Officials, experts weigh in on stalled state housing measures at City & State’s On Urban Development

The expired state 421-a program, which incentivized the construction of affordable housing units in New York City, may not get renewed this legislative session – and that’s just fine with some state lawmakers.

“I don’t think anything will happen with 421-a in the next 10 days,” said state Sen. Liz Krueger, “and I think that’s fine.”

Krueger, a member of the state Senate Committee on Housing, Construction and Community Development, weighed in on the controversial tax incentive program during a panel discussion on affordable housing at City & State’s recent On Urban Development conference.

Other panelists countered that 421-a, which offered tax exemptions to developers for constructing affordable units, is essential to meeting affordable housing targets. Ed Wallace, a former city councilman who now works at the law firm Greenberg Traurig, called the program “essential and vital.” New York City Councilman David Greenfield said that if Albany does not renew the program, the city will struggle.

“We’re at a very significant disadvantage, because we modeled an entire program around the idea that we would have 421-a to supercharge it, for lack of a better term, and 421-a does not currently exist,” said Greenfield, the chairman of the council’s Land Use Committee.

Earlier this year the New York City Council approved two major zoning changes, Mandatory Inclusionary Housing and Zoning for Quality and Affordability, which are part of Mayor Bill de Blasio’s strategy as he seeks to build or preserve 200,000 units of affordable housing. Both were designed with the expectation that 421-a would be on the books.

Krueger said that new incentives should be implemented now that 421-a has lapsed, but that steps should be taken to include lower affordability levels and to ensure that real estate developments that qualify ultimately benefit lower-income residents, not wealthy luxury housing developers.

“But 421-a as it existed gave away enormous amounts of taxpayer money to build a very small number of actual affordable units, to build an enormous number of luxury units that do not need taxpayer support at this point is history,” Krueger said. “Do I believe there should be a model for a tax subsidy to support building affordable housing? Yes. Do I think that we should call it 421-a? No. Because I think there’s too many bad associations with what 421-a has been and potentially could be.”

The major sticking point for renewing or replacing the program, however, is whether to require a prevailing wage for construction workers on qualifying projects.

Gov. Andrew Cuomo blocked a deal the mayor made with the Real Estate Board of New York, which represents real estate developers, insisting on more generous terms for unionized construction workers on 421-a projects.

REBNY and the Building and Construction Trades Council of Greater New York, a union group, were tasked with reaching a compromise on the program, but they failed to do so by the deadline set this past January. Cuomo has insisted that any deal must protect labor.

If no deal is reached this session, there are other existing programs that promote affordable housing. Joseph Lynch, a partner at Nixon Peabody, said that Article XI of the Private Housing Finance Law, which provides tax exemptions through a city agency, could “sort of mimic a 421-a-type program.”

Greenfield also cited the 420-c and UDAAP housing programs, which also require certain levels of affordability. But the councilman pointed out that “none of those vehicles actually create mixed-income rental housing,” which many developers prefer to build.

Some observers have speculated that the standoff over 421-a has gotten tied up with another housing measure stalled in Albany: how to spend $1.9 billion earmarked for housing and homelessness in the budget this year.

That funding allocation is the first installment of a five-year, $20 billion housing program Cuomo announced in January, but it came with a memorandum of understanding that postponed a decision on how the money would actually be allocated.

Krueger said that there is “no structural reason” the funding and 421-a should be tied together. While renewing or replacing 421-a would require a vote by state lawmakers, the so-called three men in the room – Cuomo, Senate Majority Leader John Flanagan and Assembly Speaker Carl Heastie – could determine how to divide the nearly $2 billion.

“It’s critical that we actually get an outline of what all those dollars are intended for,” Krueger said. “You all in this room can tell me far better than I know how important it is to know what’s going to go on in the five-year period in total for you to start in the pipeline anything you might be looking to accomplish with some of that money.”

The other panelists pressed for action on 421-a. Wallace said that New Yorkers “expect our elected officials to do the people’s business, and that means find a way.”

Greenfield said that the “X-factor” is the ongoing feud between Cuomo and de Blasio, which makes the outcome even more unpredictable.

“It’s very difficult to say what is going to be the result of that,” Greenfield said. “But it’s certainly something that needs to be acknowledged and recognized as a factor in all of these conversations when it relates to the natural tug of war between the state that actually has the power and the city that would like the power.”

You can listen to the full panel discussion by pressing play here. You can download, review and subscribe to this and other episodes of The City & State Presents podcast on iTunes or stream the episode via Stitcher.