Cuomo, Legislature Screw Tenants Again as Budget Revives 421-a

The New York State budget passed April 8-9 resurrects the 421-a tax subsidy for new residential construction in New York City. Despite Gov. Andrew Cuomo’s renaming it the “Affordable New York Housing Program,” it will still only subsidize a token amount of affordable housing—and will cost New York City up to twice as much as the old version.

The old 421-a subsidy, which was created in 1971 and expired in January 2016, was long criticized as a wasteful giveaway to real-estate developers. It costs the city more than $1 billion a year in lost property-tax revenue, while fewer than 10 percent of the apartments it subsidized rented for less than market rate. The new version will provide even more generous benefits to developers, with no real increase in the amount of affordable housing. While there are different interpretations of how much it will cost, the Community Service Society is probably closest to the mark in predicting that the tax loss will almost double, to $2.4 billion in the first year.

Cuomo, however, included it in his executive budget in January, and was determined to make sure it did not fall through the cracks in negotiations. He was aided by the Republicans and the turncoat Democrats who run the state Senate, and by compliant Assembly Democrats, who always promise to fight for tenants, but once again failed to draw a line in the sand. At a time when the city of New York is anxiously anticipating large cuts in federal housing aid under Donald Trump’s regime, the state has likely blown a huge hole in its budget.

The renamed version will increase the requirement for below-market units slightly, from the previous 20 percent to 25 or 30 percent, depending on various “affordability” options available to developers. But the lion’s share of these “affordable” units will rent for $2,500 a month or more, hardly within the reach of most New Yorkers—and after 40 years, they can be converted to market-rent status. Cuomo’s office estimates that the new subsidy will produce “up to” 2,500 affordable apartments per year, which means they could cost almost $1 million each in subsidies.

In larger projects in Manhattan below 96th Street and on the Brooklyn and Queens waterfronts, developers will be required to pay union-level wages and benefits to construction workers, but will get much larger tax benefits in return. Crain’s New York Business, hardly a pro-tenant publication, said the higher subsidies are not needed to allow developers to pay the union-level wages. Instead, it said that they would simply increase profits, and fuel gentrification by enabling developers to pay higher prices for land.

Cuomo also added a new anti-tenant feature. Under the old 421-a law, which was supposed to result in 20 percent “affordable” and 80 percent market-rate apartments, the landlord was required to place the market-rate units under rent stabilization, at least for the length of the subsidy. ProPublica has documented how the state has failed to enforce that, reporting last October that owners of almost two-thirds of the 6,400 buildings receiving 421-a tax reductions had failed to register the apartments as rent-stabilized with the state. Under the new law, landlords will be allowed to remove units from rent and eviction protections the first time they become vacant—while still receiving the full tax benefit.

And in an obvious diss of Mayor Bill de Blasio, Cuomo’s bill prohibits the city from putting restrictions, limits, or conditions on the scope or amount of 421-a benefits, as it did it 2008 when it expanded the areas where developers must include below-market housing.

Capital funds finally released

The budget agreement contains some good news: It finally ends the roadblock to the release of $2 billion in capital funds for affordable-housing creation that were enacted a year ago, but not spent because Cuomo made them subject to a Memorandum of Understanding that the Senate and Assembly leaders both had to sign. Senate Majority Leader John Flanagan refused to sign, holding the $2 billion hostage to the revival of 421-a.

This outlay will be increased to $2.5 billion, including $1 billion to produce 6,000 units of supportive housing, $472 million for new multifamily construction, and $125 million for senior housing. Also in this pot are $200 million earmarked for capital repairs to New York City public housing, $125 million for public housing authorities outside the city, and $75 million for Mitchell-Lama preservation programs.

The budget also contains $18.2 million for the Neighborhood and Rural Preservation Companies programs, which provide support to hundreds of community-based organizations, and $4.5 million in reappropriated funds for the Tenant Protection Unit.

Why did the Assembly Democrats go along?

The short answer is real-estate money. While the Republicans and turncoat Democrats in the Senate get more campaign contributions from landlords and developers, Assembly Democrats get their share. The real-estate lobby buys support everywhere it can.

While many legislators understand why 421-a is a wasteful and even harmful program, others do not think it is so bad—or they figure that it’s “better than nothing,” as it will at least create some affordable housing. And by forcing some developers to use union labor, they can please the building-trades unions.

Why didn’t the Assembly at least insist on removing the vacancy-decontrol language? Why did it acquiesce to eliminating the city’s ability to require greater affordability? And why, when 421-a and the state’s rent and co-op laws have historically expired on the same date, did the Assembly go along with giving 421-a three more years? The state rent laws are due to expire in two years, in June 2019, but 421-a will now sunset in 2022. This decoupling sets up a 2019 scenario in which the Senate GOP can demand more weakening amendments as the price of renewing rent protections, and pro-tenant legislators can’t counter that by threatening not to renew 421-a.

If the Assembly Democrats would not stand up for tenants in 2017, why should anyone believe that they will not wimp out once again in 2019? Once again, tenants get screwed in Albany, and it is “our friends” who have screwed us.