Gov. Hochul Plans Push to Restore 421-a Affordable Housing Tax Break
Construction of new multifamily housing has plummeted since 421-a expired in 2022.
Jan. 12, 2024 — Return of property tax exemption could revive multifamily housing construction.
At her recent State of the State address, Gov. Kathy Hochul made restoring the 421-a tax break for developers of affordable housing into one of her top priorities for 2024, globest.com reports.
The 421-a program, which expired in June 2022, gave New York real estate developers who construct new residential buildings a property tax exemption in exchange for designating a portion of the homes as affordable. Those tax breaks, which had an expiration date, were passed on to buyers of new condo apartments in those buildings.
Housing production has plummeted across the five boroughs since the expiration of 421-a, 6sqft reports. A report released this week by the Real Estate Board of New York found developers filed 285 multi-family foundation plan applications with just 9,909 apartments proposed, a 78% drop in total unit filings from 2022. The number of dwelling units proposed last year is 50% of the roughly 20,000 units produced per year between 2000 and 2020.
That plunge in new construction is seen as contributing to the dearth of apartments listed for sale in the five boroughs, which in turn puts upward pressure on prices. Also factoring into the city's sluggish real estate market in 2023 was the rise in interest rates, which have plateaued and are expected to come down during 2024. The declines in new construction exacerbate the city's linked problems of homelessness, high rents and stratospheric real-estate prices.
When 421-a expired in 2022, Hochul introduced a new property tax code, 485-w, that called for more affordable units but maintained much of the old tax break. It failed to move forward. Last year, the governor proposed extending the construction deadline for projects grandfathered into the lapsed 421-a program; it also failed.
Hochul's housing initiatives have faced fierce opposition from New York City's suburbs, where residents objected to the controversial plan to give the state the power to override local zoning officials and force them to increase higher-density housing development along transit lines by a certain percentage.
Gov. Hochul has scrapped those ambitious plans and will now try to revive 421-a, which was derided by many critics as "welfare for developers."