On Politicking 421-A

By Council Members David Yassky, Annabel Palma and Letitia James, representing Brooklyn and the Bronx

Recently, we introduced legislation in the City Council to reform the 421-A tax code with 18 of our colleagues. We wish to make two points about the resultant 421-A debate on this blog and in other forums.

First, on the substance: 421-A is really two very different programs joined at the hip. Inside the so-called “exclusion zone,” the goal of the program is to use tax breaks to encourage affordable housing. In this area, which currently includes only “core Manhattan” (14th Street-96th Street) and a small slice of the Greenpoint-Williamsburg waterfront, developers get a tax break for projects that include affordable housing. Some of the issues in reforming this part of the program are how much affordable housing to require in exchange for the tax break (20%? 30%? more?), what counts as “affordable,” and whether the affordable apartments need to be in the same building as the market-rate apartments.

Outside the “exclusion zone,” the program operates very differently. In the “automatic tax break zone” – which currently includes all of Queens, the Bronx and Staten Island, virtually all of Brooklyn, and most of Manhattan – developers get a tax break automatically for any new apartment building. The goal here is to encourage development, period. We believe the first part of the program is worthwhile, but the second part – the automatic tax break – is a wasteful use of taxpayer money. We simply do not accept that taxpayers should be subsidizing market-rate development. Throughout Brooklyn, Queens and Staten Island, and in much of the Bronx, development is proceeding at a breakneck pace. The Pratt Center estimates that the automatic tax break will cost the City $100 million a year, even under the Administration’s scaled back proposal. If the 421-A law was not already on the books, who would think it was worth $100 million to “stimulate” market-rate development in New York City? That is why we have proposed to eliminate altogether the “automatic tax break” part of the program, while retaining the part that offers tax breaks in exchange for affordable housing.

Second, on the process to date: We believe that Speaker Quinn has done a great job in pushing the Bloomberg Administration toward much more sweeping reform than the Administration had originally proposed. Most important, Speaker Quinn has ensured that some of the “hottest” areas of Brooklyn will be taken out of the automatic tax break zone – surely, taxpayers do not need to subsidize development in neighborhoods where condos routinely sell for upwards of $1 million. Unfortunately, the Administration has insisted on keeping most of the automatic tax break zone intact, including many neighborhoods (Long Island City, Flushing and Riverdale, for example) where market-rate development plainly needs no help. Our third point is that the debate on legislation in the City Council is only the first step in reforming the 421-A program. The State Legislature has the final say – and Assembly Housing Chair Vito Lopez, together with more than 50 cosponsors, is seeking to eliminate the automatic tax break entirely. We introduced our bill in part to make it clear to state legislators that a significant number of City Council Members supports this position.