Every two weeks the New York City Council holds its
"Stated Meeting" to introduce and pass legislation. As
a regular feature, Gotham Gazette covers these
The debate over how to reform a tax incentive program
for developers, which once seemed likely to sharply
divide the City Council, came to a relatively peaceful
conclusion on December 20. In its final stated meeting
of the year, the council overwhelmingly passed a
compromise measure to reform this plan, called 421-a.
The changes are intended to shift the plan away from
simply encouraging real estate development â€“- as was
its original intention â€“- and toward the creation of
Under the measure approved by the council, developers in
many parts of Manhattan and the Brooklyn would get the
property tax exemption only if one fifth of the
apartments in a new project are affordable. It would
also create a fund to finance affordable housing.
But the debate over 421-a has not ended. In order to
remain in existence, the program, with or without
changes, must be approved by the state legislature by
the end of 2007. Assemblymember Vito Lopez, chair of
the assembly housing committee, has indicated that he
tighter restrictions on 421-a.
421-A: INCENTIVES FOR DEVELOPMENT
During a housing crisis in 1971, city officials
worried that developers would not build in New York.
To spark residential development, the city started the
421-a program, which offered property tax exemptions
to those willing to construct apartment buildings. As
the real estate market in certain neighborhoods heated
up starting in the mid-1980s, the city began to tweak
the program. The focus shifted away from encouraging
all development, toward the need for affordable
In 1985 the city decided that in much of Manhattan â€“
the so-called exclusion zone â€“ developers would have
to build a certain amount of affordable housing in
order to qualify for the tax benefit. More recently,
this zone has been slightly expanded, and now includes
Manhattan between Houston Street and 96th Street, as
well as a small part of Brooklyn. Developers working
inside the exclusion zone can meet the affordable
housing requirement by either designating 20 percent
of the new project as affordable housing, or by
building a corresponding amount of affordable housing
in other areas in the city.
Buildings elsewhere in the city â€“ including all of
Queens, the Bronx, and Staten Island â€“ have remained
eligible for the original incentives, affordable
housing or no.
The measure approved by council would expand the
exclusion zone to upper and lower Manhattan, as well
as to such Brooklyn neighborhoods as Park Slope,
Carroll Gardens, Williamsburg and Greenpoint.
The City Council bill would also:
- Set up a commission, appointed by the mayor and the
City Council, to review the boundaries of the
exclusionary zone every two years.
- Require developers to create the affordable housing
on the site of the rest of development for which they
receive the abatement. Now, they can build the lower
priced apartments in another building, or even another
- Target some of the affordable units to lower income
- Create a $400 million fund to create affordable
housing, particularly in the city’s poorest
neighborhood. The changes in the 421-a system are
expected to save the city money, because fewer
developers will be eligible, and this money will go
toward the affordable housing fund. The fund replaces
another program that encouraged such development but
which council believes benefited developers more than
the city’s lower income residents.
- Set a cap on the subsidies for building out the
exclusion zone to limit the tax breaks for luxury
And the council will also urge the state government
to create a similar plan top encourage development of
affordable one, two and three family homes and to
create ways to ensure that buildings remain affordable
for many years into the future.
A FIRST STEP
City Council Speaker Christine Quinn, who negotiated
the council plan, called it “fair and balanced.” “It
recognizes you can create housing through an abatement
but you have to make that abatement something that
developers will want to take,” she told council.
Earlier Annabel Palma and 22 other council members
introduced had introduced a competing bill that would
have put much more aggressive requirements on
affordable housing. It called for requiring all
developers throughout the city â€“ not just in certain
parts of it -- to build affordable housing in order
to qualify for the 421-a benefit. The bill would have
required that 30 percent of all units, not 20 percent,
be affordable if developers were to qualify for the
Council members Alan Gerson, Letitia James, and Rosie
Mendez proposed a separate bill that would require
developers to set aside 35 percent of a development be
for affordable housing in order to qualify for 421-a
But following long negotiations, many of these
opponents accepted Quinn’s plans. “We need to look at
this piece of legislations and look at the significant
improvements,” Palma said. And David Yassky, who had
cosponsored the Palma bill, said the measure approved
by council “will result in more affordable housing and
in eliminating some of the most egregious disparities
in the property tax.”
But not all council members agreed.
Councilmember Charles Barron and Hiram Monserrate
expressed concern that the affordable units would not
be affordable enough for many New Yorkers. “The mayor
and the council may be able to live with this bill,
but poor and working class New Yorkers are not going
to be able to live in New York City,” Barron said.
While saying the bill was indeed an improvement, Rosie
Mendez said, “I still believe the bill could be better
yet.” In particular, she said, developers should have
to make 30 percent of the apartments in any
Tony Avella faulted the whole notion of giving
developers tax benefits in New Yorkâ€s booming real
estate market. “I find troubling the fact that we are
gong to give huge tax abatements to luxury developers
who are making millions of dollars off each project,”
Avella’s comments echo those of other critics of the
421-a system, who argue that developers don’t need
expensive incentives to build in New York these days.
The program costs the city money, they say, and
benefits building owners and developers of luxury
apartments far more than it encourages affordable
According to a report released in April by Habitat for
Humanity-New York City and the Pratt Center for
â€˘ The program will cost the city $320 million in 2006,
up from $130 million in 2002.
â€˘ The program has given tax breaks to more than
100,000 housing units since it began, but as of 2003,
only about 8 percent are affordable housing.
â€˘ Developers only put a fraction of the money they
saved on taxes toward affordable housing sites, which
are mostly in the Bronx.
In response to criticisms of the incentive program and
as part of a broader campaign to create affordable
housing, Bloomberg created a task force in February to
evaluate 421-a. It called for expanding the exclusion
zone to include more of Lower Manhattan, parts of
Harlem up to 110th Street, DUMBO, Brooklyn Heights,
and more of the Brooklyn and Queens waterfront.
Many members of the City Council criticized
Bloomberg’s plan, asking for more sweeping reform.
Quinn developed her own plan, which she introduced,
with 28 other council members as co-sponsors.
Bloomberg endorsed the compromise.
Supporters of the competing plans spent weeks
negotiating over specifics.
During the stated meeting, many council members
praised the negotiations as a victory for democracy,
applauding the speaker, various administration
officials, council members and staff for long hours of
consultation that derailed plans for Christmas
shopping and watching football games.
They congratulated themselves themselves for
disagreeing on an issue and working it out. Saying
debate on substantive matters was laudable, Bill de
Blasio said, “This is a very positive dayâ€¦. A lot has
been accomplished in these past weeks.”
Quinn herself acknowledged how unusual such debate
was. “Some people commented that it was a little odd
that there was more than one bill on this topic in
City Council,” she said. “That indicated these has not
been enough significant debate in the past on
But debate or not, the final vote was lopsided, with
44 council members voting for Quinn’s housing measure
and 5 (Barron, Avella, Monserrate, Mendez and Darlene
The comments section is provided as a free service to our readers. Gotham Gazette's editors reserve the right to delete any comments. Some reasons why comments might get deleted: inappropriate or offensive content, off-topic remarks or spam.