Opinion: This state tax break helps fuel Brooklyn’s gentrification
Many fondly remember the 1970s in New York City, but by 1974, the city was on the brink of fiscal crisis, dodging bankruptcy by the skin of its teeth. The near economic collapse was a result of unfortunate patterns and practices here in the city. Recovery would depend on the revival of a local economy that was already being rocked by a decline of manufacturing jobs, and by how it dealt with middle-class suburb migration.
Consequently, the housing market took a drastic turn when we failed to put in place initiatives that would promote fiscally responsible infrastructure driven by a partnership between the public and private sectors. Though many believe that the downturn in housing stock was a result of overly progressive public policies, the real decline was caused by an industry-driven private sector, and our failure to create real mandates for affordable housing throughout the five boroughs.
Because of that failure, New York, including but not limited to New York City, has experienced high levels of gentrification and displacement. As a result of housing and land use policies that too often prioritize profit over people, many Brooklynites are no longer able to afford living in neighborhoods where they were born and raised.
One policy that is fueling gentrification is the 421-a tax abatement program. The 421-a program is available to almost any new residential building of more than five units. Projects that qualify for the exemption must set aside 20 percent of their units as “affordable.” This relic of 1970s New York was intended to encourage big real estate to build affordable housing. However, we have learned that these tax breaks do not spur affordable housing, but instead accelerate gentrification by saturating local housing markets with luxury housing units and driving up housing costs while providing a small number of “affordable” units that are often only affordable to families earning over $100,000.
Fortunately, New York City has two programs that will put the private sector back in a position where the benefit of creating new and real affordable housing will be shared proportionately with working families. The programs — the Extremely Low & Low-Income Affordability program and the New Housing Opportunities Program — are under the supervision of the New York City Housing Development Corporation. These programs provide benefits for lower income families that range from setting aside units for formerly homeless applicants, to mandating a number of affordable units based on 30 to 60 percent of Area Median Income, all while providing below-market mortgages for developers constructing moderate income rental housing. Both of these programs serve as prime examples of our city’s desire to build affordable and sustainable housing for all.
However, when unsustainable tax abatement programs like 421-a remain an option to lending institutions, we leave developers to their own devices and, subsequently, our worst outcomes as a city. 421-a costs New York City over $1.5 billion per year in lost property tax revenue to fund housing units unaffordable to the majority of New York City residents.
The program also fails to meet the ultimate and real-time demands to build income-targeted housing that is sufficient for the homeless and city residents in need, putting the demand for profit over everything else. In fact, the New York City Independent Budget Office looked at a case study of a Midtown luxury condo building in 2015 and found that its 421-a benefits cost the city $65 million while the project created a mere 66 affordable units off-site in the Bronx. Had the development simply not received 421-a benefits, the IBO estimates that the city could have used that revenue to fund the construction of over 300 units in the Bronx by way of cash grants.
As long as we keep tax abatement programs like 421-a in place, the priority to efficiently build sustainable, supportive and truly affordable housing will remain secondary to leveraging housing for corporate profit.
The recent Housing Stability & Tenant Protection Act has been the most robust legislative response to the rental crises in the history of the state. It is one that ensures all involved in the industry of affordable housing make the necessary changes in their practices to break the cycle of poverty. Similar to the task we faced in the 1970s, we must now decide the fate of roughly one million-plus city renters and their families. From luxury deregulation, capital improvement removal and preferential rent elimination, the desperate need for structural changes is obvious. However, the stage is set to take that next critical step — a step that will run counter to arguments made by corporate interests and attempt to create a new resolve for those who want to call our great state home.
Assemblymember Walter Mosley represents the 57th Assembly District, encompassing the Brooklyn neighborhoods of Fort Greene, Clinton Hill, Prospect Heights and parts of Bedford-Stuyvesant and Crown Heights. Alex Fennell is the Network Director at CUFFH, a grassroots organization that works toward community empowerment through community organizing, youth engagement and sophisticated social services.
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