Despite mounting opposition from New York Mayor Michael Bloomberg, the city’s real estate industry is pushing hard for additional tax breaks in the 421-a tax incentive program, which provides relief for developers who set aside low-cost housing for the poor.
The 421-a program allows developers to claim property tax abatements for 20 years, in exchange for providing 20% of their apartments for tenants with low incomes.
Housing chiefs are worried that developers will opt out of the program and increase rents unless they gain additional tax relief. Many developers operating apartments built in the 1990s are coming towards the end of those tax breaks, and will be looking to hike their rents without additional financial support.
The Real Estate Board of New York’s Mike Slattery commented “We shouldn’t just be looking at the costs of foregone taxes, we need to consider what the costs would be when it comes to replacing these housing units as well.”
Even so, the mayor says that the extra property tax revenue is needed in order to pay for more services in the city.
Brooklyn City Counselor Brad Lander sided with the mayor, saying “Developers cannot opt out of the 421-a program for ten more years anyway.”
Vito Lopez of the State Assembly Housing Committee also pointed out that additional tax breaks would likely cost the city half a billion dollars in three years.
With so much opposition, it’s hard to see how the industry can get its way. However, Slattery’s group insisted the cost would be much less, estimating that relief for 25,000 apartments, of which 5,000 are low income units, would cost just $40 million in three years.