Statement of Council Member Brad Lander on the NYC Independent Budget Office’s Review of the 421-a “Extended Affordability Benefit”
Thank you to the Independent Budget Office for evaluating the impact of the “Extended Affordability Benefit” (EAB) provision of the recent 421-a legislation. Over the years, I have worked hard to reform New York’s 421-a property tax-exemption, long a for-too-generous giveaway to developers for far-too-little affordable housing. Last year, I came out in support of the Mayor de Blasio’s reform proposal, which would have improved the program significantly, demanding more and deeper affordability across all five boroughs.
Although negotiations in Albany to reform the 421-a program failed, and the program was ended for new development, developers managed to sneak one new provision into the State Legislation: the so-called “Extended Affordability Benefit,” which offers certain rental buildings the opportunity to extend their tax-break benefits for 10 or 15 years.
According to the IBO, the “Extended Affordability Benefit” will give a tax break of $856 million to owners of 63 buildings over the course of 15 years. However, it will create no new low-income units, and it is a very expensive approach to preservation. Owners will be required to make 5% of the units (approximately 800) available to families earning up to 130% of AMI ($118,000 for a family of 4). The existing 3,300 low- and moderate-income units in these buildings will be preserved; however, many are likely already covered by regulatory agreements as a result of other subsidies. The IBO calculates that this program will cost the City $30,000 per apartment, per year (a subsidy of $2,500 per unit per month). In short, the EAB is an expensive program, offered to a few dozen developers, for too little in return.
I had hoped it would be possible for the City Council to suspend the EAB -- at least until a new, more comprehensive deal is reached. Unfortunately, we have determined that the Council’s power to intervene is limited.
The NYC Department of Housing Preservation and Development (HPD) is doing its best to salvage this mediocre State policy. Last week, HPD issued new rules which address some of my concerns with respect to the EAB. The new rules require applicants to submit strong evidence that the affordable units will remain affordable throughout the duration of the program and that rent stabilized tenants will not be displaced once those tax breaks disappear. The new rules also ensure that the additional five percent of affordable units created by the program are legitimately provided to eligible applicants through Housing Connect. Finally, the rules stipulate that applicants must pay for an approved organization to monitor its compliance, which will serve to offset the City’s cost of administering the program.
Still, Albany is forcing New York City to give up $856 million, to just 63 building owners, for too little benefit, and the City has no say in the matter. We could surely put this money to far more effective use to address NYC’s affordable housing crisis.