NEW YORK, NY October 10, 2006 —The words 421A tax incentive program likely sound arcane to most New Yorkers. It is the type of bureaucratic jargon that causes ones eyes to gloss over. But for some housing activists, and elected officials the words evoke a potential windfall of affordable housing. Just how much will depend on whether the program gets tweaked or overhauled. A city task force is currently looking at how it should be changed. WNYC’s Cindy Rodriguez reports.

REPORTER: 421A provides 10 to 25 year property tax breaks to developers all over the city. It began in the 1970’s as a way to spark development during a time in the city’s history when no one was building. As it’s renewal date comes up the program is being analyzed. Housing groups and some elected officials say 421A has undoubtedly worked, so much so, that it’s no longer needed at least not in its current form. City councilwoman Melissa Mark-Viverito represents East Harlem:

VIVERITO: We need to preserve and we need to build more affordable housing in the city of New York for those working families and the working poor in the city who want to continue to live in the city and who want to live in their neighborhoods and not be priced out.

REPORTER: Viverito and others contend property tax breaks should not be given automatically Instead they want developers to earn them by setting aside 30 percent of the apartments they build for low income and working class New Yorkers.

Right now the only place where market rate developers have to include cheaper apartments if they want their tax breaks is in Manhattan between 14th and 96th Streets. The area is called a “exclusion zone”. How far to expand this area will be one of the crucial parts of reforming the program. Real estate experts warn any drastic change could stifle building. Michael Slattery is Senior Vice President of the Real Estate Board of New York and says there are still many neighborhoods developers won’t touch without no strings attached tax incentives:

SLATTERY: South Bronx, Bed Stuy other areas of the Bronx and Brooklyn. Parts of upper Manhattan as well These are areas that have not seen nearly enough market rate development…

REPORTER: Slattery sits on a mayoral task force that’s been trying to come up with recommendations for reforming the program. Everyone from mega developers such as the Related companies – the group responsible for the Time Warner building at Columbus Circle, to small scale affordable housing builders in the Bronx to housing activists, have been in on the discussion. Bringing in all parties holding a stake in a debate has become the Bloomberg way of dealing with issues that have the potential for controversy. Though the diverse group is unlikely to reach consensus there is broad agreement that in a few neighborhoods incentives are no longer necessary. Tribeca is often used as the most glaring example:

REPORTER: On Leonard Street, a construction crew puts the final touches on the glass façade of a 20 story high rise. According to a report done by the Pratt Institute and Habitat for Humanity, rents in the building will start at close to 2-thousand dollars for a studio and exceed 12-thousand for a 3 bedroom. The report says the property will be worth 7 million dollars once the construction is complete. But the benefit of 421A is that properties are assessed based on their pre-construction value which in this case is 400-thousand dollars. This means a tax savings for the owner of more than 700-thousand dollars a year. Brad Lander from the Pratt Institute believes the property taxes the city is missing out on are enormous.

LANDER: I believe that the tax savings from the changes that we’re talking about over the next 10, 15 or 20 years have the potential to be over a billion dollars and that the appropriate share of that goes for affordable housing, we’ve gotta look a little more closely and calculate it, but should be in the high hundreds of millions so significant new revenue for affordable housing as well as hopefully more integrating buildings and more integrated neighborhoods.

REPORTER: Lander who sits on the same task force as Slattery believes housing for the poor and working class should be built within market rate developments.

LANDER: We don’t want a segregated city where there’s ghettos of the rich and ghettos of the poor. That doesn’t work well….

REPORTER: Right now, just about the only place where the rich, the poor and the working class coexist in the same buildings is in this exclusion zone in. Manhattan. There, developers who want a 20 year tax break must rent 20 percent of their units for below market rates. Michael Slattery says there’s a reason for that.

SLATTERY …that’s the only market where market rate development can sustain that low income housing… .. When you think about 80/20 what you’re really saying is that 4 market rate units have got to bare the full cost of one low income unit and in order for those 4 market rate units to do that they have to be very profitable…

REPORTER: Slattery favors keeping a program that allows developers to build their share of cheaper housing away from where the market rate units go up. The system now allows market rate developers to subsidize affordable housing. They do this by purchasing certificates from affordable housing builders who use the revenue to partially finance their projects often located in outerboroughs neighborhoods where the poor and working class live:

Most, including Slattery agree the certificates are too cheap and should be sold for more money. Brad Lander:

LANDER: The data shows ….for every tax dollar we give up about 12 to 15 cents goes to affordable housing through the certificate program. We could make it twice as efficient as it is today and we would still be getting 25 cents on the dollar. I think it’s such an inefficient program, it’s tough to figure out how to reform.

REPORTER: Lander believes the certificate program should be ended. Instead he wants developers to pay into a fund that would be set aside for affordable housing.

Slattery and Lander agree on very little and it’s likely when 421A is reformed the changes will fall somewhere in the middle of the two men. Though Lander does have a strong ally – Democratic Assemblyman Vito Lopez who recently took part in a press conference held by housing activists on the steps of city hall:

LOPEZ: I’m the chairperson of the housing committee in Albany and the key to this argument is not here locally – it’s in Albany. If we do not do anything there is no 421A benefit. You cannot have a benefit without Albany authorizing and we’re going to put modifications on the current law to make it more pro affordable.

REPORTER: 421A expires in December of 2007 but many of the changes need to be negotiated by the end of this year if they are to kick in by the start of 2008. The task force that Slattery and Lander sit on should be releasing their recommendations this week. After that the city council and the State Assembly will have the final word on how the program will be reformed. For wnyc, I’m Cindy Rodriguez