New York lawmakers and developers reached a deal with Gov. Andrew Cuomo earlier this week to revive the state's 421-a tax break, The Real Deal New York reported. The measure has been sent to the state legislature for approval.
According to Curbed, the latest agreement mirrors Cuomo's Affordable New York proposal earlier this year, establishing wage tiers based on project location and size and extending the tax break's duration from 25 years to 35 years.
Rent regulation is a critical factor for the program. If the system is not renewed in 2019, when it is next up for review, the 421-a program will likely fall through. The new deal puts the tax break in effect through 2022.
While no new projects can get the tax break at this time, Cuomo's proposal seeks to bring back the process, with the goal of encouraging developers to include affordable housing units in their projects. Still, critics are concerned that developers could be passing off the break as a benefit to condominium owners in certain buildings, with a January report by the New York City Independent Budget Office alleging that $2.5 billion or more in program benefits between 2005 and 2015 were claimed by owners.
The new wage requirements could cost up to $5.7 million in taxpayer dollars per 300-unit building, according to an assessment of Cuomo's proposal by the New York University Furman Center. The report also found that if already-high labor costs offset the benefits of the tax abatement, developers could turn to smaller projects, constructing buildings under 300 units to avoid the program's wage requirements.
The legislative proposal comes as New York City and other U.S. metros seek ways to increase affordable housing stock. Some cities are getting creative. In Chicago, plans for three co-located library branch and public housing projects are underway. Meanwhile, in New York City's East Harlem, a former Metropolitan Transportation Authority bus depot will be converted into a 730-unit affordable housing complex.
For more housing news, sign up for our daily residential construction newsletter.