Comptroller: 'Boondoggle' 421-a Cost City $1.8B In Revenue From Developers

New York City Comptroller Brad Lander is urging state legislators to
seize the moment with the expiration of the Affordable New York tax abatement, pushing them to let what's commonly known as 421-a expire and instead overhaul the property tax system by the end of the year. 

Lander’s office released a fresh analysis this week that found the program, which is set to expire June 15, will cost New York City $1.77B in tax revenue this year. Instead of introducing "tweaks" to the program, as proposed by Gov. Kathy Hochul in her executive budget, he said it is time to let the program sunset.

“Rearranging the number and letters is tantamount to slapping a gold-plated bandaid on to hold together a deeply inequitable and opaque property tax system, and then pretending we’ve fixed our affordable housing crisis,” Lander said in a statement. “Tinkering around the edges may be what developers want, but it’s not what New York City needs.”

New York City Council Members Tiffany Cabán and Pierina Sanchez announced co-sponsored resolutions urging state legislators to let the program expire. 

In his report, Lander's office found that, of all the units built between 2017 and 2020 using the tax break, 60% were set at rents affordable for families making 130% of the area median income. That means a family of three would have to earn roughly $139K and pay around $3,400 each month for a two-bedroom apartment, the report found. Most of the developments that score the subsidies are smaller projects in Northern Manhattan, the report states.

Instead of renewing or adapting the program, Lander is calling for the introduction of a single, revenue-neutral tax rate for one- to three-family homes, co-ops, condominiums and small rental buildings. He also wants a new tax incentive aimed specifically at affordable housing, rather than an exemption that backs a mix of market-rate and affordable housing.

“The 421-a program is a towering boondoggle — costing our city $1.77 billion this year in foregone taxes and delivering only a small handful of actually affordable units in return,” Lander said.

The program currently allows developers a tax exemption for 35 years if they set aside 25% to 30% of the units for low- and moderate-income tenants when they build a market-rate rental building with more than 300 units. Its expiration has been causing great angst amongst developers for more than a year, with many arguing that without it housing supply in the city will grind to a halt.

Hochul in January laid out a new proposal called Affordable Neighborhoods for New Yorkers, which garnered praise from the real estate industry. Hochul’s plan mandates that any building with more than 30 units have 25% of the apartments set aside for people earning between 40% and 80% of area median income.

In buildings with fewer than 30 units, 20% of the rental units would need to go to those earning up to 90% of AMI. Affordability requirements would be permanent for housing in buildings with more than 30 units but would still stop at 35 years for buildings with fewer than 30.

Housing advocates criticized her proposal, and it was not included in either the state Assembly or Senate's one-house budget resolutions this month.