Legislative Session Ends without the 421-a Tax Break

The New York State Legislature finished its last official session of 2016 without renewing or replacing the state’s 421-a program. The 421-a program expired in January. Originally, it launched during the fiscal crisis of the 1970s to encourage new residential construction by offering developers tax breaks. Owners who receive the 421-a tax benefits are supposed to submit all the units in their properties to rent stabilization for the duration of their tax breaks, which can span up to 34 years and significantly lower property tax burdens, in some instances by more than 90 percent.

When the program was set to expire at the end of last year’s legislation session, Governor Andrew Cuomo extended it to January and challenged real estate developers and construction labor unions to negotiate a new deal. The groups needed to include some form of a prevailing wage requirement for construction workers for buildings with 15 or more units that are participating in the program. They failed to come to an agreement.

Without a tax break program, developers warned that rental housing development is likely to shrink and impede Mayor Bill de Blasio’s plans to build 80,000 new units of affordable housing over the next decade. In a final effort, lawmakers had proposed a replacement bill called 421-aa that sets new wage floors for construction workers at $15 an hour, rising annually to hit $21 an hour by 2020, on projects receiving the tax breaks. And developments with more than 300 units built south of 96th Street in Manhattan would be required to pay construction workers at least $55 an hour under the proposal.

The proposed legislation would also repeal the authority of the city to shape the affordability requirements of 421-a and decrease the percentage of low-income units required, while lengthening the exemption period to 35 years. However, the proposed bill never made it out of the Senate Rules Committee.