421 a legislation will deprive city of cash, jobs & housing

Real Estate Weekly, Jan 17, 2007

The Real Estate Board of New York (REBNY) warned that 421a tax exemption legislation approved by the City will deprive the city of tax revenues and its residents of jobs and housing.

"All projections indicate there will be one million additional people living in the five boroughs by 2020, putting a tremendous strain on housing," said Steven Spinola, REBNY's president. "Where will we house them?"

Early last year, the Mayor established a task force to review and make recommendations to amend the 421a tax exemption program. Then, in December 2006, the City Council adopted a bill that dramatically reduced the tax exemption benefits available citywide.

REBNY vigorously opposed numerous aspects of this bill as harmful to the production of market rate and affordable housing and managed to help win the retention of the 80/20 program.

There was an organized effort by a large number of low-income housing advocates as well as 20 members of the City Council to eliminate the 421a program citywide unless a new project set aside 30% of its units for low-income households. The support for this 70/30 position was strong and steadfast throughout the process.

Prior to the Council's adoption of the compromise bill negotiated with the administration, this group proposed the imposition of an assessment cap on 80/20 projects. REBNY strongly and successfully opposed this modification. In the coming year, the state legislature will have to extend the 421a program.

It is our goal to retain unchanged the 80/20 program and restore in a modified form an ability to qualify for a 421a tax exemption in the enlarged geographic exclusion area by building affordable housing off-site but in the vicinity of the market rate building receiving the tax exemption.

The certificate program, a provision of 421a, was responsible for the construction of 5,400 units of affordable housing since its inception. The legislation will do away with this effective affordable housing production program.

"The certificate program not only promotes the construction of market rate housing but also creates thousands of units of affordable housing for low income families. [This legislation will] result in less market rate and less affordable housing--not more. It will also cause the loss of millions in tax revenues for the city, and fewer jobs for New Yorkers," added Spinola.

During construction, every 1,000 units of high-rise housing generates in New York City more than 3,000 jobs, total wages and salaries of $185 million, nearly $15 million in tax revenues and total economic activity of $592 billion.

"All this is at risk," said Spinola, "because the administration and the City Council decided to completely rebuild the engine when only an oil change and tune-up are needed."