New York City wastes billions on affordable housing tax breaks -study

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By Hilary Russ | NEW YORK

NEW YORK New York City wasted as much as $2.8
billion over an 11-year period on condominium apartments
included in a massive affordable housing tax break program,
according to a new study to be released on Monday.

Instead of fulfilling its mandate to stimulate additional
housing development, the benefits are going to condo owners in
the form of tax relief through the program known as 421-a,
according to the study by the New York City Independent Budget
Office (IBO), a non-partisan fiscal watchdog.

Critics, including the anti-poverty group Community Service
Society, have said 421-a subsidizes mainly market-rate
apartments at a huge annual cost to the city.

The program, which stopped accepting new applications a year
ago, faces an uncertain future as Governor Andrew Cuomo wrestles
with lawmakers and New York City Mayor Bill de Blasio about how
to revive it, including whether to keep condos in the program at
all.

The program is the city’s largest tax abatement, totaling
$1.2 billion this fiscal year. That figure includes breaks not
only for condo units, which make up a third of the program, but
also rental units at 50 percent, according to city tax data. The
remainder of the program includes cooperative apartments, family
and mixed use units.

Earlier this month, Cuomo introduced his Affordable New York
legislation, calling for qualifying new residential developments
to get full property tax abatements for 35 years. Though it
targets development in the city, the program must be authorized
by the state.

The 421-a program is supposed to promote affordable housing
by providing a tax break for up to 25 years if developers set
aside apartments for low-income New Yorkers in their residential
construction projects. It was enacted in 1971, when private
development had stalled in a city that would face the
possibility of bankruptcy just a few years later.

Once developers sell units or buildings to new owners, the
421-a benefit moves to the new owners, usually at a premium
because the tax incentive is attached.

In its study, seen by Reuters, the IBO only examined condos,
comparing more than 17,000 repeat condo sales from 2005 through
2015.

Manhattan condo owners paid only 53 to 61 cents on average
for every dollar received in tax savings, the study found.

“Condo owners receive tax relief through a program intended
to incentivize development,” the IBO’s Geoffrey Propheter wrote
in his report. “It represents wasted dollars because buyers are
receiving more in benefits than they pay for.”



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