A New Tool for Tracking 421-a Tax Abatements

There’s now a New York Department of Finance (DOF) tool that co-op and condo boards can use to track their property’s 421-a tax abatement status, along with other vital information. On the DOF site, enter the property address, then scroll to the bottom to find “421-a Benefits.” This is an effortless way to stay on top of where your property’s tax abatement stands with city government. If your building’s abatement is nearing its expiration, your board is facing a major expense and needs to plan accordingly. Be aware that the city’s system of tax abatements is a tangled mess. And remember: it is possible to challenge your real estate tax bill.

Meanwhile, a political battle continues to rage over the resuscitation of the 421-a tax abatement, which expired in January of this year when building trade unions and the real estate industry could not agree on a wage for construction workers. Developers have received $1.4 billion in tax breaks in exchange for making 20-30 percent of apartments in new buildings “affordable.”

“This [requirement] is difficult to impose on developers without offering a tax abatement,” says Pierre Debbas of Romer Debbas, a Manhattan law firm specializing in New York’s housing market.

With industry watchdogs and city and state officials undertaking cursory investigations, it became apparent the city had been granting the tax benefit to developers without verifying that the qualifying number of affordable housing units were in place. This error was due to divided oversight by city and state regulators, and it led critics to deride the tax abatement as “welfare for rich developers.” When the abatement expired, new development applications quickly dropped off. (Construction projects filed before the expiration in January continue to enjoy the tax abatement.) “We are at a standstill until we hear back from Albany,” Debbas says.

The Building and Construction Trades Council of Greater New York and the Real Estate Board of New York announced an agreement on wages earlier this month. The proposal has been sent to Albany, where the bill must pass the Republican-controlled state Senate and Democratic-led Assembly. An earlier version of the legislation died there in March.

“All parties have agreed to extend the abatement provided a certain number of units would be classified as affordable housing, plus an increase in union workers’ wages,” says Debbas. Much hangs in the balance for the housing market as developers wait to see exactly what revisions, if any, will come from Albany. While Governor Andrew Cuomo had hoped for more affordability in the revised 421-a, he fully endorses the legislation as it’s now written.

“If the abatements are making the properties more attractive for investors, which are making development more attractive for developers because they’re getting a higher price as a result of the lower carrying costs, it’s good for near-future development,” explains Debbas. “If you take that away, what’s that going to do to development?”

Waiting for Albany is not as bleak as waiting for Godot. “Given that this proposal got to Albany, it means both parties have essentially agreed to the principles,” Debbas says. “Now it’s a matter of what the revisions are going to be.”