Tax Breaks

By Paul Moses
The City Council’s vote on Dec. 20 to rein in a major tax break for building housing marks an evolution in City Hall, even if many Council members were looking for deeper changes in the program.

The 421-a program, in effect since 1971, allows developers a hefty tax break if they build new housing. Those building in certain areas – Manhattan, more or less between 14th and 96th streets, and, more recently, a stretch of the Greenpoint-Williamsburg waterfront – had to make 20 percent of the units “affordable” to qualify for the tax break.

With the housing market so hot, especially in Brooklyn, it hardly seemed reasonable for city taxpayers to continue shelling out hundreds of millions of dollars a year in tax breaks without getting something in return. And so the Council voted to expand the areas in which builders need to develop affordable apartments to get the tax break. According to the Council’s news release, the area now includes “downtown Brooklyn, Carroll Gardens, Cobble Hill, Boerum Hill, Park Slope; most of Fort Greene, Prospect Heights, Williamsburg and Greenpoint and significantly into Sunset Park and Bushwick.” Further, the affordable units need to be built on site and not tucked away elsewhere, the usual practice in the past.

This still leaves out many Brooklyn neighborhoods where developers are aggressively developing expensive new housing with help from taxpayers. I am sure that community activists in places like Manhattan Beach and Sheepshead Bay would like to see some additional check on what’s been happening there (or even enforcement of existing buildings laws).

But even so, the vote marks an evolution in City Hall.

The Council, prodded by Mayor Michael Bloomberg and City Planning Commission Chairwoman Amanda Burden, voted in 2003 to re-zone Park Slope with little regard for the need to develop affordable housing. The re-zoning protected brownstoners in the wealthy section of Park Slope by preventing out-of-scale (read: ugly) new developments. But it cleared the way for construction of 10- and 12-story luxury buildings along Fourth Avenue, the area where the Slope’s poorer residents lived. That’s lived, in past tense, since the ensuing real estate boom has driven many of them away.

The re-zoning of Williamsburg and Greenpoint in May, 2005, was a different story. Unlike in Park Slope, the community organized in opposition to City Hall’s plans and local elected officials negotiated more aggressively. The result was that the 421-a “carve-out,” as it is sometimes called, crept out of Manhattan and into Brooklyn, with affordable housing required in exchange for tax breaks to build luxury housing on the Greenpoint-Williamsburg waterfront. That set a precedent. Further, as a result of middle-of-the-night negotiations, the affordable units had to be on site, setting the precedent adopted in the 421-a revisions.

How that deal has worked out for Greenpoint and Williamsburg is another matter – and very much the subject of debate among community activists there.

But it did set a precedent. And the latest vote from the Council sets another precedent – that within two years, a joint mayoral-Council commission will review the “carve-out” area to see if it should be changed. That’s another setback for major real estate interests, which doesn’t happen everyday in New York politics.

Why is City Hall slowly giving ground?

I suggest two factors.

The first is that when community groups are truly organized, the Council needs to compromise. Occasionally, that leads to surprises, as when the Council rejected then Mayor Rudolph Giuliani’s effort to ease construction of “big box” stores such as Home Depot in New York City. There was definitely a case to be made for that, but well-organized local merchants throughout the city lobbied their Council members to oppose the measure and beat out big real estate.
The second reason is that Shaun Donovan, the city commissioner of Housing Preservation and Development, is an effective voice within the Bloomberg administration for developing affordable housing. During the Giuliani years, that agency was marginalized within city government.

Now that a deal has been struck, the Council might want to maintain close oversight on how it works out. For example, protections for tenants that were a selling point to get Council members to vote for the May, 2005 Greenpoint-Williamsburg re-zoning haven’t been put firmly in place. This time, the deal needs to be monitored from the start.
Paul Moses is director of the Center for the Study of Brooklyn and a professor of journalism at Brooklyn College.