NEW YORK (Reuters) - New York City wasted as much as $2.8 billion over an 11-year period on condominium apartments included in a massive affordable housing tax break program, according to a new study to be released on Monday.
Instead of fulfilling its mandate to stimulate additional housing development, the benefits are going to condo owners in the form of tax relief through the program known as 421-a, according to the study by the New York City Independent Budget Office (IBO), a non-partisan fiscal watchdog.
Critics, including the anti-poverty group Community Service Society, have said 421-a subsidizes mainly market-rate apartments at a huge annual cost to the city.
The program, which stopped accepting new applications a year ago, faces an uncertain future as Governor Andrew Cuomo wrestles with lawmakers and New York City Mayor Bill de Blasio about how to revive it, including whether to keep condos in the program at all.
The program is the city’s largest tax abatement, totaling $1.2 billion this fiscal year. That figure includes breaks not only for condo units, which make up a third of the program, but also rental units at 50 percent, according to city tax data. The remainder of the program includes cooperative apartments, family and mixed use units.
Earlier this month, Cuomo introduced his Affordable New York legislation, calling for qualifying new residential developments to get full property tax abatements for 35 years. Though it targets development in the city, the program must be authorized by the state.
The 421-a program is supposed to promote affordable housing by providing a tax break for up to 25 years if developers set aside apartments for low-income New Yorkers in their residential construction projects. It was enacted in 1971, when private development had stalled in a city that would face the possibility of bankruptcy just a few years later.
Once developers sell units or buildings to new owners, the 421-a benefit moves to the new owners, usually at a premium because the tax incentive is attached.
In its study, seen by Reuters, the IBO only examined condos, comparing more than 17,000 repeat condo sales from 2005 through 2015.
Manhattan condo owners paid only 53 to 61 cents on average for every dollar received in tax savings, the study found.
“Condo owners receive tax relief through a program intended to incentivize development,” the IBO’s Geoffrey Propheter wrote in his report. “It represents wasted dollars because buyers are receiving more in benefits than they pay for.”
Reporting by Hilary Russ; Editing by Daniel Bases and Tom Brown