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NYC Department of Housing Preservation & Development
Press Room

FOR IMMEDIATE RELEASE
Press Release # 444
Wednesday, December 20, 2006

Contact: Stu Loeser/Jason Post (212) 788-2958
Neill Coleman (HPD) (212) 863-8076


MAYOR BLOOMBERG WILL SIGN COMPROMISE BILL TO REFORM 421-A TAX INCENTIVE PROGRAM INTO LAW

Legislation Passed by Council Builds on Framework Laid Out by Mayor’s Task Force; Ensures 20,000 New Affordable Housing Units Citywide

Map of Geographic Exclusion Zone

Mayor Michael R. Bloomberg today announced that he will sign into law the amended bill that reforms the City’s 421-a property tax program that was passed by the City Council by a vote of 44-5. The final legislation, which will create an estimated 20,000 new units of affordable housing, was negotiated by the Administration with Council Speaker Christine Quinn and council members, and fulfills a promise made by Mayor Bloomberg in February when he made reform of 421-a central to the expansion of the New Housing Marketplace Plan.  Earlier this year the Mayor established the 421-a Task Force to recommend changes to the program.  The legislation passed today by the City Council builds on the reform framework established by the Task Force in October and will provide $300 million in additional funding for the New Housing Marketplace Plan. 

“The passage of today’s bill advances our $7.5 billion New Housing Marketplace Plan, which will provide affordable housing for 500,000 New Yorkers, more than the entire population of Atlanta,” said Mayor Bloomberg. “We are pleased that a broad coalition of City Council members voted in favor of this amended bill introduced by City Council Speaker Christine Quinn.  I want to thank Speaker Quinn and her staff as well as Housing and Buildings committee Chair Erik Martin Dilan for working closely with the Administration to develop sound changes to this important program that will eliminate unnecessary tax breaks for luxury developments.”

“The City is using every tool at our disposal to build and preserve 165,000 units of affordable housing by 2013 as part of our ten-year New Housing Marketplace Plan,” said Deputy Mayor Dan Doctoroff.  “Our success has drawn people from around the world to New York, creating a shortage of housing that drove up prices.  With this bill, the Administration and the Council struck a balance between maximizing affordable housing for low-income New Yorkers while also continuing our recent housing boom for the middle class that is closing the housing gap.”

“As our housing challenge shifted from abandonment to affordability, our New Housing Marketplace Plan responded with innovative new strategies to create much-needed housing for working New Yorkers,” said New York City Department of Housing Preservation and Development Commissioner Shaun Donovan. “By expanding on the key program changes proposed by the members of the Mayor’s 421a Task Force, today’s legislation is a perfect example of how we can harness our strong housing market to create new incentives and new resources for affordable housing.”

The 421-a tax incentive program was created in 1971 to spur housing development at a time when housing market conditions were weak. Under the program, housing developers within designated areas are given tax incentives to develop housing. The program has helped fuel the construction of over 110,000 apartments in the City. However, the City’s real estate market has changed dramatically since that time. In recognition of the need for reform of the program, the Mayor convened a 26-member task force in February 2006 to examine 421-a and suggest changes that would better align it with the current real estate environment. 

The legislation passed today by the Council adopted the Task Force’s changes with a number of important modifications.  The primary elements of the legislation will:

Expand the 421-a geographic exclusion area (GEA). The current exclusion zone, the area where developments are required to provide affordable housing in exchange for 421-a tax benefits, includes Manhattan from 14th Street to 96th Street and the Greenpoint-Williamsburg waterfront in Brooklyn.  The approved legislation will include many neighborhoods with substantially high real estate values and significant zoning density.  The expansion includes Manhattan south of 135th Street in West and Central Harlem, and south of 117th Street in East Harlem, as well as an area between 124th and 126th Street in East Harlem that has been proposed for rezoning.  The expanded zone will incorporate additional Brooklyn neighborhoods, including all of downtown Brooklyn, Carroll Gardens, Cobble Hill, Boreum Hill, Park Slope; most of Fort Green, Prospect Heights, Williamsburg and Greenpoint, and portions of Sunset Park and Bushwick. In order to receive the tax abatement inside the Exclusion Zone, the legislation will require that developers must provide 20% affordable housing on-site.

Furthermore, to ensure that the GEA is calibrated over time to changes in the housing market, the legislation establishes a Boundary Revision Commission, comprised of appointees from the Council and the Administration that will meet every two years to review clearly established criteria and assess the current state of the housing market in neighborhoods across the city.

Grant twenty-five years of benefits only to developments that provide affordable housing. The approved legislation will allow only developments that provide affordable housing the maximum duration of benefits. Other developments would receive fifteen-year 421-a tax benefits. Currently developments in neighborhoods such as the South Bronx and Kingsbridge, Williamsburg in Brooklyn, Jackson Heights in Queens, Port Richmond in Staten Island and much of northern Manhattan can receive twenty-five years of benefits without providing affordable housing.  These areas, formerly threatened with housing abandonment when the 421-a program was established, now increasingly face the challenge of housing affordability.  The legislation will for the first time provide an incentive for developing low-income housing in these neighborhoods.

Set a limit on the total amount of 421-a tax benefits that any market rate unit may receive.  The approved legislation creates a ‘luxury cap’ that will limit the total amount of 421-a tax benefits that any market rate unit may receive.  Only the first $65,000 of an apartment’s assessed value would receive the 421-a tax exemption. However, projects providing affordable housing on-site would not be subject to the cap, helping to increase the incentives to provide affordable housing.

Abolish the existing negotiable certificates program and create an Affordable Housing Trust Fund.  The negotiable certificates program allows developers in the geographic exclusion area to receive 421-a benefits in return for purchasing certificates sold by developers of affordable housing outside the exclusion zone.  By eliminating the certificate program, market-rate developers in the GEA are required to pay full taxes unless providing affordable housing on-site. The result would increase property tax revenue to be used for a dedicated $400 million Affordable Housing Trust Fund, which will be above and beyond the $300 million generated for the Mayor’s New Housing Marketplace Plan by the legislation’s other changes.  The Fund will be targeted primarily to the 15 poorest neighborhoods in the City, as based on federal census numbers, and will be administered by the New York City Housing Development Corporation (HDC).

The Mayor is expected to sign the bill into law on December 28, 2006. As required by State law, the changes will go into effect one year from the effective date of the legislation, thereby creating an orderly transition to the new 421-a requirements that will help to keep the housing market strong.  Following the enactment of this bill, the Administration and Council will work with the State Legislature to ensure renewal of the State 421-a legislation, which expires on December 31, 2007. The Administration and Council are also committed to working with the State Legislature during the upcoming session to seek passage and implementation of a tax exemption program to spur the construction of affordable Class 1 owner occupied properties.

Map of Geographic Exclusion Zone

 




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