Dive Brief:
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New York City Council members are calling for audits of landlords that receive tax breaks to build affordable housing, according to nonprofit journalism organization ProPublica. The news comes as the state and city consider expanding the 421-a tax abatement, which currently grants more than $1 billion annually to developers in New York City.
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Under the proposed legislation, the city’s housing agency would audit at least 20% of all buildings receiving the 421-a tax break each year. If a building breaches the rules, the property would lose its tax benefit for a certain period.
- A second piece of legislation would require developers in key destination neighborhoods who are required to include a certain number of affordable units to face a similar audit.
Dive Insight:
The proposed legislation comes as some observers believe the city has been granting 421-a tax benefit without ensuring that developers and landlords are fulfilling their requirements. A ProPublica investigation found that nearly two-thirds of the nearly 6,400 rental properties in the program do not have an application on file with the city’s Finance Department.
The revival of the 421-a tax credit comes as Mayor Bill de Blasio attempts to provide 200,000 new or existing affordable housing units in the next 10 years. The mayor’s plans were given a boost recently after New York Governor Andrew Cuomo approved an additional $300 million in federally tax-exempt bonds to subsidize the building of affordable housing.
Other cities grappling with similar affordable housing issues are also looking at inclusionary zoning as one solution. There are some concerns that those measures can lower developers’ margins, however, with the recent example of developers in Chicago paying the city's $100,000 opt-out fee instead of including affordable units.
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