A deal has been made to revive the 421-a tax break for developers. If the state approves, it will mean more new rentals and affordable units in Brooklyn.
Editor’s note: A new deal was struck in November of 2016. Click here for all the details.
Hated by many, beloved by some and misunderstood by most, the 421-a tax abatement expired on Friday after the Real Estate Board of New York and the Building and Construction Trades Council of Greater New York failed to come to an agreement regarding its extension.
But what was the 421-a tax break? And why should you care?
Landlords have been overcharging tenants in thousands of Brooklyn apartments, according to a report from the office of New York Attorney General Eric T. Schneiderman. Is your building on the list?
Despite some of the most extensive rent regulation laws in the nation, a bureaucratic entanglement is leaving New York City tenants at the mercy of developers’ illegal and unpunished abuse of tax breaks, according to a report.
What’s the rush? Developers created nearly three times the number of units this year using New York’s voluntary inclusionary housing program than in 2014.
The rate of Brooklyn’s housing permits went on a roller coaster ride this summer as builders hurried to begin construction before the lucrative 421-a tax break expired on June 15. Brooklyn gave out 8,499 construction permits in June — more than any other borough. But in July, that number was a meagre 246, reported Crain’s.
The 421-a program gives developers a tax break if at least 20 percent of their units were affordable housing. But as we wrote about last week, not all Brooklyn developers have held up their end of the 421-a bargain.
Builders could have cooled it in June — the law was extended through the end of the year, and a new version of the 421-a is in negotiations. If passed, it will likely require a higher percentage of affordable units and higher wages paid to workers on 421-a sites.
You’ve heard of the 421-a tax incentive program, despised by the de Blasio administration and abhorred by many locals, who view it as an antiquated tax break no longer applicable to since-gentrified areas. 421-a, however, is not the end all of tax breaks.
REAP stands for the Relocation and Employment Assistance Program, a relocation tax credit for relocating commercial and industrial businesses, excluding retail and hotels. REAP provides business income tax credits to businesses previously located outside New York, or below 96th Street in Manhattan, that are relocating jobs to the outer boroughs or specified areas above 96th Street.
The naysayers of tax abatement program 421-a have new ammunition. The New York Times reported that developers of almost 200 buildings citywide — the majority in Brooklyn — failed to meet the requirements of the 421-a program. Close to 2,500 apartments subsidized by the program have neither been made into affordable units nor put on a rent-stabilization roll as required.
Without the regulation of rent stabilization, owners may remove tenants and sell the units at their convenience.