From The Jewish Voice:
As reported by The Real Deal, thousands of landlords are getting 421a tax breaks that they didn’t qualify for. The 421a tax exemption program was started July 1971 as a way to kick start construction on vacant or underutilized land, by offering drastically reduced property taxes for developers of multiple dwellings for a set period of time. Besides for adding much needed housing to the city, the primary goal of the initiative has always been to increase affordable housing for the underprivileged. To be eligible for the government tax breaks, developers need to fill out the paperwork, pay the filing fee and promise to set aside 20% of the building’s units for rent stabilization. Once construction is completed, they are issued a certificate of approval to get the tax break.
A ProPublica analysis has found that the well intentioned plan is turning into a $1.4 billion a year tax forgiveness program that requires nothing in return from the majority of landlords reaping the benefits. Almost two-thirds of the approximately 6,400 landlords paying reduced property taxes do not have an approved application on file. Together these rental properties save roughly $300 million a year in property taxes without basic proof that they qualified for the tax break. In some cases, Landlords enjoy the tax break for more than two decades while still waiting for approval from housing officials. While undoubtedly this measure does encourage much needed new residential development, it may, in practice not be providing the promised affordable housing benefits.
As per The Real Deal, three fourths of the more than 4,000 properties without certificates of approval who are receiving benefits, failed to register for rent stabilization in 2014. This would allow those landlords unlimited freedom to raise their rents.
The Department of Housing, Preservation and Development and the Department of Finance together administer the 421a. They blame each other for the program’s faults. The Department of Finance has continuously allowed property owners to collect tax benefits even before the Housing department has approved the applications. The Housing Department has a que of applications sitting unapproved for years. Currently, more than 2,200 cases are still pending from years 2000 to 2010, and a there are cases going back to the early 1990s. Last year, the housing agency collected $27 million in application fees from developers but only spent $560,000, paying a meager nine employees to do all the work. The agency has said it will be hiring additional staff.
Mayor de Blasio has proposed reforms to state lawmakers, requiring owners to meet all eligibility criteria before collecting benefits. De Blasio also has high hopes to raise the 421a requirement to 25% or 30% affordable units per property. Perhaps, implementing current standards would be a vital first step.
By Ilana Siyance
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