421-a Revamp: A Lose-Lose Proposition?

421asign.jpgThe new regulations for the 421-a tax-abatement program, which long offered developers a tax break in exchange for building affordable housing in certain parts of the city, are set to go into effect at the end of June. The bulk of reporting on the subject has focused on the fact that the program’s new rules will mean developers can’t receive abatements in many neighborhoods they used to, including large swaths of Brooklyn. According to a story in today’s Times, however, changes to 421-a will also mark the end of its “negotiable certificate” program, whereby affordable housing builders could transfer or sell off the abatements they received for building affordable units to another developer who was building market-rate housing at a completely different project. The certificate transfers thus generated revenue for affordable builders and gave market-rate developers tax-abatements they could offer to their building’s buyers. A spokesperson for HPD says very few affordable developers used the transfer program, though developer Gary Barnett of Extell Development Corp., for example, says the change will mean there will definitely be a slowdown in affordable development, and development in general, in the city. Carol Lamberg, executive director of the Settlement Housing Fund, a nonprofit group that has built low-income homes in New York since 1969, says that while the certificate transfer program favored affordable developers who were well capitalized, its sunsetting is still a blow for the larger affordable housing development community. It’s one less tool, and we need every tool we can get, she says.
Developer of Affordable Housing Faces New Challenge [NY Times]
421-a Compromise Reached; AY Carve-Out Reduced [Brownstoner]
Downtown Boosters Wary of Credit Crunch, 421-a Revamp [Brownstoner]

0 Comment

  • if you can afford a $800-2000 per sq ft condo you do not need a tax abatement

  • maybe i would prefer to pay $450/square foot plus taxes but developers seem only able to bring product in at $800, in which case i need the apartment to be tax free (and for one of my parents to die)

  • I don’t understand this program – who gets the tax abatement – the developers or the owners who buy the property the developers build?

  • # 3 – it’s the owners who buy the condos who get a tax abatement.

  • Wow would have guessed that the Govt would end up implementing an effective tax increase at the precise moment that housing prices and the local economy were the most vulnerable….

    And I always thought that the Govt knew what it was doing….

  • Horse-puckey!

    421-a has been abused for years, period, end of story. The majority (and I’d bet it’s 95% or higher) of the recent developments that took advantage of 421-a’s current incentives NEVER build any affordable housing, or rather, only built houses for those making well into the 6 figure range.

    I was a proponent of killing off this “tax leech” completely, but definitely tying the affordable housing to the actual building and not some certificate transfer program will stop some of the rampant abuse.

    Now, let’s see who rushes to beat the clock as the current version sunsets.

  • Yes but 10:03 – since the developers can then sell the units at higher price (b/c of the low taxes), the developers reap alot of the benefit….

  • 10:21 (Action Jackson) – I don’t think you understand how 421a worked. There were 3 ways to get the benefit: 1) Be located outside of the “exclusion zone”, 2)Include at least 20% affordable units in your projects, or 3) Buy certificates from an affordable housing developer who earned them by actually building affordable housing somewhere else. The first option did not lead to any new affordable housing, nor was it intended to. It was intended to spur new market rate development in what were considered blighted areas. Obviously the definition of what was in and out of the exclusion zone was outdated and included some pretty ritzy neighborhoods, but that’s a different issues. The second option actually resulted in many 80/20 projects getting built in manhattan, which accounts for alot of affordable housing. The third option provided cheap financing for affordable housing developers and was a very important element of the financing stack for projects all over the city – mostly in the Bronx and Staten Island. Developers like Arker used them all the time. It’s just factually incorrect to say that 421a didn’t result in the development of affordable housing in the city.

  • 10:21

    You actually making a comment about something you have no idea bout.

    And 9:14
    You are complete tool also. Do you even know the math? If your mortgage is $2000/month, common @ $600 – you are saying a tax that increases your monthly bill 30% is not significant. You must be a renter.

    both of you should really STFU.

    421-a has always been flawed. But opening both of your mouths will probably lead to a worse idea since you actually have no clue how 421-a works and the actual numbers.

  • Nice. So much for an intelligent debate/discussion, 11:12am.

    Keep up that wonderful charm of yours. Any chance of you clarifying your STFU statement or just being trollish today?

    10:54am, while 421-a may have sparked AH in Manhattan, SI and the Bronx, it did nothing but spur on luxury condo development in Brooklyn, especially in the past 5 years.

    But hey, what do I know, right?

  • I think based on 10:54′s and Action Jackson’s comments, we can infer that “exclusion zones” were very slow to catch up with market values in Brooklyn, which has seen the most rapid gentrification of all the boroughs. Therefore, the part of 421-a that operated on this basis was baloney. Is that what we’re saying? And is this part going to be tossed?

    Sounds like the other parts of 421-a were more beneficial and operated as intended. Or have I got this wrong?

  • Affordable housing or not – the cities tax coffers are going to be growing rapidly as the new developments built with 421a begin to have their abatements expire.

