David Yassky for New York City Comptroller

November 30, 2006

David uses the tax code to increase affordable housing

Challenging a Tax Break for Housing Developers
By Janny Scott
New York Times

More than a third of the City Council came out yesterday against the Bloomberg administration’s plan to tighten up the city’s most popular tax break for housing developers, saying the tax break should go only to projects in which at least 30 percent of the apartments are affordable to low- and moderate-income New Yorkers.

Members of the group said that they were submitting a counterproposal under which no developer anywhere in the city would get the tax break without including lower-cost apartments. Under the administration’s plan, that requirement would apply only in parts of Manhattan, Brooklyn and Queens where the real estate market is hottest.

“The administration is proposing to narrow the tax break very slightly,” said David Yassky, one of the 20 co-sponsors of the new bill. “We’re proposing to get rid of the loophole altogether. A project that includes affordable housing deserves taxpayer subsidy. We are completely eliminating the tax break for pure market-rate development.”

Under the current program, known as 421-a, developers of new buildings in most neighborhoods are eligible for a 10- to 15-year exemption from the increase in real estate taxes resulting from the work. Only in central Manhattan and in Greenpoint and Williamsburg in Brooklyn are they required to include lower-priced units on site or nearby to get the tax break.

In October, the administration proposed expanding those areas to include Lower Manhattan, parts of Harlem, the Dumbo section of Brooklyn, Brooklyn Heights and other parts of the Brooklyn and Queens waterfront. In the rest of the city, market-rate developments would remain eligible for the tax break, but under stricter rules.

The aim of each proposal is to encourage developers to build more housing that middle- and working-class New Yorkers can afford. Developers have argued that tightening the tax-break program too much could slow housing construction; housing advocates say giving tax breaks for market-rate developments is, in effect, subsidizing gentrification.

The City Council is expected to vote on the proposals later this month.

Under the new proposal, no project anywhere in the city would be eligible for a 421-a tax break unless the developer made 30 percent of all the apartments affordable to families earning no more than 50 percent of the median income for the area, or about $35,000 for a family of four, according to the plan’s supporters.

The lower-cost apartments would have to be built on the same site as the market-rate units — a requirement that does not currently exist but that is also included in the administration’s proposal. The new plan would require that the lower-cost units remain permanently affordable to lower- and middle-income tenants, even after the tax break expires.

City officials say the administration’s plan would result in hundreds of millions of dollars in increased tax revenue, some of which they hope would go to building more low-cost housing. Supporters of the alternate plan say their plan could produce more than $1 billion in additional revenue over 10 years, most of which should go to creating and preserving low-cost apartments.

Christine C. Quinn, the City Council speaker, has said she intends to introduce her own 421-a bill next week.

“I think the gap between these positions is bridgeable,” said Brad Lander, director of the Pratt Center for Community Development and a critic of the administration’s plan. “I’m still hopeful for a deal that works.”