Progressives are hot to see the 421-a tax abatement, which encourages developers to build more affordable housing by reducing their property-tax liability, die when it expires next month. But if the Legislature doesn’t pass a replacement, it’s a clear loss for New York City.
A new analysis by the Citizens Budget Commission confirms those losses include:
- Less rental housing construction.
Supposedly pro-tenant activists and lawmakers won’t admit that, absent some incentive like 421-a, developers will stop building residential units (except luxury ones) because the default tax rate for new construction is prohibitively high.
They also claim that ending the abatement will free up $1.8 billion in tax revenues. The CBC points out that not only are they wrong, but that much current revenue wouldn’t exist without 421-a.
Existing projects will still benefit from the abatements granted before 421-a lapsed, so the city will “lose” only about $100 million per year through Fiscal Year 2029 if the program’s not renewed; not until FY 2043 will even $1 billion of the now-foregone revenue be returned to the tax rolls.
Meanwhile, CBC reports, most development that occurs thanks to 421-a wouldn’t happen. That means the city loses out on the tax take such projects would generate after the abatements expire — as well as on the new housing (both market-rate and affordable) constructed.
So the budget watchdog urges both renewing or replacing 421-a and a broader package of policies to boost housing production, such as reducing construction and operating costs, increasing as-of-right zoning capacity and reforming the property-tax code.
A sane city tax code wouldn’t make it impossibly expensive to build new non-luxury housing; 421-a is a patch that allows enough construction to prevent Gotham from losing ground. Fixing the entire property-tax code won’t happen this year (or maybe ever); if the Legislature doesn’t replace the abatement now, it’s dooming New York to housing decay.