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421- A Tax Break Expiration Update

On January 31, 2016, the tax abatement program known simply as 421-a expired, we previously wrote about how it affected affordable housing here. On February 1, there were no longer tax incentives for developers to build affordable housing within the boundaries of New York City.

Many of the boroughs enjoyed a significant boost in the amount of affordable housing that became available because of the program. According to, the program creates over $1 billion in new construction projects that may not have otherwise happened. Now, what?

What Was 421-A Tax?Taxes taxpayer words

The tax abatement legislation known as 421-a gave tax breaks to developers who built affordable housing within the five boroughs of New York City. When it was first released in the 1970s, 421-a applied to any project that was approved. After a while, it was changed to only apply to certain geographic areas of the city. Despite the new geographic limitations, 421-a still did its job in motivating developers to build affordable housing.

New York City Mayor Bill de Blasio announced that 421-a was one of the tax programs that played an integral role in his desire to see 80,000 new affordable housing units built. However, when it was announced that the public money would no longer be available as of February 1, 2016, development of affordable housing units all but stopped.

Developers Versus Unions

A new law being proposed would drop the wage floor for projects built with public money to $15 per hour. This would open the door to non-union shops being able to bid on public projects, and the idea did not make New York City labor unions happy. Union leaders insist that $15 an hour is an insult to the hard and dangerous work that construction workers do, but developers say that without this break there can be no new affordable housing built.

Even with the new wage floor, developers are warning that without something similar to 421-a, it will be difficult to build new affordable housing in the city. The end result could mean more high-priced residential properties in the city, which could cause more changes to zoning laws, possibly leading to tenements again.

The Possible Downside Of The Expiration

There has been much talk of gloom and doom coming from all sides of the 421-a discussion. Developers are warning that all new construction in New York City will be luxury residential units because of the costs associated with buying and developing land within the city. Unions are warning that a lower wage floor means more construction worker injuries and a general decline in the quality of work being done on public projects.

Perhaps the one aspect of this issue that is concerning New York City government officials the most is the idea that more luxury housing means that the affordable housing units will plummet in value. If that happens, rents will fall and New York City could be looking at another tenement situation very similar to what happened at the turn of the 20th century.

What Is The Way Forward?Financing available words

The 421-a stalemate could have serious ramifications if it is not resolved. The problem right now is that the only resolution being offered by the state government is the new wage floor. Contractors indicate that a new wage floor is a good start, but it does not come close to creating the kind of affordable housing friendly atmosphere that 421-a created.

New York governor Andrew Cuomo put the responsibility of negotiating a new prevailing wage for a publicly funded project on the developers and unions within the state. The governor extended 421-a to the end of January 2016 in anticipation of a new agreement. When the agreement did not happen, 421-a was allowed to expire and that is when the problems really began.

For now, the flurry of new building permits that was approved just before 421-a expired will see the construction industry through to potentially the end of 2016. But as New York City gears up to try and boost construction for 2017, the city knows that it faces a battle.

Without an incentive as enticing as 421-a, the city could see a shift back to luxury housing and the potential for conditions that would usher in a new era of inequality in New York City. There are tax programs being discussed right now that could help the situation, but there is nothing on the table that is making developers optimistic. These next few months will decide what happens to affordable housing in New York City, and what happens to the neighborhoods within the city that the residents hold so dear.

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