If the city seems even more like one big construction site than usual, it’s not your imagination. Building permits have risen to an historic peak, up by 156 percent over the last year, the Daily News reports, and an astounding 749 percent over the 2010 post-slump low.
This new high–according to Department of Buildings Data and the New York Building Congress–includes permits for 52,618 new residential units over that time period.
Find out what’s behind the boom
If you need more proof that there are some serious flaws with the 421-a program, once again, look no further than One57. As reported by the Journal, the super-luxe tower was the beneficiary of a whopping $65.6 million tax cut, an abatement granted in exchange for a paltry $5.9 million contribution to help cover the cost of 66 affordable apartments in the Bronx. That means your tax dollars subsidized apartments at nearly $1 million per unit—the highest known subsidy under the program—when affordable units on average cost a mere $179,000 apiece. It’s estimated that the generous cut could have provided for 367 affordable apartments. The findings came from the latest review by the city’s Independent Budget Office (IBO).
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Back in March, we learned that the owner of the $100 million apartment at One57 (the most expensive sale ever in the city) pays only $17,268 in annual property taxes– “or 0.017 percent of its sale price, as if it were worth only $6.5 million,” as we noted. “In contrast, the owner of a $1.02 million condo nearby at 224 East 52nd Street is paying $24,279, or 2.38 percent of its sale price.” Why does this happen? It’s in part due to the 421-a program, which offers tax breaks for the inclusion of affordable housing and “lowers the billable-assessed value of a property to incentivize real-estate development,” according to CityLab. It’s also thanks to the city’s haphazard system for assessing market values of condos and co-ops.
In response to this growing issue of inequality, Mayor de Blasio announced just last week that he hopes to end 421-a for condos, as well as implement an even stricter mansion tax. To make the issue a bit more black-and-white, CityLab has put together two charts that show just how disproportionate the actual value of the city’s ten most-expensive apartments is compared with their property taxes. As they note, “In NYC, billionaires pay 1/100th the average property-tax rate.”
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Mayor de Blasio via @KevinCase via photopin cc; One57 © Wade Zimmerman courtesy of Agence Christian de Portzamparc (ACDP)
From the onset, Mayor de Blasio has been extremely vocal about his plan to add 200,000 units of affordable housing over 10 years, 80,000 of which will be new construction. Though many feel this is an arbitrary number, backed up by no data as to where the units will be, the Mayor seems committed to reforming current policies to reach his goal. And after months of speculation, he has revealed his planned changes to the city’s 421-a tax incentive program, which is set to expire in June.
According to the Times, under his proposal, the controversial tax would no longer apply to condo projects (to understand the logic behind this decision just look at the $100 million sale at One57 that received the tax abatement). But it would apply to new rental projects, which would have to have apartments for poor and working-class residents make up 20 to 30 percent of the building in order to qualify for city tax breaks. It would also extend the abatement from 25 years to 35 years. Another part of the overhaul is to eliminate so-called poor doors.
De Blasio also wants to up the city’s mansion tax. Currently, home sales over $1 million are subject to a 1 percent tax, but de Blasio proposes adding an additional 1 percent tax for sales over $1.75 million, as well as a third 1.5 percent tax for sales over $5 million. He estimates this will bring in an extra $200 million a year in tax revenue, money that would be allocated to affordable housing programs.
More details ahead
Brooklyn’s Pacific Park development, one of the pipeline projects examined in the report for it’s affordable housing offer. Rendering by COOKFOX
This morning the Real Estate Board of New York (REBNY) released a report today saying if the city fails to renew the existing 421-a partial tax exemption program, we could stand to lose thousands of affordable units. REBNY took a look at a sample of projects in the pipeline—including Essex Crossing, 5Pointz, Domino and Pacific Park, amongst others—and found that 421-a is responsible for 5,484 affordable apartments and 13,801 market-rate units in these developments. They argue that without the abatement the theses units would be in jeopardy and be “immediately be sent back to the drawing board.” They add that some of the units could even end up as high-end luxury condominiums and some of the middle- and low-income housing now in the works would be lost forever.
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By now it’s no secret that there’s an unbalanced tax system in place for those living in the city’s luxury towers, but exactly how much is being lost–and where–has for the most part been a mystery. To shed some light on just how much of our money goes into subsidizing the likes of One57 and its eye-poppingly expensive friends, the Municipal Arts Society (MAS) has created a map (h/t Gothamist) that shows not only how much tax each of the city’s top buildings skip out on annually under the 421a tax abatement, but how long their exemption will last—which together can add up to staggering amounts for many. Last year alone, MAS found that we forfeited $1.1 billion in tax revenue and 60 percent of that went to building apartments in Manhattan targeted at the 1 percent.
Find out more here
Remember the $100 million apartment at One57, the most expensive ever in New York City? Well, the (presumably) billionaire buyer pays just $17,268 in annual property taxes on the unit, or 0.017 percent of its sale price, as if it were worth only $6.5 million, according to the New York Post. In contrast, the owner of a $1.02 million condo nearby at 224 East 52nd Street is paying $24,279, or 2.38 percent of its sale price.
This is just one example of the fact that the owners of the city’s ten most expensive apartments pay effective rates that are unbelievably lower than those paid on cheaper properties. How is this possible? It’s in part due to the 421-a tax abatement, but more so due to the city’s convoluted method of assessing market value for condos and co-ops.
More on the tax inequality here
Mayor de Blasio via @KevinCase via photopin cc; affordable housing buildings via gkjarvis flickr
Developers have been rushing to break ground on projects before June, when the controversial 421-a tax abatement is set to expire, as it provides incentives to developers for up to 25 years when they reserve at least 20 percent of a building’s units for low- and moderate-income tenants. However, those against the 40-year-old program criticize it for using working people’s tax dollars to build swimming pools and pet hotels for the world’s billionaires; after all, the construction of One57, where a penthouse recently sold for $100 million, was built using subsidies from the program.
But on what side of the debate does Mayor de Blasio, whose goal is to implement “the largest affordable housing program that any city, any state has attempted in a ten-year time span in the history of the republic,” fall? Though many of his supporters oppose 421-a, in order to reach his goal of building 80,000 new affordable housing units–especially in places like East New York where a rezoning would be necessary to allow for denser construction that mandates the inclusion of permanently affordable apartments–de Blasio says he needs the program, according to Capital New York.
More on the 421-a debate here
Image via Pexels
It would be nice to think that developers added affordable housing to their projects out of the goodness of their hearts, but it probably has more to do with the construction bonuses and tax incentives afforded for up to 25 years to developers when they reserve at least 20 percent of a building’s units for poor and moderate-income tenants.
But this real estate tax break, known as the 421a abatement, is set to expire on June 15, lighting a fire under developers to break ground on new projects. The concern, though, is that some development sites receive 421a benefits as of right (meaning solely for putting up a new building), while others are required to include affordable housing. The difference is based on geographic location. For example, Manhattan between 14th and 96th Streets and the waterfronts of Brooklyn and Queens must include affordable housing. According to Crain’s, some housing advocates “want projects to get abatements only if they create affordable units—which are priced for renters who earn 60 percent or less of the area’s median income.”
What does this mean for the future of affordable housing?