  • I am with the rational people on this. 421-A is many things to many people but it’s primary purpose was to spur development in bad areas. In most cases, where the developer opted to build market rate housing the tax benefit went to the buyers and not the developers. The developers in fact have to pay $26,000 – $36,000 per credit – that cost is then passed on to the buyers who think they are getting a bargain because their taxes are so low. In fact, they are paying those “taxes” up front in the cost of the unit. The money “saved” would serve them better if they bought an older place and kept the mark-up in their pocket.

  • ActionJackson

    11:12AM here…
    Trolling. Like most internet forum, Curbed and Brownstone are rather useless place to discuss such serious topics (if you don’t know why then god help you). If you take it seriously then there is really nothing we can do.

    That being said, about STFU – it still stands. You have no idea how 421-a works, although that did not stop you from putting your .02 in.

  • 10:54 here. 11:45 is exactly right. The problem with 421a was that the “exclusion zones” really only included manhattan south of 96th Street. So it was silly to have Dumbo, Brooklyn Heights and Park Slope not included. What was needed in order to reform 421a was simply to redraw the boundaries to include the high-rent neighborhoods of Brooklyn. However, the reform that was passed went way beyond that. The exclusion zone was expanded to include huge sections of Brooklyn that are clearly not “high rent” also, the whole third portion of the program I listed above (buying certificates from affordable housing developers) was effectively killed. The reform went way too far and killed a program that on the whole was an effective tool to get affordable housing built and bring new market rate development to “pioneering” neighborhoods.

    Action Jackson – so you admit that 421a was an effective tool for affordable housing, just that it wasn’t working in Brooklyn? Then we agree.

  • Oh – and you can thank Vito Lopez for destroying a good program by pushing the reform too far…

  • “Action Jackson – so you admit that 421a was an effective tool for affordable housing, just that it wasn’t working in Brooklyn? Then we agree.”

    I have yet to see it work well in Brooklyn and that is the only exposure I have to it. I’ll take other’s leads for the other boroughs. The redraw, in my POV, will do little to encourage the new use. If anything, it will discourage the abuse of the current 421-a with the new rewrite of the tax abatement.

    So, I guess we can half agree then…

    Again, Mr. STFU (can I call you that), I would disagree that logical and well thought debates to occur on blogs such as this (hell, the major news outlets sight brownstoner often…perhaps you don’t read?). Of course the blogs do also have trolls like yourself.

    So much for witty repartee.

  • You are still wrong Action.
    You declare it not working in Brooklyn how? Do you have statistics? Do you have low cost developers telling you not working? What does developers selling 421-a certificates say about it. Do you have anything other than your keyboard?

    the only thing you are doing is putting your .02 in where it does not matter. So in return I put my .02 – STFU already! But mine lack pretentiousness.

    The anonymity, lack of evidence and simplification of a complex topic makes blog sites worthless of any serious discussion. All it does it gives random people place to vent – no matter how nonsensical their comments are.

  • BTW -

    11:50 you are also wrong. All current abatement stands (10 or 25 year). Only developments are affected. And that remains to be seen if there is a slow down in both affordable and market priced development.

  • I think 11:50 was taking a longer term view and saying that, as project that have been built over the past 10 years begin to have their abatements expire over the next 10 years or so, the City will reap the additional tax collection.

  • NY Sun, May 8, 2008
    Last Chance at 421-a Credits Could Spur Condo Market

    By CANDACE TAYLOR

    Excerpt:

    “While some developers bemoan the end of the certificates, the city claims it wasn’t an efficient way to generate housing for poorer New Yorkers, as it leveraged only 15% to 20% of the value of the tax benefit for subsidized developments, a spokesman for the Department of Housing Preservation and Development, Neill Coleman, said. “Eliminating the certificates will lead to a greater mix of affordable and market-rate units citywide, and the production of more affordable housing in high-price neighborhoods,” he said.”

    And that’s from City and HPD.

    Need I demonstrait more? Wait, I guess I should STFU.

  • Wow you quoted the NY Sun. Everybody go home.
    That is your research and basis for your specific ‘I have yet to see it work well in Brooklyn’ comment?

    If you where in your junior year HS – I would fail you.

    2:40
    Understood. But as I said, that still remains to be seen. 10 years is a long time. The city already started a program to replace 421-a. God knows what else can come up between now and 2018.

  • Totally cutting out program an unmitigated long-term knee jerk disaster for affordable and unaffordable housing.

    Good news – will kill much development in city, bringing down inventory. Will also cause shortage in 2-5 years, helping raise prices again.

    Taxes so high in city. Program rules ought to have been changed to faster fade-out, partial abatement or some such thing, not total fadeout. Govt. and R.e. don’t mix well.

    There will be less affordable in city as a result.

    I spent 9 years doing 1000 affordable units for City and a NPO in BK, 10 years selling apartments in BK and Manhattan and how do commercial.