The New York City housing grant program is dead. What should a relaunched version look like?

Remember “the gate of the poor,” the unofficial name for the separate entrance for the non-rich to an Upper West Side luxury resort? Have you heard of so-called 80/20 projects? Do you know anyone who has scored an apartment through the New York Real Estate Lottery?

These are all better-known keywords from New York’s 421-a program, which gave real estate developers decades-long tax breaks in exchange for incorporating a percentage of affordable housing into their new projects. The program began in 2016 and just expired at the end of the June legislative session, with few Albany lawmakers doing much to revive it.

Why? Because it has not lacked controversy. But will he ever be resurrected? And if so, how will it reconcile the difference between the needs of the developers and those of the community?

But first, let’s backtrack a bit: 421-a was actually the dry-sounding name of a version of the program that started in 2016, but has actually been around in New York since its cash-strapped days. of the early 1970s, when the city was desperate to encourage new development. Over the years, as the city moved from impoverishment to prosperity, the program was renewed, each time with more and more requirements to integrate affordable units into projects.

Which brings us to the present moment, when the city’s housing affordability crisis is so severe that the average rent in Manhattan has just exceeded an unprecedented $5,000 per month. Everything in New York costs a fortune, including land and construction, and a myriad of zoning restrictions often make building new homes that much harder. Meanwhile, more than 600,000 people have moved here over the past decade, bringing the population to a record 8.8 million – and there just aren’t enough affordable apartments for everyone who needs them. need.

Not that there hasn’t been a new building since 2010, far from it. According to a June report from the NYU Furman Center, over the past decade more than 185,000 new multi-family units have been completed, of which about 32% were income restricted (i.e. say artificially lower than the market rate), and almost all those units aimed at households earning up to 80% of the region’s median income, or AMI, or $74,720 for a single person and $106,720 for a family of four.

So that’s about 52,000 very affordable new units over the past decade – and of those, about 9,300 have benefited from the 421-a program alone, while the rest have received other types of federal, state, and other subsidies. and municipal.

But despite the fact that 421-a has led to more than 9,000 new units for low-income people, few entities in the city, except for the development and construction sectors, were calling for its renewal – and many , especially low-income housing advocates and their fiercest progressive allies in Albany, demanded his final death.

Why? Opponents said the program favored developers too much. Just over 9,000 very affordable units is a drop in the bucket compared to the majority of the 421 units that were reserved for people earning up to 130% AMI, in the realm of $100,000 or more.

Developers pay almost no taxes on 421-a properties for up to 35 years – only owing what was owed in land and/or property taxes before the project began. For too long, critics have said that 421-a and all of its predecessors have been a huge giveaway for developers – with a tax loss to the city of $1.77 billion a year.

“It just shouldn’t exist anymore,” said Debipriya Chatterjee, senior economist for the Community Service Society, who co-authored a report on the program in February. “We want developers to build more 100% affordable projects, subsidized by something like 421-a, but without market rate units.”

But other housing experts have called 421-a a major driver of new housing overall, which the city desperately needs. “So many homes have been built with 421-a,” said Matthew Murphy, executive director of NYU Furman Center. The independent city budget office reported that from 2016 to June 2021, nearly 40,000 units were created under 421-a, of which about 30% are subject to income restrictions at various levels.

“In his absence, what happens now? ” He asked.

It’s a good question. The city won’t immediately feel the building’s downfall from the end of 421-a, as several projects have recently been launched under the program in anticipation of its expiration. “(But) we’re already wasting a year of pipeline planning,” Murphy said.

But at the heart of 421-a’s future were the details — actual metrics that hardly anyone wants to reveal — because the balance between developers, activists, and lawmakers is so difficult.

A key part of the 421-a controversy was the 35-year tax exemption. “It’s a blatant waste,” said one longtime observer. “It’s longer than anywhere else in the country. In Philadelphia, it’s 10 years. Here it should be 5-10 years with some kind of sunset.

But, as Murphy pointed out, “the less exemption, the less affordability” developers can squeeze into a project. How much exemption reduction could the real estate sector tolerate? Asked about the measures, James Whelan, who heads New York’s powerful Real Estate Board, replied by email: ‘Major unions, elected officials, research bodies and editorial boards agree on the need for a program to boost the production of rental housing by the private sector. sector that includes affordable housing, as 421-a has successfully done. The housing crisis in New York will only get worse without it, and we will lose much-needed family support (construction) jobs in the process. A handful of major developers declined to comment.

