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June 20, 2007
State Raises Affordable Housing Bar for 421-a Bill
In a move not likely to boost fundraising efforts with developers, state lawmakers yesterday agreed on a tougher version of the 421-a bill than the city had proposed last December; it is expected to pass when it is brought to the floor on Thursday. The 421-a program, originally enacted in 1971 to spur development in a weak market and set to expire at the end of this year, gives builders significant tax breaks over anywhere from 10 to 25 years. In recent years, even luxury projects in the ritziest neighborhoods have benefited from the law, sparking criticism that the tax breaks are nothing but give-aways in a booming market that would support the creation of new housing on its own. When the City Council proposed extending the bill for another four years back in December, it did so with the proviso that projects in certain upscale neighborhoods be required to set aside 20 percent of its units for people making less than $56,000 a year. (A map from The New York Times of the City's plan is at right.) The State version not only expands the affordable housing zone (called the "exclusion area") by 12 neighborhoods but it also brings the income hurdle down to $42,000. (Additionally, it calls for developers to pay workers a "prevailing wage" on participating projects.) While stiffening the affordable housing requirements, the State bill does throw developers one bone: It pushes back the start-date for the new rules to July 2008 which should lead to a wave of projects looking to get grandfathered under the existing rules.
Albany Likely to OK Affordable Housing Bill [NY Sun]
State Revises 421-a "Corporate Welfare" Subsidy [AY Report]
Legislators Agree on 421-a Reform Bill [Crain's]
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Comments
I see the unions got their hands in there. I admire the efficiency of their thuggery.
Posted by: Jeremy at June 20, 2007 9:47 AM
I can't (or fail to see) mention of which 12 neighborhoods were just added beyond the previous version.
Anybody see that info?
Posted by: Anonymous at June 20, 2007 9:58 AM
the 421-a are paid for by the developers and then passed on as deferred taxes benefits to the buyers. It is not exactly a giveaway to developers.
as 9:47 stated, the unions and their close political allies like Christine Quinn (mayoral candidate) got some concessions to keep the unions share of the pie.
Posted by: Anonymous at June 20, 2007 10:28 AM
How much of the total new construction in this city under the 421-a program is built by union workers? In Brooklyn, as I see it everyday, much of it seems to be built by non-union workers of Latin American origin. If the unions really wanted to be powerful again, they would open their doors to new membership, especially Third World membership. Then they could really have the power to make sure safety regulations are upheld, and workers are paid a decent salary. They still have some political clout, but nowhere near what they used to have.
While there are certainly many problems with unions, especially when they go power mad, historically speaking, they have made this country a better place for the working stiff. Many of the building trade unions need to wake up and join the 21st century, however. The construction industries are no longer the sole domain of people descended from Western European immigrants, with a sprinkling of others. Like the Catholic Church, they must make room for the brown, black, yellow and female workers who also have a stake in the American workplace.
Developers have gotten stinking rich in this market, and through this program. It has not all been passed on to buyers. A little less for them, a little more for those who did the work sound fair to me. It can't all be passed down to the consumer. If the prices are above what the public will pay, they won't. We've seen that reported here, time and time again.
Posted by: Sterling Silver at June 20, 2007 10:56 AM
"Developers have gotten stinking rich in this market, and through this program."
SS, could not have said it any better...let us see, incentive to build in the 5 boros. Am I missing something here? Booming market that could add a huge new tax roll to the city, instead, let's allow developers who are already making hand over fist the allowance of marketing their luxury condo units as "tax abated" under the current 421-a program.
Makes sense to me. More $$ for the developers, less $$ for the city...and I guess the State, indirectly.
And not a single affordable unit to date.
Hate to sound callous, but until I see the benefit of this abatement, I see it nothing but a free lunch (well a hefty coupon for "dollars off") for the developers and their high end buyers.
It is not 1971 anymore folks.
Posted by: ActionJackson at June 20, 2007 11:10 AM
so what do the exempted areas mean? That developers can not offer Tax Abatements is those areas at all? Or thye need to include low income houseing to get the abatement?
Posted by: exemptions? at June 20, 2007 11:33 AM
There are the areas a developer MUST provide a % of affordable housing, then those areas where they do not have to and still get the abatement.
Should have been the entire city. Use 421a, then you have to build a % of affordable, period.
