HPD Commissioner Shaun Donovan
The housing market has been nudging downward for a while now. Add one more factor: the overhaul, recommended this morning by the city housing department, of the so-called 421a tax break. Housing commissioner Shaun Donovan said in a conference call this morning that condo “prices would potentially go down to some degree” in neighborhoods where the abatements would be eliminated. In those neighborhoods, like Tribeca, the Financial District, Dumbo and Brooklyn Heights, prices have been inflated by about 50 percent of the value of those abatements, he said.
Just how much difference would that make? A Pratt Center/Habitiat for Humanity report (PDF) earlier this year looked at some examples where the abatements, originally meant to spur construction back in the gloomy 1970s, were worth $40,000 to $210,000 over their lifetimes, so prices would come down $20,000 to $105,000 just because of that one change.
“It’s very clear that implementing these changes in a measured way over time is the right way to do this so that there is not a one-time significant impact,” Donovan told reporters.
That said, Mayor Bloomberg said early this year that real estate prices were too high, so we don’t imagine he is too worried.
The recommendations (PDF or press release) would seem to go a long way to answering critics of the program, regardless. Not only would those downtown and Brooklyn neighborhoods be exempt from automatic abatements, but breaks on homes outside the exclusion zone would be limited to the first $1 million of value.
Still, that is not enough for housing advocates. In a statement this afternoon, Julie Miles, executive director of the Housing Here and Now coalition, said, “The recommendations of the 421a task force do not go nearly far enough to fixing this broken program. They simply tweak the program a little bit – but make no difference for the vast majority of the city’s neighborhoods.”
“The map” of the exclusion zone–which housing advocates argue should encompass the whole city–will appear to become the center of the debate as it moves from the Bloomberg Administration to the City Council. But it will not be the only controversy. Donovan also recommended eliminating the certificate program that permitted market-rate builders to buy certificates from affordable housing developers and to qualify for a 10-year tax break even within the exclusion zone. The arrangement was meant to spread the wealth, but the prices of the certificates have been so low–between $12,000 to $15,000–to do much good. This is a simple but radical step: if it passes, big builders like The Related Companies and Rockrose Development Corp. will have to build low-income units on-site or pay full freight.
On the other hand, Donovan hinted that eliminating the certificates–which he said was the “perhaps most controversial” part of his recommendations–was not his strongest card to play. He said that nixing that part of the program “is contingent on an affordable housing fund to replace it” and that he wouldn’t recommend it if legislators did not agree to dedicate the tax revenue from new market-rate buildings to be used to construct affordable units elsewhere.