(To read more on the multifamily market, click here.)
NEW YORK CITY-Mayor Michael Bloomberg has signed Introductory Number 468-A. The bill, which reformed 421-a, provides tax abatement to developers who dedicate a certain percentage of the multifamily units to affordable housing.
Originally introduced in 1971 to spur housing development, Bloomberg says, "The program has helped fuel the construction of over 110,000 apartments in the city." In early 2006 the mayor created a task force to look at the city's real estate industry and from that the revisions to 421-a were suggested to better address current real estate issues.
"The passage of [Thursday's] bill will strengthen the connection between the 421-a program and the development of affordable housing," Bloomberg says. "This will add to our record of building for the city's future by providing $300 million, in addition to the $400-million Affordable Housing Trust Fund, for our $7.5 billion New Housing Marketplace Plan, which will provide affordable housing for 500,000 New Yorkers."
The new law will enlarge the geographic exclusion area from the current Manhattan parameters to areas including lower Manhattan, Dumbo, Brooklyn Heights and Williamsburg. Developers working within the GEA are offered tax abatement if 20% of the project is for those residents who make up to 80% of the area's medium income.
The new legislation also calls for the elimination of the negotiable certificates program and the creation of an Affordable Housing Trust Fund that will aim at the city's 15 poorest areas. The certificates program requires developers to have affordable housing as part of the existing project in order to receive tax abatement, and will not allow them to buy certificates sold by other developers outside the GEA.
The bill also sets a 'luxury cap,' which will limit the total 421-a tax benefits a market-rate unit can receive. The current law sets no limit to the amount, but the new version calls tax abatement for only the first $65,000 of the apartment's assessed value. Additionally, only developers who provide affordable housing will be eligible for 25 years of tax benefits.
In the last half of December, the Real Estate Board of New York issued a warning against the proposed bill. REBNY president Steven Spinola said in a release that the new law would "severely stifle the construction of new housing units instead of encourage it."
REBNY did not issue a formal statement after the mayor signed the bill into law, but a spokesperson for the company says, "REBNY continues to believe that the new law will cause less, not more, housing both affordable and market-rate to be built. It's REBNY's intent to work with the state legislature in 2007 to tune-up the economic engine that the 421-a program is rather than rebuild the engine from scratch as this new law attempts to do."
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