By Prem Calvin Prashad
The controversial 421-a tax abatement program expired quietly on Monday night, temporarily ending tax breaks on new constructions in the city, but also putting the status of hundreds of thousands of rent-stabilized housing units in limbo.
A deal may still come from Albany, one negotiated between the governor and heads of the Assembly and the Senate, the titular “three men in a room”—a practice that no one should believe ended with the loss of leadership posts for Sheldon Silver and Dean Skelos, both felled by their real estate industry dealings, no less.
421-a exemptions have, to date, fueled construction on the waterfront as well as trendy neighborhoods in Brooklyn and Manhattan. Long Island City, the site of the borough’s construction boom, is one of the areas exempt from these affordable housing requirements, meaning that none of the units built here under 421-a are intended for Queens households and their median income of $54,373, according to the most recent Census.
The longstanding exemption was enacted to incentivize building during a construction bust. In recent years, as property values have soared in New York City, politicians have tried to reshape 421-a as an ad-hoc affordable housing plan, allowing the developer to set aside some units in the new construction with temporarily below-market rates. Developers in certain areas could also purchase offsets, meaning they could claim a tax break and set aside no units for affordable housing, provided they built affordable housing units elsewhere.
Mayor de Blasio, Governor Cuomo, the real estate lobby, construction unions and various members of the state Legislature have come down on different iterations of ways to reform 421-a. The governor proposes the simplest option – renewing it in its current form for the next eight years, preserving the tax breaks but providing no additional protection to the units set to rise to the “market rate.”
Year after year, “luxury” apartments creep east, first along the waterfront, in Williamsburg, Brooklyn and Astoria, but now popping up in Ridgewood, as well as neighborhoods east of Prospect Park, such as Prospect Lefferts Gardens. New residents can hardly be blamed for going where the cheaper rents are, yet new units are also built to accommodate this demand, changing low- to medium-density residential neighborhoods. This trend will only continue, into Elmhurst, Jackson Heights and Woodside.
Renters in rent-stabilized units fear that the loss of rent-stabilization protections will give free rein for landlords to drive up their rents or throw them out. As recently as last week, tenants’ rights groups Chhaya CDC, Woodside on the Move and Asian Americans for Equality protested Benedict Realty Group, alleging efforts to push rent stabilized tenants out of their building in Elmhurst.
421-a is a flawed program of a bygone era, one that does not reflect the boom market of New York real estate. Developers have an obligation to maximize profit and we should not resort to bribery to get them to provide a temporary public good—these goals are fundamentally incompatible. With projects such as Astoria Cove, the city has demonstrated that it can negotiate concessions better than the 20 percent required by 421-a, in exchange for the rights to develop. Furthermore, the astronomical value of many of these new constructions, as well as the laughable offset scheme, indicates that 421-a or any substantially similar extension will be a giveaway to real estate interests.
The time is now, during boom times, to collect property tax on the new developments in our neighborhoods, based on the fair market value of the land the stand on. Taxes collected can go to fund long-deferred public housing maintenance, as well as subsidizing the construction of truly affordable buildings, rather than hoping for handouts from private interests.
Construction unions have a stake as well. The unions have insisted that any building receiving the tax break have mandatory provisions for unionized labor, a provision that many real estate interests have called “cost prohibitive.”
Furthermore, in refusing to respect construction unions and fair wages, 421-a creates a convenient scapegoat—non-unionized and largely immigrant construction workers. Renewed in its current form, 421-a will surely entrench this divide, as developers will always seek to pay less—building cheaply with the cheapest labor available.
Comprehensive reform for rent regulation and associated tax breaks for affordable housing must utilize skilled, unionized labor to ensure that new buildings are built safely—for both the workers and the future residents. The unions, on their end, should work to expand and diversify membership—Asian men as well as Hispanic men and women are the least unionized populations in the United States, according to a report by the Bureau of Labor Statistics.