The 421-g Tax Incentive Program was enacted in 1995 to get developers to convert commercial buildings in the Financial District into residential ones, as part of a push to make the area more residential. The developers who took advantage of it received a construction period exemption of one year, a 12-year exemption from the increase in real estate taxes resulting from the work, and 14-year abatement of about 80 percent of the real estate taxes paid on the property before conversion. In exchange, they were supposed to make the units in the buildings rent-stabilized for the duration of the benefits. The majority of the developers, in true developer fashion, happily claimed the abatement and when it came to rent-stabilizing the apartments said, nah, we're not doing that.
According to a Wall Street Journal article, via analysis of data from the New York City Department of Finance and the Independent Budget Office, at least 32 rental buildings, containing 5,560 apartments, receive the abatement, but only just over 700 of them have stabilized leases. The controversy pops up occasionally—a tenant in 37 Wall Street was successful in a 2010 court battle against the landlord and received a stabilized lease—and has just reared its head again due to another law suit. This time, however, the landlord, in 85 John Street, is suing the tenant after the tenant mentioned 421-g. The landlord, Kibel Cos., declined to comment, but another developer made the case that because the tenants started out paying market rent, had the landlord simply adhered to the conditions of the program in the first place it likely would have been able to destabilize the apartments by now anyway.
· New York City Tenants Cite Tax Credit in Fight Against Rent Increases [WSJ]