Housing and Hardball Politics

The adopted State budget includes a $2.5 billion appropriation for new affordable housing, with $1 billion for supportive housing. The new money should help New York City substantially with its housing crisis. The budget also resurrected the real estate developer property tax break known as 421-A, renamed ” Affordable NY “. How the two came together is a lesson in hardball New York politics.

In the spring of 2015 Mayor DeBlasio had negotiated a deal with the Real Estate Board of New York on a new 421-A program, which was expiring along with the rent regulation laws in June 2015. The tax break had long been criticized as overly generous to the real estate industry while producing little affordable housing, but it had powerful backers in Albany. As the construction unions sought a union-wage mandate to be added to the bill, Governor Cuomo attacked the new legislation, derailing it. The legislative session ended in June 2015 with the tax break unresolved. A law was passed extending 421-A until January 2016, allowing the Real Estate Board and the unions to come to terms. If they were unsuccessful, 421-A would expire. In fact, the parties could not agree and the law expired.

That same January Governor Cuomo put $2 billion for affordable housiing in his new budget for April 1,2016. But it didn’t quite get approved. Instead, the funds became entangled in a post-budget Memorandum of Understanding(MOU) that would have to be ok’d by Cuomo, Heastie, and Flanagan before being released. REBNY and the unions, still bent on winning the profitable tax break, continued their 421-A talks as the year dragged on, with the MOU on the sidelines. In November 2016 they finalized a deal but it still would require legislative approval. At this point there was no way the State Senate Republicans would let the money get released until REBNY and the unions got what they wanted.

Cuomo then put the 421-A deal and the money(with $500 million added) into the 2017 proposed budget. By then evidence that the 421-A tax break was unnecessary to spur affordable housing production was flowing in. A City Housing Department report for 2016 (http://www1.nyc.gov/site/housing/action/housing.page?) showed a record pace of affordable housing production with no 421-A. And the Association of Neighborhood Housing Developers reported there was no drop-off in housing starts in 2016 in NYC compared to the average of 2012-14( 2015 was an anomaly because developers knew the tax break might expire)(https://anhd.org/policy-reports/).

But hardball politics prevailed. Both the tax break and the money were approved together. The Governor’s budget press release highlighted both and claimed the 421-A break would produce 2500 affordable units a year( failing to mention many of the units were for people of middle-income, that overall most units were market rate anyway and that the tax breaks would extend for decades). The Assembly website highlighted only the new funding.