Housing and Tax Breaks
September 20th, 2006
Brooklyn Democratic Party boss Vito Lopez is an unlikely candidate for Robin Hood — yesterday we noted his propensity to use the courts as patronage playgrounds — but nonetheless the State Assembly member is apparently set to take on the mayor and real estate interests over tax breaks for developers of luxury housing, Matthew Scheuerman reports in today’s Observer. Under the 421-a system, Scheuerman explains, outer-borough builders earn certificates for each unit of affordable housing they produce, and them to Manhattan developers who then reap tax breaks.
Lopez, who represents rapidly gentrifying areas of Bushwick, fears the program will make those communities more expensive and push people to less desirable areas. The real estate industry likes 421-a, and efforts are underway to fix rather than abandon it.
But Lopez has lots of clout in City Council and in Albany, and some experts think his position make sense. Brad Lander, the director of the Pratt Center for Community Development, told Scheuerman the program “should be eliminated, and … market-rate developers should pay full taxes and [the city] should use those dollars to build affordable housing.”
By Gail Robinson on September 20, 2006, 11:59 amIn category: Community Development, Finance, Gotham City, Housing
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September 20th, 2006 at 12:53 pm
(The program “should be eliminated, and … market-rate developers should pay full taxes and [the city] should use those dollars to build affordable housing.”)
I might prefer lower taxes or more school funding, but the premise is right — stop handing out tax breaks. Breaks should be reeled in, and rates reduced.
The only way a development tax subsidy make sense is if the infrastructure is in place to support it and development would be infeasible otherwise. And if development were infeasible otherwise, the price of development sites would fall close to zero. That is the test of where a subsidy may be needed.
Instead, the price of development sites in the outer borough has soared.
The tax breaks allow the developer to charge more to the future resident. That allows the landowner to charge more to the developer, who captures the entire city subsidy, eliminating any additional incentive to build.
From a basic land economics point of view, the program is a heist.