Posted by: ActionJackson at June 20, 2007 11:52 AM
Without the abatement, high land prices, and rising construction costs, development will no longer make financial sense. It is too expensive to build the affordable units and with higher taxes the prices per square foot on sell-outs will be too low for development to be feasable at all. The change in legislation will create no new affordable housing. All it will do is stop development which is in turn bad for the economy. Developers don't build to lose money.
Posted by: Jonz at June 20, 2007 1:47 PM
(Without the abatement, high land prices, and rising construction costs, development will no longer make financial sense.)
Which means the price of development sites will fall, in some cases to less than the value of an existing building used as such.
In the meantime, everyone rush to get grandfathered as we head for a recession! I'm looking forward to a glut!
Posted by: WT Economist at June 20, 2007 2:22 PM
/\ NY isn't the center of the world. If it isn't profitable to build/do buisness/grow here, they'll do it elsewhere. All these post about "greedy developers" neglects the fact NYC has the highest taxes than anywhere else in America. Without 421a, developers will do one or more of the following:
-Hire non-union
-Stop buidling in NYC
Posted by: CommonSense at June 20, 2007 3:26 PM
CommonSense:
B.S., they may not build affordable housing, but they will build. As much as there are 421a developments, there are certainly enough which are not. Demand is high, though where the $$ for the units is coming from (a flush year at Wall St.?), I don't know.
They will be built, for a profit, with or without 421a.
Let us try without for a while.
Posted by: ActionJackson at June 20, 2007 4:09 PM
And PS, most are not hiring non-union workers. Unless there's a new undocumented immigrant labor union I don't know of.
Folks must be dying to join.
Posted by: ActionJackson at June 20, 2007 4:11 PM
ActionJackson,
With land selling at $150-$225 per buildable square foot and hard and soft construction costs at $350 psf (and rising) it just makes no sense anymore. Units in W'burg for example are selling at roughly $700 psf with the abatement. Without the abatement units are worth closer to $550 psf which is right around where the land and construction prices amount to. Developers won't build in NYC if they are just going to break even. The only way it will work is if land prices are halved and that will never happen overnight.
Posted by: Jonz at June 20, 2007 4:45 PM
"With land selling at $150-$225 per buildable square foot and hard and soft construction costs at $350 psf (and rising) it just makes no sense anymore. Units in W'burg for example are selling at roughly $700 psf"
Jonz, that's a valid point and a major part of the problem. Since buyers are paying more, land owners are selling at higher prices, developers must spend more to build, buyers then are spending more! And so on. Circular and downright damaging to the market as a whole if you ask me.
Time will tell, ultimately. But I honestly do not agree that all building in the City will suddenly halt if 421a goes by the wayside.
Posted by: ActionJackson at June 20, 2007 5:14 PM
I agree in reference to the city as a whole but in areas where sellouts average below $800 psf it is going to be devestating to the development market.
Posted by: Jonz at June 20, 2007 5:40 PM
/\ Halt. No.
Market come crashing, yes. Both here and on Curbed, people have this arrogance like "My house will never devalue becuase i live in NY". Bullshit, wait till the era of 1,000+ homcidies come back. Or if Wall St tanks. Both, as well as other scenairos, can happen.
I'm all for affordable housing, but then we slap them with insane taxes and downzonings, which slice profit margins very thin. Trust me, most of the heavy hitters in real estate in this city got their money either in hedge funds or they're overseas investors scamming condo buyers. It's hard to make money building in NY outright. Nevermind trying to price it for the middle class.
I can assure you, ActionJackson, you will see a complete halt to most private investment in NYC if we continue to make it less profitable to build here. Then the only housing being built would be Michell-Llama or even worse...........NYCHA(read: projects).
Trust me, that's not what you want....
Posted by: CommonSense at June 20, 2007 7:41 PM
All this shows is the city wants to push development in new areas: Bronx, East Brooklyn and Queens. Its not an end to the system.
Posted by: Anonymous at June 21, 2007 7:30 AM
Just to show how corrupt the system is and why 421-a should be totally abolished look at the fact that Ratners Atlantic Yard fiasco has been carved out to be eligible for continued Government subsidies (under the old 421-a regulations), despite the fact that it is no were near having any foundations in and that everything else around it will now be part of the new regulations.
Posted by: My2Cents at June 22, 2007 8:48 AM
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