The future of the 421, a property tax exemption in New York City, by Harriet Robertson

The future of the 421

a property tax exemption in New York City

By Harriet Robertson

New York is a city in the U.S. In 1970, the city grew at a substantially slow rate and this conceived the idea of introducing the 421 tax exemption. The aim of tax exemption to date has been to make construction of multifamily houses in New York and its outskirts affordable. However some people argue that this method of tax exemption is the most unfair, opaque an expensive. They want other transparent methods adapted by the end of June 2022 as it is when the 421 tax exemption is deemed to end.

HISTORICAL OVERVIEW

As stated earlier the property tax exemption started in 1970, a time where by the New York was declining in investment and there was need to restore the condition. Since that time there have been adjustments made periodically to foster growth of housing units that are more affordable by the occupants. The 421 program over the years has been able to construct about 3,000 properties with 117,000 thus benefiting the dweller. It is also worth considering that there are those who claim 421 tax exemptions was not after a simple and transparent property tax system but to reduce the burden of taxing in residential development after which it would bring in a new market rate in the city something that even the policy makers could not think of. Further the group says that with the tax exemption the housing problem shifted to affordability from abandonment.

Adjustments started in 1980 where income restriction was included to the housing units responding to the house problem shift. The requirement was imposed in 1985 by the strongest markets in Manhattan at the time also

called (Geographic Exclusion areas). In 2006 and 2007 negotiable certificates were abolished and Geographic exclusion area extended. Also in 2017 some changes which are deemed to expire on June 2022’ called the Affordable New York were made. The changes required income restricted units among all rental advancement and further raised the percentages compared to previous legislation. The NYC department of finance says that the tax expenditure has reached 1.77 billion for roughly 64000 exemptions.

Units Built Under 421-a 421 a program has played a significant role over the last ten tears enabling the advancement of ,multifamily development units. 68 % of the unit which is roughly (117042) are beneficiaries of the program.

PROPERTY SIZES

74 percent (2367) of houses built over the last decade were between 4 and 29 units while 26 percent (819) of the same had 30 units and more.

421 versus 485w Enactments leading to enablement of affordable New York cover buildings that commenced construction between 1st January 2017 and 15 June 2022 and the houses will end in 15 June 2026. The programs required income restriction among all housing units. Building in 96 streets which is a middle income option 130% of AMI were added and required no income unit. The share of income restricted unit was added from the initial 20% to 25% and 30% depending on the choice of program. The ANY program brought with it an extension of 35years compared to the initial 20 years of initial programs. Lastly home ownership was only possible to up to 35 units.

Houses constructed under the ANY program were for families earning over 100000 dollars in a tear. It means that a family of three would work and pay almost 3400 dollars in a month. The program need that 30 percent of the housing units are income restricted to 130 percent of AMI and is most widely used in the New York. Meanwhile option A and E have the highest cost of and the present expenditure on tax per income restricted unit to be on average 1.4 million dollars.

As the ANY program is supposed to end in June 2022.Kathy Honchul who is a governor proposed a tax exemption program which is the 485w and is also called Affordable Neighborhood for New Yorkers. Kathy Honchul states that the program will lead to “permanent and deeper affordability” and efficient use of tax payer money. ANNY program will be possible by lowering the income restricted units from as high as 13 percent of AMI to 90 percent, Also use of exemption of tax will be expanded for the condos and co-ops. As opposed to 421 which maintains affordability for up to 35 years, 485 will need permanent affordability for properties having 30 or more units and for those with less than 30 units dwellers will enjoy a permanent rent stabilization.

CONCLUSION

421 tax exemption has faced criticism over the years and there has been claims that it a notorious system, regressive and unfair. Reports show that 421 tax benefits will not impair production of housing in the short term. The tax exemption program will end in June 2022. Honchul introduced a new tax exemption called 485w which will work towards achieving a structural reform to behave a more transparent, fairer and a better tax property system that will address the underlying inequities and support better the housing development in the New York city and thus bring with it affordable housing.