The 421-a tax abatement program, which offered tax breaks to developers who agreed to include affordable housing in their projects, expired at midnight after the Real Estate Board of New York failed to reach an agreement with construction labor unions on labor wage.
The program, which launched in 1971 and has gone through many iterations since, offers developers working on mutli-unit residential developments a mutli-year tax exemption, provided they include a percentage of affordable apartments in their project. In June, 421-a was re-extended for another four years, with the caveat that REBNY and the construction units would have to agree on whether workers on the 421-a projects would be guaranteed certain wages. They did not, and now it's dead—or, officials say, at least "suspended" until the two parties can come to some kind of agreement.
It's unclear what the real estate future will look like without 421-a. REBNY officials say this could mean the death knell for affordable housing, now that developers no longer have the financial incentive to include below market rate units in their projects. "Without a program like 421-a, one can’t build multi-family rental housing with a significant below-market, or affordable, component on a scale necessary to address the City’s needs,” REBNY president John H. Banks, III, said in a statement. REBNY says the city will lose 18,000 affordable units over the next four years with 421-a gone.
Still, tenant advocates say that 421-a gives developers extra cash in exchange for just a handful of units that are still out-of-reach for the New Yorkers that need them most. The Mayor's office has pledged to create and preserve thousands of affordable units over the next decade, but only a very small percentage of those units will go towards New Yorkers who make $38,500/year or less.
Either way, the push for affordable housing is real. Some members of the tenant community say that getting rid of a "broken" program like 421-a could help politicians put their energies toward a more fruitful solution for providing affordable housing. "Both sides [real estate and unions] have a lot invested in making sure 421-a moves forward," Katie Goldstein from Alliance for Tenant Power said earlier this week. "To us, it's a giveaway to luxury developers. We're interested in a program that helps tenants."
The construction labor unions say they're up for renegotiating, but it might take some time. "We remain ready to engage with all stakeholders in the weeks and months ahead to achieve our goals of creating needed affordable housing and middle class jobs for New Yorkers," Building and Construction Trades Council of Greater New York president Gary LaBarbera said in a statement.