Press Release

“Affordable New York” Has Failed to Make New York Affordable, New CSS Report Finds

Calls on lawmakers to end the 421-a program and fund real affordable housing

Since 2017, the 421-a tax exemption for real estate developers – New York’s single most expensive housing expenditure – has gone by the name “Affordable New York.” But 421-a fails to live up to that moniker: not only does it mostly subsidize luxury housing, but the affordable housing it produces is unaffordable to three quarters of New York households. Often that “affordable housing” is not just unaffordable to the average neighborhood resident, but costs more than most vacant apartments nearby.

Taking a deep dive into the data from the past five years, this new report from the Community Service Society of New York (CSS) finds that each of these unaffordable affordable housing units cost the city $1.6 million in uncollected taxes over the course of the tax break. That astronomical figure is eleven times the per-unit cost to the city of directly financing deeply affordable housing construction. In fact, the total tax revenue lost to 421-a over the past three decades – $22 billion when adjusted for inflation – would have been enough to close the New York City Housing Authority’s capital budget gap years ago, to provide enough vouchers to cover every homeless household today, or to cover the city’s share of the capital subsidies needed to build 160,000 units of low-income housing.

In addition to its underperformance as an affordable housing production strategy, CSS’s report also shows that Affordable New York has failed to protect tenants from unlawful rent increases and has contributed to rising housing costs. The program’s rules around rent stabilization are murky and under-enforced, enabling landlords millions of dollars in tax benefits to hike rents, harass tenants, and deregulate apartments. Meanwhile, 421-a has driven up the sale price of land in New York City, thus inflating some of the very costs the program is supposed to be lessening.

Senator Liz Krueger said, “As today’s report proves yet again, 421-a has been little more than an annual multi-billion dollar boondoggle that takes money from city taxpayers and puts it in developers’ pockets, with barely any benefits in return. The Governor's replacement proposal does not address the fundamental flaws in the program. The city would be much better off spending this money directly subsidizing truly affordable housing, without being forced by the state into accepting this dubious deal."

State Senator Brian Kavanagh, Chair of the Senate Housing Committee said: “I thank the Community Service Society for developing this comprehensive and thought-provoking report analyzing the failings of the 421-a program, and for continuing to champion the cause of true affordable housing throughout New York.”

“The 421-a program is exorbitantly expensive and provides very little affordable housing in return,” said Comptroller Brad Lander. “Rather than modifying a program that costs the city almost two-billion dollars a year, we need to overhaul it and restructure a more fair and stable property tax system that can help address our housing crisis. The June expiration date provides New York City’s best window to build a property tax system that eliminates disparities between homeowners on Staten Island and brownstone Brooklyn, incentivizes mixed-income rental development, and targets our limited public dollars to create long-lasting affordable housing for New Yorkers.”

“Over the last five years, we’ve found that Affordable New York has failed to make New York more affordable,” said David R. Jones, President and CEO of the Community Service Society, referring to findings from the report, 421-a at 50, part 2: Unaffordable New York. “It’s time to stop throwing good money after bad and end 421-a for the last time. Let’s put our tax dollars toward housing programs that work and reform our property tax system to be more equitable and balanced.”

While Governor Hochul’s proposed replacement plan would make some strides toward allowing some lower-income New Yorkers to access buildings receiving 421-a, it maintains the core structure of the program and all its inefficiencies. It also provides a lucrative homeownership alternative to its rental housing options, which developers are often likely to select, particularly in gentrifying neighborhoods. In those cases, the city would be forgoing millions of dollars to help higher-income people buy condominiums in lower-income neighborhoods, rather than using the same city tax dollars to help low-income households remain in their homes or move into new affordable housing.

Ultimately the legislature and the Governor should keep 421-a out of the budget and end the program once and for all, then turn toward rebalancing the tax code between new rental development, older rental buildings, and owner-occupied housing, and shift city and state subsidy dollars toward more effective affordable housing programs.

The report makes the following policy recommendations:  

  • End 421-A: Allow 421-a to expire on June 15th, 2022 or pass A1931a (Rosenthal)/ S260a (Myrie) to repeal it now. Future incentive programs should provide developers benefits in proportion to social benefits they provide the city—i.e., the amount and cost of the affordable housing they produce. In the meantime, the city needs comprehensive property tax reform to balance the burden between coops, condominiums, small homes and rentals, and between lower- and higher-income property owners.
  • Audit Recipients: Pass S6384 (Hoylman)/ A7265 (Gallagher), which mandates that the state conduct an annual audit of previous 421-a exemptions to ensure compliance from past recipients on affordability, rent stabilization, labor law and other provisions of the program. Improve public reporting on 421-a to provide a clearer annual account of projects and units that receive the benefit, the number of affordable units per building, and other relevant data.
  • Protect Tenants: Pass A641 (Rosenthal)/ S76 (Hoylman) to prohibit landlords from sending inaccurate lease riders to tenants in income-targeted 421-a apartments that falsely state their homes will be removed from rent stabilization when the tax break expires. Pass A8899 (Rosenthal) to ensure that all 421-a income-targeted apartments remain rent stabilized in perpetuity.

“New York City and State should be spending billions to produce urgently needed affordable housing in our city, but we can, should and must do better than 421-a” said Samuel Stein, CSS Housing Analyst and report co-author.” “As our report shows, Affordable New York has done much more to juice land values and build unaffordable housing than it has to produce new housing for those who need it most.”

“Even the Affordable New York version of 421-a, which explicitly required developers to create on-site subsidized units, has not helped improve housing access or affordability for a majority of New Yorkers,” said Debipriya Chatterjee, CSS Senior Economist and co-author on the report. “Incentivizing the creation of a few subsidized units by bestowing a generous subsidy to the entire development has proved to be one of the costliest and inefficient use of taxpayers’ dollars.”

“As the city takes steps to promote an equitable recovery, we need to reimagine plans for what a truly affordable housing plan looks like;  421-a should not be an option, said Emerita Torres, Vice President for Policy, Research and Advocacy at the Community Service Society. “Rebranding 421-a as an ‘affordable’ housing program is beyond misleading; it has resulted in the  loss of billions of tax-payer dollars that could have been invested in housing that New Yorkers could actually afford. Now is the time to end 421-a; it would be woefully irresponsible of our government to continue to astronomically subsidize the luxury real estate industry when our report clearly shows that the program has largely created ‘affordable’ housing that 75 percent of New York households simply cannot afford.”
 

Issues Covered

Affordable Housing