The 421-a program operates on a scale to rival programs such as the state's Mitchell-Lama developer incentives: 421-a has figured in the construction of more than 110,000 apartments in the city since its inception nearly 40 years ago, according to the governor's office. It’s a tax abatement program that exempts developers from paying, for a decade or longer, the substantial increases in taxes that result from building on a vacant lot or improving an existing building. The program, created in 1971 to encourage residential building of any kind during the city's fiscal crisis that decade, was reformed in the 1980s to limit the givebacks to developers.
Even with the earlier reforms, 421-a required developers to build affordable housing only if they were getting the 421-a tax break for developments in Manhattan between Houston Street and 96th Street, or on one section of the Brooklyn waterfront. Brooklyn, Queens and the Bronx saw rents rise in recent years, but the affordable housing requirements did not apply to them.
And developers weren't required to have affordable units in their buildings, meaning the lower-rent units could go into a different building or even a different neighborhood – contributing to gentrification. So in February Mayor Bloomberg convened a task force, and in December the city council passed a law making major changes to the 421-a program, including forcing developers to put the affordable housing on-site and increasing the number of neighborhoods where affordable housing is required for 421-a.
Since 421-a is part of state law, City Council sent its bill to Albany for approval. After political maneuvering by state and city officials and development lobbyists, the final bills emerged.
The Albany and City Hall reforms mean a number of dramatic changes to the law. The state legislature's language also means special provisions for Atlantic Yards, the enormous residential and commercial development under way in Brooklyn. The highlights of those changes and provisions:
• The amount of land that stands to get affordable housing under 421-a is more than doubled. The areas of the city where affordable housing is required expand from most of Manhattan to all of Manhattan, huge swaths of Brooklyn, and parts of the Bronx, Staten Island and also Queens. (The language in the legislature's bills identifies the neighborhoods by county and street intersections, but the Pratt Center for Community Development has mapped out the neighborhoods here.) The result is that for many parts of the city, developers would have to commit to affordable housing to get 421-a tax benefits.
• Affordable housing is required in the new or improved buildings themselves – which means from now on, 421-a in the exclusion areas will be a mixed-income housing program. Under the 1985 reform, the areas of Manhattan between Houston Street and 96th Street were considered a "geographic exclusion area," meaning they were set aside as areas where developers had promised the city affordable housing units in order to get 421-a tax breaks. But until City Council's changes in December – and now the state legislature's changes – developers in that zone were able to build that affordable housing off-site. They got "certificates" from the Department of Housing Preservation and Development that allowed them to put the affordable units in a totally separate building or different neighborhood. (Affordable units had to be finished before developers could get 421-a tax breaks on the market-rate units, however). That stipulation is no more. Now, developers must include the affordable units in the building themselves.
• Atlantic Yards got special provisions – but they may be trimmed in the fourth and final piece of 421-a legislation. Since the City Council's expansion of the "geographic exclusion areas," the Atlantic Yards development must build affordable housing according to 421-a stipulations to receive the tax abatements. Under the legislature’s bills, Atlantic Yards will be allowed to have tenants with higher incomes in its affordable housing units than generally is allowed under 421-a. The language in the bills also says Atlantic Yards would be allowed to meet the requirements for affordable housing across all of its units, a number that developer Forest City Ratner projects at 6,400. The legislation means – and will mean until the fourth bill passes with amended wording – that the Brooklyn development could receive tax abatements for affordable housing before any such housing is built. Under the proposed fourth bill, A. 9373/ S. 6446, the development will be required to meet the 421-a affordability requirement every 1,500 units, however.
• There are provisions to make sure the affordable housing units stay affordable, and that they're available to people already living in the neighborhood. In the statement put out by Spitzer's office on Friday, Brooklyn Assemblyman Vito Lopez, the Assembly sponsor of the city's bill, said the reform "mandates that 50% of the affordable housing units built using 421-a will be set aside for community residents." What's more, the units will be required to stay affordable for 40 years, under the current bills, or for 35 years under the fourth bill – and that's regardless of how long the developer's 421-a tax abatement for the building lasts.
• There's a grandfathering provision that will allow developers to keep intact the financing plans for developments already underway. This "prevents the disruption of projects already in the development pipeline by exempting them from these new regulations," according to the Friday statement. In practical terms, that means if a development company got an off-site "certificate" for affordable housing before Dec. 28, 2006, and if it begins construction before June 30, 2009, it is exempt from "exclusion zone" affordable housing requirements. In general, the 421-a reforms will apply to construction beginning on or after July 1, 2008.