Why New York’s most contentious real estate tax break is about to expire


A possible trade

Tenant activists had a major priority of their own this session that also didn’t get passed: good cause eviction. The bill would have barred landlords from not renewing leases for tenants who had kept to their terms and restricted rent increases to 1.5 times the inflation rate or 3%, whichever was higher.

Though passing a bill championed by tenant activists in exchange for extending a tax break championed by landlords might make sense in theory, a potential good cause-for-421-a trade did not actually work out in practice.

“Enacting good cause and extending these kind of tax programs have different constituencies, and different legislators are interested in them, but I don’t know that a simple connection of those issues alone makes it easier to do either of them,” said state Sen. Brian Kavanagh. “Just jamming those two issues together, I don’t think that was ever really something that was likely.”

The rumored deal also never actually fit the political realities in Albany, said Weaver. Politicians from outside of the city who were against good cause did not have much stake in whether 421-a continued, making them unlikely to support one program in exchange for the other, she said.

“Upstate Assembly members who are opposed to good cause eviction are not assuaged by 421-a, and in fact they’re kind of annoyed by it,” said Weaver, “because it’s the kind of subsidy that, one, really only benefits New York City and, two, benefits really large property developers over their district’s property owners.”

Some tenant advocates also argued that the real estate industry fought against good cause much harder than they fought for 421-a this past session, which also hindered the opportunity for a deal to emerge.

Judith Goldiner, attorney in charge in the Legal Aid Society’s civil law reform unit, has long been an outspoken critic of 421-a, although she said a deal to continue the tax break and enact good cause would have been worth it. It seemed like there was a chance for a big housing package to pass at one point during the session, but other issues—most notably redistricting—ultimately derailed this.

“Frankly, after the redistricting fight, the legislators, they seem to just want to go home and campaign and not do anything else,” she said. “That’s the very strong sense I get.”

Kavanagh acknowledged that he always wants the Legislature to do more for housing but still defended its recent accomplishments on this front. He pointed to measures like the New York City Housing Authority Trust and the additional funding for rent relief included in the budget as evidence that housing was still a big priority in Albany.

Assemblyman Harvey Epstein, however, expressed more frustration.

“It’s disappointing that so much time from April to June was focusing on lines and redistricting and litigation,” he said. “So much was up in the air that we really lost time to work on the policy work that New Yorkers sent us up here to do.”

421-a fallout

Developers say the outcome of losing 421-a is straightforward: There will be less affordable housing built at a time when the city already faces a massive affordable housing shortage.

The two main types of projects developers will focus on without the program are housing for extremely low-income New Yorkers, which uses different tax abatements, and housing for extremely wealthy New Yorkers, according to Eli Weiss, principal at Joy Construction. Housing for the middle-class is what will get squeezed out.

“If rental housing can’t be built, then for-sale housing will be built,” said Weiss. “Without a tax abatement, then for-sale housing will be catered to, ultimately, a population that can afford to pay full real estate taxes, which is generally the affluent.”

Real Estate Board of New York President James Whelan, 32BJ President Kyle Bragg and Building and Construction Trades Council of Greater New York President Gary LaBarbera sounded a similar note in a joint statement, saying that the city’s housing crisis “will only get worse” without a program to help spur construction of affordable apartments, “and we’ll lose much-needed family-sustaining jobs in the process.”

Many 421-a critics have argued it is just a Band-Aid for broader property tax issues in New York, and the better response to the city’s affordable housing crisis would be to enact broader property tax reform.

However, this is much easier said than done, said Slate Property Group Principal David Schwartz.

“That’s a gargantuan task, so I think, given the complexities of New York state and getting things done, that’s going to be really challenging,” he said. “I’d think that at some point people will realize that you need some sort of program again.”

But Kavanagh expressed hope that there might be enough energy around property tax reform to enact some major changes. Although some type of affordable housing tax break could be included in this, he argued, it would involve much more dramatic changes to 421-a than the state has enacted before.

“I think we have an ability to put something together that works if there’s an appetite for going down that direction,” he said. “I don’t think you’re likely to just tinker with it and call it a day.”

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