March 13th, 2015, 1:37 pm
$1.1 Billion/Year Tax Exemption Predominantly Benefits Manhattan Housing Construction
The Municipal Art Society released a first-ever interactive tool mapping the impact of one of New York City’s most expensive housing incentive programs. Spread across three city agencies, the data required to evaluate the affordable housing output of 421-a has never been publicly compiled until now.
In total, the city forfeited more than $1.1 billion in tax revenue in 2014 alone through the 421-a program, 60% of which (nearly $670 million) subsidized buildings in Manhattan, a borough currently undergoing a historic building boom that renders a building subsidy unnecessary. The annual exemption recurs for 10-20 years in the city’s most expensive neighborhoods.
Creating the maps required MAS to track down and merge data—some of it in PDF form—from the Department of Finance, the Department of Housing Preservation and Development, and the Department of City Planning. The City’s Independent Budget Office assisted MAS in this effort by compiling the data from the Department of Finance.
“It’s not the 1970s anymore. In these booming Manhattan neighborhoods, the only value of a 421-a program is to spur affordable housing, yet the data on 421-a’s affordable housing impact is largely unavailable. And what information we do have is scattered across three city agencies. It’s long past time that Albany provides a transparent public accounting of this four-decade-old, $1 billion/year program.” -Margaret Newman, MAS Executive Director
The 421-a program, created in 1971 to spur residential development, was amended in 1985 in response to the rebounding real estate market. After 1985, new development projects seeking 421-a tax exemptions in flourishing Manhattan neighborhoods—defined by the so-called Geographic Exclusionary Area (GEA)—were required to dedicate 20% of total units to affordable housing. However, in 2008 legislators expanded the boundaries of the GEA to include all of Manhattan, but also neighborhoods in the Bronx, Brooklyn, Queens, and Staten Island.
“Reimagining 421-a as an engine for affordable housing was a well-intentioned but doomed idea. We’ve amended it again and again over four decades, trying to mold a program that was designed during a construction drought into one that makes sense during a construction boom. The geographic exclusionary area should do just that—exclude luxury neighborhoods from cashing in on 421-a.” -Margaret Newman, MAS Executive Director
The 421-a program is up for renewal by the New York State legislature in June 2015. Based on the findings revealed in the maps, MAS urges that the program cannot be renewed as is.>
- Rationalize 421-a’s cost-benefit equation either by strengthening the affordability requirements or by decreasing the financial incentives;
- Redraw the lines of the GEA to reflect actual market conditions, based on data and statistics, rather than politics; and
- Dramatically increase the program’s public transparency and use this data to monitor the program’s successes and failures.
Select Findings535 West End Avenue
City forfeited $3.3 million in tax revenue in 2014 subsidizing 6 affordable units built in 2013; this annual exemption continues through 2023
150 East 86 Street
City forfeited $5.8 million in tax revenue in 2014 subsidizing 24 affordable units built in 2011; this annual exemption continues through 2021
505 West 37 Street
City forfeited $12.1 million in tax revenue in 2014 subsidizing 167 affordable units built in 2012; this annual exemption continues through 2032