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New York's Great 421-a Debate: The Uncertain Future of Trading Affordable Housing for Tax Breaks

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Rent-regulation laws aren't the only complex housing policies that may change come June 15. The 421-a program, which essentially grants tax abatements to developers if their buildings are at least 20 percent affordable, is also set to expire on Monday. With lawmakers yet to start formal discussions as the deadline draws ominously closer—and the Times calling for politicians to extend their session past Wednesday to come to a satisfactory solution for "New York's housing emergency"—there still isn't much agreement on whether to end, extend, or modify the scheme.

De Blasio's Controversial Bill
On June 1, Mayor Bill de Blasio's revised 421-a policy was first presented to the State Assembly. The bill, which was announced a month earlier, earned the support of the (pro-development) Real Estate Board of New York, but elsewhere, the reaction hasn't been too positive. In some ways, de Blasio's bill highlights the two major issues surrounding 421-a renewal that are up for debate.

First, there's the problem of how to expand the requirements—essentially, what the developer has to concede in order to get the tax breaks—if at all. De Blasio favors making it so that buildings must be 25 to 30 percent affordable (up from 20 percent) no matter its location in order to receive the 421-a tax abatement. At the moment, depending on the planned building's site and other specifications, a developer may receive the abatement without having a single affordable unit in the building; Long Island City is one notable neighborhood where this loophole exists. Lots of luxury buildings have benefited from the program, and de Blasio wants to ensure that the maximum number of affordable units is built in exchange.

De Blasio's bill would largely resolve this first issue, but then there's the dilemma of prevailing wages—a.k.a. the higher wages unionized workers would command—which his proposal would mandate for some buildings, but not others—and also only certain types of workers. Construction workers, for instance, have gotten up in arms over being left out of the bill, largely because they are currently included. Supporters of the mayor's proposal say that prevailing wages for both service and construction workers would increase costs substantially, potentially by 30 percent for some projects. According to Capital New York, Alicia Gen, deputy mayor for housing and economic development, said mandating prevailing wages would actually cost the city 17,000 affordable units. On the other hand, critics of de Blasio's proposed legislation argue that the mayor unfairly favors service workers (such as doormen, security guards, cleaners, supers, et al.) because their unions are more politically aligned with him.

There is a helpful PDF document filled with charts and graphs that help support de Blasio's position.

Two Other Options
Also on June 1, alongside the introduction of de Blasio's bill, Manhattan Democrat Keith Wright presented his own version of a 421-a reform bill to the Assembly. Though it is far less detailed than de Blasio's, Wright's proposal would require those higher wages for construction workers. Wright's bill includes some other small differences concerning affordability. For instance, while de Blasio's offers some flexibility on how to break down the affordable units in 421-a buildings based on the neighborhood's specific housing market, Wright's bill has just one option that favors tenants in the lowest income bracket. However, Wright's proposal also does not mention necessitating affordable housing for 421-a recipients, though his aides told Capital New York that this was the intention.

The next day, state Senator Jack Martins, a Long Island Republican, introduced yet another option for the state legislature to review. His bill likewise includes mandated prevailing wages for construction workers, but only in buildings that have more than 50 units and are less than 50 percent affordable.

A Last-Ditch Attempt
Finally, Capital New York reported just this morning that Republican state senators are crafting their own bill—just three days before the expiration of the current 421-a program. This proposal, which is not yet available to view, allegedly aligns closely with de Blasio's bill; its only major difference is that it keeps the tax breaks for condominiums, whereas de Blasio proposed eliminating them so that luxury condo developments—like 57th Street powerhouse One57, which used 421-a and built affordable housing off-site—would not be eligible. It isn't clear if the Republicans' bill addresses the prevailing wage controversy.

Cuomo Weighs In
The other major player here is Governor Andrew Cuomo, whose solution to the prevailing wages debate has been to support a simple extension of the current program. This approach, of course, has not been entirely well-received either, and Cuomo has refrained from providing his own ideas for reform. Most recently, he elaborated on his support for a simple extender, saying that "you can't come up with a resolution in these next few days," thereby discrediting de Blasio's attempts to do so.

The Potential for Compromise
With so many opinions coming from politicians on both the left and the right and from stakeholders on all sides of the issue, the possibility of compromise—especially relating to the issue of prevailing wages—seems unlikely. Nonetheless, Capital spoke to experts on the topic, who laid out two different ways to meet in the middle. One involves forcing developers to pay taxes from the second year of construction onward if they did not offer prevailing wages, and the second would be to set a specific zone for which prevailing wages are mandated—say, Manhattan south of 110th Street. Stakeholders opposed both proposals, saying that they would not effectively close up the current policy's loopholes, but Capital noted that it is impossible to satisfy the full demands of all parties.

An End to 421-a?
The final possibility—one that is actually growing in popularity—would be to eliminate the 421-a policy altogether. A month ago, the New York Times ran an op-ed supporting the abolition of the program, calling it "a relic of a dreary time when the city truly needed tax incentives to spur construction." After hearing the backlash against his bill, de Blasio also indicated that, if there can be no agreement on how best to reform the 421-a, he wouldn't be opposed to ending the program once and for all. Just this week, 12 organizations jointly issued a statement announcing their continued opposition to the 421-a.

"There are now rumors of a 'straight extender' of 421-a in Albany," the statement reads.
"As representatives of the communities this program will affect the most, we want to make our position clear: public money must require public responsibility, and that has never been the case with the 421-a program."

Impossible to Predict
At this point, it's pretty difficult to say what'll happen. De Blasio has been the most gung-ho about reform so far, but it's been made pretty clear that time has run out for him to propose any alternatives. Meanwhile, the governor is calling for a straightforward extension, while various groups want the opposite: an end to the program. Each day, new statements and ideas are presented on the issue. Come Monday, keep an eye on Albany.
—Wesley Yiin
· All 421-a coverage [Curbed]