The penthouse at One57, which offers panoramic views from 1,000 feet above 57th Street, recently sold for a record-setting $100.5 million.
But it is not the price that has grabbed the attention of housing advocates, policy analysts, developers and city officials. Rather, it is one of peculiarities of New York real estate: a billionaire’s lair that comes with an incentive that cuts this year’s property tax bill by 95 percent, or an estimated $360,000.
That has turned the six-bedroom, 11,000-square-foot duplex into a prime example for an intensifying debate over the future of a housing program known as 421-a. It offers generous property tax abatements for as long as 25 years to encourage construction, or in some cases, to generate apartments affordable to poor and moderate-income tenants.
At a City Council hearing last week, critics derided the 421-a program as an expensive boondoggle, a giveaway to developers building luxury housing in a city where the poor and the middle class often find themselves priced out of the market.
“It’s time for 421-a to go away,” said Maritza Silva-Farrell of the housing coalition Real Affordability for All. “We are being forced to subsidize luxury developers who build apartments the vast majority of New York City residents cannot ever afford.”
But the city’s developers contend that it is nearly impossible to build rental housing in New York today without the tax breaks, given the high costs of land and construction, as well as high property taxes. Without the incentives, they say it is easier and more profitable to build condominiums.
“You’re not going to generate more housing production,” Steven Spinola, president of the Real Estate Board of New York, said, “by giving fewer tax breaks and asking for more affordable housing.”
The debate about an otherwise arcane area of housing policy has taken on a sense of urgency because the 421-a program, which began 44 years ago, is up for renewal by the State Legislature in June. Mayor Bill de Blasio plans to plunge into the debate in Albany as he seeks every lever to make good on his pledge to build 80,000 units of housing affordable to low-, moderate- and middle-income tenants.
Deputy Mayor Alicia Glen has met with developers, bankers and low-income housing advocates, but it has encouraged all parties to avoid negotiating the terms of the deal in the press, until she unveils the administration’s entire housing plan.
At the hearing last week, Vicki Been, the city’s housing commissioner, did little to illuminate the city’s strategy on 421-a: “Our approach to possible reforms has been to examine the various aspects of the policy that could be tweaked or changed to better achieve our goal.”
According to city records, about 150,000 apartments got the 421-a tax exemptions in the fiscal year 2013, at a cost of $1.06 billion in forgiven taxes. The tax abatement, which starts with a steep, 95 percent discount on property taxes, slowly decreases over time until the tax hits full rate.
But only 12,748 of the 150,000 apartments were earmarked for low- and moderate-income tenants, making it a costly way of creating more affordable housing, according to the Association for Neighborhood and Housing Development, an advocacy group. “This program should be ended because it’s a relic that gives away billions in tax dollars and gets almost nothing in return,” said Benjamin Dulchin, executive director of the advocacy group. “But if it can’t be ended, then it must be fixed with a bottom-line level of public benefit that delivers enough housing that is truly affordable and located in the local community.”
Originally intended to stimulate construction, the 421-a program was enacted in 1971, when the city was in a severe economic and fiscal slump.
Critics today, including members of the de Blasio administration and some developers, say that the current program often stimulates luxury housing more than affordable units.
Also, critics say, developers often “double-dipped,” seeking and receiving 421-a benefits, tax-free financing and other housing benefits without producing additional affordable apartments.
Antonio Reynoso, a city councilman from Williamsburg, Brooklyn, said the 421-a program generated some affordable housing, but also spurred gentrification and displacement in his Brooklyn neighborhood, once a working-class area. The number of Latinos has fallen sharply in the past decade, he said.
“Affordable housing is not being built fast enough to offset the losses,” Mr. Reynoso said. “There’s no need for an incentive in Williamsburg. Why give it away?”
But peak land prices have soared to nearly $500 per square foot in New York, and real estate taxes on multifamily buildings now account for more than 30 percent of the buildings’ gross revenues, said Mr. Spinola of the real estate board.
“We expect 421-a will be modified and put forward as part of the mayor’s overall housing plan,” Mr. Spinola said. “But you can’t build rental housing in New York without some version of 421-a.”
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