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.
• The fourth bill is expected to allow developers multiple options for meeting the standards for affordable housing. The upshot is that developers will be able to build a mix of low, moderate and middle-income housing using 421-a tax breaks. Lopez pointed to 421-a's new commitment to mixed housing, saying the reform "is a major victory for low-income and middle-income New Yorkers."
These developments on 421-a were preceded by other recent developments in affordable housing, including city and state announcements.
On Wednesday, the state Housing Finance Agency approved $42.6 million in financing to build new affordable housing in Brooklyn and renovate a complex in Manhattan. Some $30 million of the funding will go toward a new development in the Brownsville section of Brooklyn, to be called Prospect Plaza. HFA says Prospect Plaza will have just over 150 apartments in 20 buildings.
In addition, HFA is giving the owner of Abyssinian Towers, a 100-unit building in Harlem, a $12.5 million loan in exchange for its commitment to “keep rents affordable” for another 40 years, HFA said in a statement. HFA spokesman Philip Lentz said these recent HFA expenditures are part of “something we’re doing more and more of…preserving affordable housing.”
Last Monday, at a City Hall press conference, City Council Speaker Christine Quinn announced a $14 million budget initiative to preserve and upgrade selected housing run by the federal Department of Housing and Urban Development.
Flanked by city councilmembers and affordable housing proponents, Quinn said the "number one concern” she hears from city residents is they want more affordable housing.
The money will go toward improvements at five buildings with about 500 apartments total, said Quinn. The buildings haven’t been specified, but likely will be in East Harlem, Bedford-Stuyvesant or other lower-income areas. Some of these HUD buildings, where the federal agency holds the mortgage and provides rent subsidies, are in need of a financial infusion because of finance and repair problems “on the part of private landlords,” according to the Partnership to Preserve Affordable Housing, a coalition of NYC housing groups.
At the conference, Quinn acknowledged that "$14 million is a lot of taxpayer money,” but said the city needs to “keep adding resources” to deal with the city’s HUD housing problems. The $14 million will be used for physical repairs such as lead abatement, boiler fixes, plumbing and roofing, according to the city Department of Housing Preservation and Development (HPD). And the money is slated to be distributed to nonprofit developers as one-time grants.
Poor management by private owners can put HUD complexes into foreclosure and place them on the auction block. The buyer may not keep rents within reach of current tenants, and that’s why housing advocates try to prevent HUD properties from going into foreclosure.
“To the extent that we can avoid that process, it’s a good thing,” HPD Commissioner Shaun Donovan said after the press conference. “We have been trying in each case to keep the HUD subsidy going for the property."
Though the $14 million is coming from the city’s budget, HPD and HUD will work together to identify the buildings where the money will be used. The spending is part of an existing city initiative to fix distressed HUD properties, according to HPD spokesman Seth Donlin.
And earlier this month, as if to further prove that the city's business goes on in the dog days of August, Spitzer signed into law the "shelter allowance bill," which many housing activists have long advocated. Under previous regulation, New York City Housing Authority (NYCHA) complexes were receiving less public money for tenants on public assistance than private landlords were getting. With the new regulation, the NYCHA allowance will equal what the private landlords get from city, state and federal funding sources.
Supporters of the bill, which was sponsored by Assemblyman Lopez, the Brooklyn Democrat, and Senator Andrew Lanza, a Staten Island Republican, say that it makes the subsidy system fairer. In an Aug. 15 statement, Mayor Bloomberg said the bill “resolves an inequity that paid private landlords a higher shelter allowance than local housing authorities.” According to Julie Miles, the executive director of Housing Here and Now, the legislation is “a basic issue of parity for private and public” sectors.
The addition to NYCHA coffers that will result from the bill is especially important now, when NYCHA is making budget cuts and rent increases, according to city officials and housing advocates. In a sense, it offers a boost to NYCHA during a budget crunch. The new money won’t close the budget gap at NYCHA, but it will mean additional tens of millions of dollars a year from the city, state and federal governments, according to Housing Here and Now.
Bloomberg said that by enacting the shelter allowance, Spitzer “has helped ensure the viability of public housing in New York City.”