New building permits soar in New York City amid the end of the 421-a tax break

New York developers are rushing to start the construction of new apartments before June 15, when the 421-a tax break will expire. The program allows building owners to pay lower property taxes if they include affordable housing units in new developments.

The 421-a tax exemption, also known as the Affordable Housing New York Program, plays a huge role in housing construction. The estimates suggest that the program is expected to provide developers with $1.8 billion in real estate tax relief this year alone. 

Over the past decade, 68 percent of all new residential units built in New York City benefited from 421-a tax abatement, according to the data provided by the Furman Center. Now, developers must have the foundation completed by June 15 to qualify for the soon-to-expire tax break. 

The tight deadline leads to a dramatic increase in project fillings. The number of new building permits surged to 4,091 in March, more than in January and February combined, according to the survey data analyzed by The City. 

A similar surge in new building filings took place in 2016, the last time the 421-a tax break expired. The number of permits issued in 2015 reached 56,248, the highest since 1962, Curbed reported.  

“As we’ve seen before, it will turn into the ‘Hunger Games’ in terms of who can pull their permits and get their footings into the ground,” Ken Fisher, a real estate attorney and a former City Council member told The Real Deal. “There’s a bulge in applications, just as there was [when] there was a renewal last time.”

The developers tax break has been criticized by the New York City Comptroller Brad Lander, who is calling to let the 421-a expire. The report published by Lander suggests that most of the income-restricted units built under this program “are unaffordable to the vast majority of New Yorkers”.

Resources:

“Developers Scramble to Start Apartment Buildings Before Key Tax Break Expires,” by Greg David (The City, 2022)

“Over 7,000 Permits Approved In Month Before 421-a Expired,” by Tanay Warerkar (Curbed, 2016)

“Looming end of tax break triggers real estate “hunger games”,” by Kathryn Brenzel (The Real Deal, 2022)

“Comparing the Current 421-a Exemption to Governor Hochul’s Proposed Reforms,” by Emma Maniere and Hayley Raetz (The Stoop, 2022)

“A Better Way Than 421-a: The High-Rising Costs of New York City's Unaffordable Tax Exemption Program,” (New York City Comptroller Brad Lander, 2022)