The New York Times
February 10, 2015
Room for Debate; Does Helping Condo Developers Hurt the City?
When the 421a Property Tax Exemption Program was inaugurated 44 years ago — when the city’s real estate market was collapsing and the population was fleeing — no one would have imagined the breadth and scale of new construction in New York City today, let alone the creation of an ultra-high net worth market. The success of the program is among the many factors contributing to the city’s incredible development.
In 2007, the program was revised so that residential developments needed 20 percent of their units to be “affordable” to qualify for the 421a break. (Most of the projects cited in the series by The New York Times took advantage of 421a certificates that were already in the market before 2007.)
But New York City’s housing needs are drastically different in 2015 than they were in 1971 or even 2007, and more reform of 421a is in order. People are moving to the city in record numbers, putting unforeseen pressure on our housing market, especially on rental housing where 65 percent of households live. Given high costs of land prices, construction and maintenance, it is extremely difficult to make rental apartment projects feasible without incentives like the 421a abatement.
With 421a expiring this year, we have an opportunity to reform and enhance the benefits for rental housing. Our real estate tax system overburdens renters in favor of coops and single-family homes. 421a can help correct that.
Policy makers should also consider increasing the city’s 1 percent mansion tax on condos selling for more than $1 million. This should be increased on condo sales over $5 million or $10 million to generate revenue to fund Mayor de Blasio’s ambitious affordable housing plan.
Reform cannot wait. We need rental housing across all five boroughs and our current tax system limits private market appetite. While luxury development in Manhattan gets all the attention, developers across the five boroughs are using the 421a program to develop rental housing for hard working New Yorkers.
At the Community Preservation Corporation, a nonprofit lender for multifamily housing in New York, we finance dozens of these projects every year and understand that without 421a, these projects would not be feasible.
Everyone agrees that New York needs more housing. We just need to find a balance between our need for more housing overall and the desperate need to keep New York City more affordable.