Housing Groups Attack Luxury Units' Tax Breaks

Housing Groups Attack Luxury Units' Tax Breaks
By JANNY SCOTT
12 April 2006
The New York Times

On the eve of the first meeting of the mayor's task force on tax breaks for housing developers, several housing advocacy groups and the building service workers' union began staking out their positions yesterday on how to reform the system.

Some want tax breaks given only when moderately priced apartments are included. The union wants the city to require any developers who get tax breaks to pay building workers the union wage.

Two of the groups, Habitat for Humanity-New York City and the Pratt Center for Community Development, released a report yesterday stating that the city's most popular tax incentive program for developers would cost the city $320 million in forgone revenue this year, up from $130 million in 2002. They concluded that the program disproportionately benefits Manhattan, where housing stimulation is needed least.

They profiled 10 apartment buildings that they said got tax breaks under the so-called 421-a program. The groups found that the program was saving individual building owners an average of $9.4 million in taxes during the multiyear period of the tax break, but that not one of the buildings included a two-bedroom apartment renting for less than $2,000 a month.

The groups announced their findings on the sidewalk in front of a 21-story apartment building under construction on Leonard Street in TriBeCa, which, they said, will receive a tax exemption they valued at more than $750,000 a year. They said two-bedroom apartments in the building would rent for $4,250 to $5,000 a month and the penthouse for $12,500.

''In its present form, the 421-a program is a massive misuse of the tax dollars of New York City residents,'' the report concluded. ''It continues to subsidize luxury homes in expensive neighborhoods, with nearly 80 percent of the benefits going in Manhattan. It subsidizes buildings that would have been built anyway -- at an annual cost to the city of $300 million and rising fast. And it creates very little affordable housing.''

In an interview yesterday, Michael Slattery, a senior vice president of the Real Estate Board of New York, a lobbying group for developers, said tax breaks were still needed to encourage market-rate housing development in many neighborhoods. He defended the 421-a program, saying that it helps generate jobs and tax revenue in the long run, even when it does not produce low-priced housing.

The task force, appointed by Mayor Michael R. Bloomberg in February to review the tax incentive program, will meet for the first time today. The group -- with city officials, developers, advocates, bankers and others -- is to make recommendations this fall to Mr. Bloomberg on how to overhaul the program, which is said to have fueled the construction of 110,000 units since 1971.

Under the program, developers of new apartment buildings in most neighborhoods are eligible for a 10- to 15-year exemption from the increase in real estate taxes resulting from their work, regardless of whether they include lower-priced units. Only in a so-called exclusion zone in central Manhattan have developers historically been required to include some lower-income housing in the development or nearby to be eligible for the tax break.

The new report was based on data from the New York City Department of Finance, a Web site called propertyshark.com and marketing information, said Julia Zuckerman, who researched the report for Habitat for Humanity. It found that even in neighborhoods like Jackson Heights and Corona in Queens, the 421-a program had ''subsidized dozens of market-rate developments to the tune of several million dollars for buildings that are out of reach of most neighborhood residents and would likely have been built anyway.''

One condominium complex in Corona profiled in the report will receive more than $14 million worth of property tax breaks, the report found. According to the report, three-bedroom condos in the building sell for $410,000. In an apartment tower in Downtown Brooklyn, the prices of one- and two-bedroom apartments range from $540,000 to $1 million, the groups found.

''I would wipe the program out, take the $320 million and have a dedicated source of money for housing subsidy,'' said Roland Lewis, executive director of Habitat for Humanity-New York City, referring to the estimate of forgone revenue for 2006.

Brad Lander, director of the Pratt Center and a member of the mayor's task force, said he wanted the tax breaks to go only to developers who include some housing for low- and moderate-income people, preferably in the same place as their market-rate units.

Kevin J. Doyle, executive vice president of Local 32BJ of the Service Employees International Union, which represents 55,000 doormen, porters, handymen and others, said the city should use the program to encourage the creation of lower-priced housing and require developers in the program to pay workers the so-called prevailing wage in the city, currently about $18 an hour.