According to the Wall Street Journal...New York City officials and real-estate executives
are resigning themselves—at least for now—to life without a lucrative
property-tax exemption program that for decades has fueled the construction of
apartments across the city.
Amid some uncertainty about how the city would
achieve Mayor Bill de Blasio’s affordable-housing goals without
the program known as 421-a, and how developers would finance their projects,
one thing seemed clear: The immediate prospects of Albany lawmakers restoring
the program looked bleak.
Under the terms spelled out in a law passed last
June by state legislators, and signed by Democratic Gov. Andrew Cuomo, developers and construction unions were asked to
produce a memorandum of agreement by Jan. 15 on a construction-wage formula or
the program would end. The two sides produced no agreement.
Alicia Glen, the city’s deputy mayor for housing and
economic development, said she hoped the program wouldn’t die, though the quiet
talk of the real-estate world was that the talks weren’t going well. She said
there was little, if any, movement toward reviving legislation at the moment.
“It is true that any tool that takes away the
opportunity to help finance affordable rental housing is something that we will
have to either find other sources for, or come up with other approaches to
leverage the private sector,” Ms. Glen said.
“Everybody is seeing where the dust settles,” she
added. “Our focus right now has been very much on the state budget, the city
budget and moving forward on mandatory inclusionary housing,” which requires
developers to build affordable units in exchange for being allowed to put up
taller structures.
The Building and Construction Trades Council and the
Real Estate Board of New York, entities empowered under the law to negotiate,
continue to talk, but the understanding is that the ball is now in Albany’s
court, according to a person close to the negotiations.
While developers and New York city hall officials
fretted over the program’s expiration, legislators in Albany mostly shrugged.
“It’s pretty much dead,” said Assemblywoman Linda
Rosenthal, a Manhattan Democrat. “The expiration of this program is an
opportunity to get more affordable housing in New York. Some people think it
should come back in a better way. Others believe it should go away, so we can
see something that’s less of a giveaway.”
Some of her colleagues disagreed. Sen. Marty Golden,
a Republican representing Brooklyn, saw more urgency. Like some others, he
pinned the program’s failure partly on clashes between the governor and the
mayor.
“Hopefully someone will step forward and get this
resolved,” he said
Assemblywoman Deborah Glick, a Manhattan Democrat,
said she knew people in government were sometimes accused of kicking the can
down the road. “This is the first time I can remember where we just threw the
ball into the bleachers,” she said.
Told of concerns over affordable housing, an aide to
Mr. Cuomo pointed to the governor’s new affordable housing plan. Last week, he
proposed a $20 billion plan that included 100,000 affordable housing units
around the state and new services to the homeless.
“We will need to find an alternative program because
affordable housing production is a state priority,” said Cuomo spokeswoman Dani
Lever.
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Mike Whyland, a spokesman for Assembly Speaker Carl
Heastie, said: “Well, we passed a law last year and that is our position.”
Asked about 421-a, Kelly Cummings, a spokeswoman for
the Senate Republicans, said “we still believe it’s imperative that a program
is in place that fixes the City’s inequitable taxing structure that is
preventing the private construction of affordable rental housing.”
Observers also see headwinds for 421-a in Albany
this year because New York real-estate executives were important witnesses for
the prosecution in recent public-corruption trials. Other reasons: It is an
election year and the feud between Mr. Cuomo and Mr. de Blasio.
In New York City, real-estate executives and policy
experts fear the loss of 421-a will curb affordable-housing construction
particularly in richer neighborhoods like downtown Brooklyn and parts of
Manhattan where development costs are higher. That could lead to a deeper
stratification in neighborhoods, with little affordable housing being built in
richer neighborhoods—and more in neighborhoods like East New York and the South
Bronx, where subsidies go further.
Developers have long said that 421-a was critical in
particular to the construction of rental buildings—helping them offset the high
cost of land, among other factors. Without it, developers and city officials
say they expect a trend toward condo construction.
“We wouldn’t acquire land to develop rental or
affordable housing without an abatement,” said David Lombino, an executive at
Two Trees, a development company.
While other tax subsidies could propel construction,
city officials may be forced to change their neighborhood rezoning plans
scheduled for a vote this spring in the City Council.
“It’s definitely going to throw a wrinkle in the
city’s plans,” said David Greenfield, who chairs the land use committee on the
City Council. Ms. Glen said the city had many other tools to encourage
affordable-housing development and that 421-a played one part in construction.
Developers say they don’t expect an immediate stop
in the pipeline, because most developers began many projects before the
deadline expired last year. Mr. Lombino said he expected a decline in 18 to 24
months.
Yet the uncertainty is worrying many.
A spokesman from the Durst Organization, which has a
project to build up to 2,400 apartments in Astoria, said the expiration of
421-a has created a “dire” situation. Affordable units are often are folded
into market-rate developments.
“It not only limits the supply of affordable units;
it cuts off the supply of all market-rate units as well,” Jordan Barowitz, the
spokesman said.