The other big sticking point is 421-a’s actual affordable unit formula. The latest version gave developers three options for projects: the first was to make 10% units at 40% AMI, 10% at 60% AMI, and 5% at 130% AMI. The second was to do 10% to 70% AMI and 20% to 130% AMI. The third, which restricted the use of any other government subsidies, was to make 30% of the units 130% AMI.

If that sounds wonky, the program was basically telling developers that they could access additional government subsidies if they put more low-income units into their projects, but none if they were going to price their non-market units. at the highest possible level, aimed at middle class and upper middle class tenants. Despite this, the net result of these three options was many studios and one-bedroom units offered in the $2,000 range, and far fewer family-friendly two-bedroom units offered in the $1,000-$1,500 range. .

This has been a big grievance among housing advocates. To address this, Governor Kathy Hochul earlier this year proposed a 421-a revision called 485-w that would have lowered the program’s highest tenant level from 130% AMI to 90% AMI and would have required units not prices remain permanently affordable (compared to 35 years in the previous version) in projects of 30 or more dwellings. Additionally, Hochul’s version required projects with more than 30 units to reserve 10% of the units for households earning up to 40% AMI, 10% for households earning up to 60% AMI, and 5% of units to households earning up to 80% AMI.

Despite these efforts to make 421-a more affordable, Hochul’s proposal fell through — a sign of 421-a’s overall unpopularity with lawmakers, especially in a now more solidly progressive and responsive Albany. housing advocates it was a few years ago.

All of this begs the question: how affordable could a revised version of the 421-a be? An observer, asking to remain anonymous, said a new 421-a program must prioritize low-to-middle income families, requiring up to 70% of affordable units in a project to be two- and three-bedroom apartments. rooms renting between $900 and $1,200. This observer also said that a new version could keep the AMI option at 130% but reduce the tax exemption period for these units by half, thus incentivizing developers to carry out projects with more low-income units and middle rather than higher income units. In the final version of 421-a, the reverse was true.

With few developers willing to talk about it, it’s hard to know if they think these numbers would work for them. Then, of course, there is the market itself. If it continues to support ever-higher rents, developers have less need for 421-a because they can take advantage of strictly market-priced projects, while affordable housing development remains on a full-fledged path. If the market falters, however, mostly market-rate projects will need tax subsidies to move forward.

So what will happen when the next legislative session begins in January? Murphy thought it could go both ways. “On the one hand,” he said, “they might not take it back.” (And indeed, they may never take it back, at least until middle-income renters achieve as loud a voice in Albany as affordable housing advocates currently have.) On the other hand, “ they might recognize that we have a housing shortage and they need to get it right, which means reforming the program to meet the housing needs of New Yorkers.”

Another observer thought that 421-a would “be mixed in with a big deal,” like greenlighting a new version of the program, to please developers, in exchange for passing an eviction law “to good cause,” which would appeal to housing advocates. . Such a law, which would essentially impose new rules on market-priced apartments, including rent increase limits and guaranteed lease renewals, failed in this year’s legislative session.

“Tenant advocates will give developers 421-a in a heartbeat in exchange for eviction for ‘good cause,'” this observer said, noting that in the last round of legislation, “it’s the developers who rejected it”.

But if you telescope the details, what’s left is a philosophical discussion of exactly what, if anything, 421-a is supposed to be. Murphy noted that the program brought low- and middle-income units into projects in affluent and up-and-coming neighborhoods, such as Hudson Yards, Long Island City and Williamsburg, thus playing some role in racial and economic desegregation. (Most purely low-income housing is built in low-income neighborhoods.)

“Is the 421-aa procurement program aimed at middle markets? Or is it an integration-based program?” Murphy asked philosophically. said, it all comes down to “a balancing act – and a lot of tricky math” to make it work.

About Christopher Easley

Check Also

Ecuadorian president seeks ‘balance’ between US and China

Ecuador’s interests are best served by “balanced” relations with the world’s two superpowers, President Guillermo …