue… is a real disservice when we think about the totality of economic health of a city or state or country.”
Discussions on the topic are sure to come to a head before the end of the legislative year in roughly a month with the renewal deadline fast approaching. Gov. Kathy Hochul proposed a similar replacement program as part of her executive budget in January, but it faced strong resistance from lawmakers who didn’t want to address the issue as part of the budget. So it ultimately dropped out of the spending plan, kicked down the road to now.
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