When it comes to some property taxes, the rich are different
by patrick arden
metro new york, AUG 30, 2006
The elegant glass tower at 176 Perry St. looks like a place where the elite would meet. Its residents paid top dollar for the privilege of enjoying seamless views of the Hudson River.
The building is in the chic West Village historic district, which falls just outside the section of Manhattan that qualifies for the city’s 421-a tax exemption program designed to encourage development in less desirable areas. But the developer of 176 Perry St. was still able to offer condo buyers a 421-a tax subsidy by purchasing certificates from builders of affordable housing.
That’s exactly how the program was meant to work, said Neill Coleman, a spokesperson for the city’s Department of Housing Preservation and Development.
“A developer who is building affordable housing in, say, the Bronx gets the certificates,” Coleman explained. “When the market-rate developer buys those certificates, he is able to get the 421-a tax break, but in return he is essentially subsidizing affordable housing in the Bronx.”
A useful tool?
Yet in a report this spring, the office of City Comptroller William Thompson found that relatively little affordable housing has been financed compared to the value of the exemptions that have been taken.
Manhattan exclusion-zone developers taking the 421-a exemption over 20 years are required to set aside 20 percent of their units for affordable rentals, but, according to the comptroller’s office, they realized $50,000 in tax savings on each of those units in 2005 alone. Exclusion-zone developers taking the exemption over a 10-year period can instead buy the housing certificates. While 1,918 units of affordable housing were financed, more than 7,675 market-rate units got tax subsidies in 2005.
Last year, the comptroller’s office reported, the city provided more than $320 million in 421-a subsidies, 78 percent of which went to Manhattan developments. Over the last seven years, the annual value of these subsidies has jumped by $240 million. Some owners of units in Trump World Tower and 176 Perry St. — both exclusion-zone buildings participating in the 421-a program — received tax subsidies of more than $100,000.
At 176 Perry, fashion mogul Calvin Klein got a $151,797 reduction from the 2005 taxes due on his penthouse, while his downstairs neighbor, hip hotelier Ian Schrager, saved $39,827 in property taxes. Almost $47,000 was lopped off the property tax bill for celebrity chef Jean-Georges Vongerichten, who said through a spokesperson yesterday he was unaware of his good fortune.
Worn out welcome?
Bertha Lewis, the executive director of New York ACORN, complained that 421-a is now subsidizing the gentrification of areas outside the exclusion zone, where developers have no obligation to provide affordable housing.
“Brooklyn is being re-segregated because developers are getting this stuff without any strings attached,” she said. “It’s like working people in East New York or Crown Heights are actually paying through their tax dollars to have themselves pushed out.”
Rather than killing the program, she would like to see the rules for the exclusion zone applied citywide and the 20 percent affordable housing rule pushed up to 30 percent. She also wants the certificate program eliminated, saying, “If you want to use 421-a on Block B, then you need to build the affordable housing on Block B.”
After the mayor’s 421-a task force issues its recommendations this fall, the City Council will have to act on them before the current program expires in 2007. Whatever it decides will then go to Albany.
“We will not advance it, unless certain things happen,” warned State Assembly housing chair Vito Lopez, D-Brooklyn.
Lopez wants to apply citywide the changes introduced under the recent rezoning of Williamsburg-Greenpoint, calling for all affordable housing to be built on-site and the paying of “prevailing wages” to building staff.
“Do builders love the 20-percent affordable concept?” Lopez asked. “No, because it limits the amount of profit. But, in my mind, there isn’t a real need for market-rate housing. The vacancy rate is about 6 percent. Where there’s a 2 percent vacancy rate is on affordable housing units. That’s a real crisis in the city, and the only way to meet this crisis is by doing something like a 421-a bill that has on-site affordability. We want landlords to take advantage of 421-a, and the way to take advantage is, create affordable units.”
A half-dozen developers contacted for this story did not return calls.
“They want the status quo,” Lopez said.
Exclusion zone
• The 421-a tax abatement program was created in 1971 to spur housing development north of 96th Street and south of 14th Street in Manhattan.
• Builders in the area between those streets, the excluded zone, can still get the tax break if they make a contribution to affordable housing.
• Since 1971, the program has played a role in 110,000 apartments citywide.
