Crain's New York
September 2, 2016
by Rafael Cestero
The governor's offer promises to restart rental construction. Let's nail it down
Gov. Andrew Cuomo’s proposed amendments to the 421-a property-tax exemption have received a lot of attention for offering a subsidy to wages for workers on projects with 300 units or more. Other smaller residential projects with fewer units would move forward under the reforms to 421-a passed by the state legislature in 2015.
Regardless of one’s views on this tax break for new housing, we can all agree that settling the issue once and for all is key to unlocking development in the city—and throughout the state—and increasing the availability of much-needed affordable housing for hardworking New Yorkers.
The 421-a program was created 45 years ago under drastically different housing conditions from what the city faces today. Implemented as an economic-development tool—not an affordable-housing program—to spur market-rate housing development, it sought to stem the waves of residents leaving the city and jump-start a stalled real estate market. Its success is among the many factors contributing to the city’s incredible development.
With that success came rising costs and demand for housing, triggering a need to reform the program in 2007 to better harness the private market to create affordable units. (At the time I was a deputy commissioner at the city's Department of Housing Preservation and Development and served on a multi-agency task force that oversaw the reforms.)
Last year, several additional important reforms to the program were proposed to boost affordable-housing production. While many of these reforms were passed by the state legislature, they were not put into action because the law required an agreement between the Real Estate Board of New York (REBNY) and the Building & Construction Trades Council of Greater New York over how to include a wage schedule for 421-a projects. No deal was reached.
But strong interest in reviving 421-a remained because despite its imperfections, it has played a crucial role in:
1) Making the development of rental housing financially feasible in New York City. This is critical in a city of renters that has an affordability crisis at all income levels.
2) Harnessing the market to create affordable housing in private projects in high-demand neighborhoods where the economics make it impossible for the city to do it. It created truly mixed-income buildings where low-income renters in affordable units are living alongside renters in market-rate units.
3) Spurring low-, moderate-, and middle-income housing development in the boroughs. More than 50% of the units created under 421-a are outside of Manhattan, predominately in smaller multifamily buildings that house working-class families.
4) Allowing the city to stretch its capital funding and other direct subsidy sources to create even more units for those in need.
With census data showing that more than 50% of New York City renters are rent-burdened (paying more than a third of income towards rent) and 30% are severely rent-burdened (paying half of income towards rent), it is imperative that we come to an agreement to put 421-a back to work and return affordable housing production to full speed.
Coming to an agreement on 421-a would not just benefit New York City. It is also critical for upstate communities in need of new affordable housing, supportive housing and community revitalization. An agreement here could allow the state to shift its focus and energy to implementing the governor’s multibillion-dollar plan for affordable housing.
The governor has offered a proposal that can end the stalemate, revive the program and put affordable housing production back on track. With a solution on the table, the other parties need to leave the hand-wringing and politics in the past and work together to settle the matter once and for all.
Rafael E. Cestero is president and CEO of the Community Preservation Corp. and a former commissioner of the city's Department of Housing Preservation and Development.