In Albany New York, a number of legislators are being extremely cautious about real estate changes due to being under ethics scrutiny. Of all issues, one of the most challenging is a tax break that literally saved developers of the city billions of dollars. Within the state capital, this tax break has twisted alliances among political leaders, thereby creating major concerns pertaining to real estate interests. This tax break is also causing a serious wedge between two of the state’s top democratic leaders.
421-A Tax Program
Known more commonly as 421-A, this tax program had received a lot of earlier scrutiny from an ethics panel in that it provides developers with lucrative benefits, some being the most generous political contributors in New York.
However, legislators, as well as Governor Andrew Cuomo and NY Mayor Bill de Blasio do not agree as to how the program should be changed. For that reason, talks are underway to temporarily extend the program, followed by putting together a special legislative session within a few months. While another option is addressing 421-A in 2016, a few lawmakers believe program changes will be bundled along with others programs to be addressed at the end of the session and get a last minute vote.
In 1971, the 421-A program began, a time when construction in New York was struggling. This tax break was applauded for recreating the Manhattan skyline, which included One57 on West 57th Street and other tall residential buildings. Now, the tax program is scheduled to expire this year on June 15, along with rent regulation laws for the city.
As Mayor de Blasio and leaders in the real estate industry stated, this tax break is actual critical since it ensures that developers will build more affordable housing units. According to a number of well-respected developers, having this program up in the air makes it extremely hard for developers to progress on projects.
In a statement from David Lombino, director of special projects for Two Trees real estate, the worst possible outcome would be an extender since within a year or two the entire issue will have to be battled yet again.
As part of Mayor de Blasio’s proposal, the 421-A tax program would continue but requirements for affordable housing would become tougher. If his proposal goes through, benefits of the tax break would be extended for the next 35 years but only for developers who have 30 percent of a project for affordable housing set aside. The current requirement is 20 percent although some developers still benefit from the program without setting aside affordable units.
For real estate leaders in Albany, this tax break is vital. In fact, it is so important that New York’s Real Estate Board and other real estate leaders, agreed to back an increase within a city tax specifically for high-dollar homes. The anticipation of the Mayor is that this action will prompt more affordable units to be developed.
Even though there are a number of economic implications, a large number of legislators are still wary about touching the program following US Attorney Preet Bharara’s attention on the state and taking over controls of the ethics panel, which soon after disbanded. The bottom line is that currently, there are several options as to how the program will be handled but until a legislative session hears both sides and comes to a decision, the future of 421-A remains unclear.
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