The 421-a Apartment Development Tax Break Is Officially Dead
New York’s 421-a tax break, which allows developers to pay less in taxes in exchange for including income-restricted units in new rental projects, expires Wednesday, with no replacement in sight.
The forthcoming expiration has been causing uncertainty in New York’s commercial real estate industry, as developers claim all multifamily development in the city will dry up as a result. Several say they are unsure of their immediate future plans without 421-a, The Real Deal reports.
Some developers who already had approval have rushed to break ground prior to the deadline, in order to remain qualified for the abatement. Others rushed to file applications in time to qualify, The Real Deal reported: As many as 80 were filed in Brooklyn in the past 12 months, according to TerraCRG.
But the number of developers applying to build new apartment projects is likely to plummet as they await a replacement.
“I think there is going to be a pause,” Nixon Peabody partner Erica Buckley told The Real Deal. “You are definitely going to have a wait-and-see moment.”
Speaking to Bisnow last week, developers said they were likely to target condominiums, outer-borough construction and some luxury developments. Majority-affordable developers plan to push ahead as usual, although they are struggling to operate amid rising costs.
While some housing advocates have said the city should increase subsidies that directly subsidize deeply affordable housing, no 421-a means fewer middle-income units in the short term, Buckley said. A majority of multifamily units built between 2010 and 2020 benefited from 421-a, recent research from NYU’s Furman Center found.
The New York Building and Construction Trades Council, the Real Estate Board of New York and 32BJ SEIU issued a joint statement voicing hope that lawmakers will work with them to address the housing crisis.
Others said political will is necessary to move forward. Albany legislators let Gov. Kathy Hochul’s proposed replacement, 485-w, sink into oblivion while declining to move fast on renewing or replacing 421-a.