The extension of the 421a tax incentive program has been successful and will result in a “boost” in housing across the five boroughs, according to data from the Real Estate Board of New York (REBNY) shared exclusively with Commercial Observer.
The REBNY data found that 740 projects around the city have taken advantage of the 421a extension. Those projects are expected to result in 78,861 housing units, with 24,961 of them affordable.
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“Our pipeline wasn’t moving forward without the deadline extension,” Basha Gerhards, senior vice president of planning at REBNY, said. “When we look at the deadline extension, and we see so many projects filed their letter of intent with [New York City Department of Housing Preservation and Development] and tens of thousands of units now, all of a sudden, are saying we intend to move forward, that’s really important when we put that into the context of the number of housing units we need over the next decade.”
The data also found that over 60 percent of the units are expected to be delivered by 2027. Fifty-five percent of the projects moving forward are 50 units or less, and the majority of them — 47 percent — are to be completed in Brooklyn. Only 2 percent of the total project filings and units are on Staten Island.
Additionally, about 80 percent of the projects will utilize the program’s Affordability Option B, meaning that 30 percent of the units must be affordable, with 10 percent of them affordable to people earning incomes at 70 percent of area median income (AMI) and 20 percent at 130 percent of AMI. Option B also accounts for 45,690 units.
To combat the housing crisis, the city needs to add 500,000 apartments over the next 10 years, or about 50,000 new apartments annually, Gerhards said.
Proponents of 421a say it has been a cornerstone of New York City’s efforts to tackle the ever-growing housing crisis that has been plaguing the five boroughs for decades.
Established in the 1970s as a way to incentivize developers to construct new residential buildings through tax breaks, 421a has undergone several changes over the years, before finally sunsetting in June 2022.
Originally, all projects developed under the most recent iteration of 421a needed to be completed by June 15, 2026, but the COVID-19 pandemic, as well as inflation and supply chain issues, had made that deadline hard to reach. So, in April, the completion deadline was extended to June 15, 2031, so long as the letter of intent was submitted by Sept. 12, 2024, according to HPD.
While REBNY applauded the 421a deadline extension, the program has not been without detractors. Back in 2015, Katie Goldstein, executive director of the grassroots organization Tenants & Neighbors, called 421a “a failed and wasteful program,” according to City Limits.
And more recently, Housing Justice for All, another critic of the program and its replacement 485x, said it discovered over 1,500 buildings built using 421a were not complying with the rent stabilization laws.
When 421a expired in 2022, there was nothing to replace it until April 2024 when the 485x program was approved — but it too has its advocates and critics. But from REBNY’s point of view, the 421a deadline extension is an important part of combating the housing crisis as 485x gets underway.
“Just the process of moving the date allows projects to move forward, and that feels very important in a space where we still don’t have the rules for the new program,” Gerhards said. “The development process in New York City is quite lengthy. So all of a sudden, for this universe of projects to essentially get a light switch on that they can move forward, because they’ll have enough time to finish, that seems pretty impactful.”
Amanda Schiavo can be reached at aschiavo@commercialobserver.com.