It’s Official: The 421-a Tax Exemption Is Welfare for Developers

A new study by New York University’s Furman Center reveals that nearly 80 percent of the buildings that received 421-a tax exemptions contain no affordable housing units – a direct subversion of the purpose of the 1970s era program, and fresh fuel for critics who have long derided the program as welfare for rich developers.

The NYU study reveals that 78.5 percent of the properties that received the tax breaks contain no affordable units, while 14.8 percent have some on-site affordable units and 4.4 percent support off-site affordable units. Properties without affordable housing account for 68,424 units across 3,524 projects, according to the study.

From 1971 to January 2016, New York City’s 421-a program offered a property tax exemption for the construction of new residential buildings. Starting in the 1980s, the city began requiring certain participating residential buildings to support the creation of affordable housing in order to benefit from the tax exemption.

While the 421-a program has been in suspension since January 16 of this year for new developments, the program remains in effect for existing buildings throughout the city that qualified under prior iterations of the program.

Reforms instituted in 2015 required affordable housing in every project that benefits from the subsidy. Since the program lapsed in January, developers have claimed that rental construction in the city is impossible without it.

In November, the Real Estate Board of New York and the Building and Construction Trades Council of Greater New York reached an agreement that appears likely to lead to the program’s revival.