Extending 421-A: Does It Matter?
The Times and WNYC have stories today about the proposed extension of the 421-a tax abatement, which gives developers tax breaks on new construction. Real estate interests, of course, think the abatement should be extended in order to spur development, as does Housing Commissioner Rafael Cestero, who tells WNYC extending the tax break will bring…
The Times and WNYC have stories today about the proposed extension of the 421-a tax abatement, which gives developers tax breaks on new construction. Real estate interests, of course, think the abatement should be extended in order to spur development, as does Housing Commissioner Rafael Cestero, who tells WNYC extending the tax break will bring jobs and go a long way toward reversing bust-induced blight. On the other hand, Cestero tells the Times that “his agency was granting many individual developers extensions anyway, and that this change merely extended benefits that the developers would have taken advantage of had the market never crashed.” Councilman Brad Lander is a critic of the proposed three-year extension, which there’s supposed to be a hearing about today, noting “the extension could cost the city $420 million in tax revenue, presuming that the extension would lead to the construction of 7,000 units” and saying We don’t need to be giving a huge bailout tax break to assist vacant sites to become the next luxury projects.” The best quote, though, is from one of Brooklyn’s biggest developers, Isaac Katan: “A lot of proposed construction projects, especially in the outer boroughs, do not make any economic sense even with a tax abatement in place…In the majority of cases, removing the tax abatement is just the straw breaking the camel’s back.” The logic on both sides of this one is getting a bit difficult to follow.
City Weighs Extending a Tax-Break Deadline [NY Times]
City Proposes Extending Tax Breaks For Developers [WNYC]
FSRQ – Whilst I think you make wonderful points; the fact is – it’s a slap in the face to residents (both renters and homeowners) in a city that’s starved of truly affordable housing that the Sate would in effect – subsidize [sic] give a tax incentive to developers to build “luxury” condos and god awful fedder houses even though there is already a saturated market for both.
FSRQ, I admit my ignorance on these matters, but in 15 years, my child who is not getting property tax revenue from these buildings spent on her schooling NOW will not be in school, and the buildings will be fifteen years older, and, in many cases, possibly not worth MORE than they are now, especially if their carrying costs have just tripled.
Furthermore, so are you saying that in 15 years when the abatements expire, the owners of these units will be paying 15 years worth of back taxes? Because I really doubt that.
FURTHERMORE, not every development has been built on a vacant lot. Some of those lots were already paying property taxes before their existing buildings were torn down.
Like I said, I am so far from an expert on this stuff, it’s stilly, but these seem like fairly obvious flaws in your logic. What am I missing? Seriously, I am curious.
a handout to the poor is a subsidy. A handout to the wealthy is an incentive…
Sounds like Republican speak to me….
wait until they take away the mortgage tax deduction…
fsr[], why isnt it possible that these lots would be developed without the tax abatement? If a lot costs $100,000 because a developer can charge x per unit factoring in the tax abatement, wouldnt it be possible for the market rate of the lot to go down to say $90,000 because the developer has to sell units for less. So yeah, the units would cost less to buyers and then they’d be on the tax rolls…why would this have to be phased in?
“Nobody is subsidizing anything! All that is happening is the city is waiting longer to collect taxes on property that WOULDNT be paying taxes if nothing was built anyway…”
…But that WOULD be paying taxes if it was built and the 421-a program didn’t exist. I get your point, but you’re assuming that every project built that participates in the 421-a program would definitely not be built if that program were not available, but that’s just not true. There have been, and will continue to be, many projects built that have and will receive 421-a tax benefits that would have been or would be built even in the absence of the 421-a programs, and tax revenue from those projects is substantially lower due to the 421-a benefits received by the projects’ developers.
I’m not passing judgment here on whether the program should be extended, or modified, or anything of the sort really… But your argument is way too slanted to one side of the spectrum. You can argue that the 421-a program should be extended without distorting the facts like that.
Nobody is subsidizing anything! All that is happening is the city is waiting longer to collect taxes on property that WOULDNT be paying taxes if nothing was built anyway…that is not a subsidy…it is a tax incentive. a subsidy is when the Government actually gives back $ it would have collected or outright pays $ for something – For example the 7500 that the Federal Government GIVES to buyers of Electric Cars – or a low income tax credit (where the Feds gives you a tax “refund” even though nothing was withheld from your paycheck)- there is a difference and it is meaningful
personally I believe that the tax abatement should only if it includes permanent low and moderate income housing. If a development doesn’t make sense without a tax break for luxury housing, taxpayers shouldn’t subsidize it. The only thing it does is allow the developer to sell the property for more. If he has to sell it for less because of taxes so be it.
Something has to give. What happens if after 15 years the tax cuts expire and the value of all of this new construction, (which wasn’t all built well to begin with, some of it), plummets? Is there really an infinite market for luxury condos? Are Scarano buildings on Stagg street really going to be luxurious fifteen years from now?
I’d say less than Benson if that’s what spurs it. A lot of those 15 year abatements will start phasing in by the end of this decade.