The 421a tax exemption looms somewhere on the Albany horizon, and it’s not yet getting the attention it deserves.

Created in the 1970s to fuel development in a depressed city, the exemption program has been periodically reformed to help protect affordable housing in a now booming market.

Most recently, Mayor Bloomberg convened a task force to study the program, and Speaker Quinn later fashioned a compromise in the City Council.

But all of it was just a non-binding recommendation for us legislators in Albany. We hold the purse strings on this program, which sunsets at the end of the year.

I believe there is room for improvement in the city proposal, and the proof is right in my district. Only half of East Harlem is covered in the proposed Geographic Exclusion Area (GEA), an area where developers who receive the tax exemption would have to provide 20% affordable housing.

The proposed GEA would roughly go up to East 117th Street on our side of the island. Were it not for the valiant efforts of Councilmember Mark-Viverito, that line might never have been pushed north from East 96th Street.

Real-estate developers, HPD, and the Mayor contend that the real-estate market north of East 117th is not strong enough to swallow an affordability requirement on the 421a exemption; they say it would be a disincentive to build.

The evidence points in the other direction. Community Board 11 has done its homework and identified several high-priced developments going up outside the proposed GEA.

Market-rates units as high as East 130th Street are selling for over a half-million dollars. The buildings themselves, without having to provide any affordability, are exempt from millions of dollars of property taxes.

For a citywide list, check out the Pratt Center’s comprehensive report: Still Subsidizing Luxury Development.

Now just imagine when we are connected to the 2nd Avenue subway in a decade or two, and it’s clear that East Harlem – already getting harnessed with names like SpaHa and Upper Upper East Side – needs more affordability, and less unfettered development.

Here’s what’s taking place in Albany: Vito Lopez has introduced a bill in the Assembly that would, among other things, create a city-wide exclusion zone and up the ante to 30% affordability.

The same bill is carried in the Senate by Serphin Maltese, a city Republican who just barely won his 2006 re-election.

If sincere, Senator Maltese has a better chance than us Democrats of getting Joe Bruno’s blessing and pushing this through the Senate. If not, he’s paying lip service to affordability, and won’t mind seeing the real estate lobby water it down.

As state legislators like myself fight to include exposed parts of our own districts in the exclusion area, the constituents of Senator Maltese would do well to track the path of his new housing bill.