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Gov. Cuomo's New Affordable Housing Proposal Would Make Some Rents Less Affordable

The governor’s initiative would water down a longstanding requirement that developers who receive a $1.4 billion-a-year tax break must cap rent increases in new apartment buildings.

Earlier this month, New York Gov. Andrew Cuomo unveiled a proposal that he dubbed the “Affordable New York Housing Program.” Turns out, one of its provisions would likely increase rents for most New York City tenants who move into buildings constructed under the program.

Cuomo’s initiative, included in his budget proposal for the state’s upcoming fiscal year, would water down the rent regulations associated with a $1.4 billion tax break for real-estate developers. This program, known as 421-a, has historically required developers who accept the benefit to cap rent hikes in new apartments — a policy aimed at slowing the explosive growth of the city’s housing costs. Developers who built in certain high-demand areas, such as Manhattan, also had to set aside 20 percent of their units for low-income renters. The program was suspended last year and is now closed to new applicants.

Cuomo wants to reopen the program, which is authorized by the state but run by the city. His plan would give developers various options for providing affordable housing, such as allocating up to 30 percent of units for low-income and middle-income renters. But his proposal would also let developers collect the tax savings without limiting rent increases on most of the market-rate apartments they build, as required under past iterations of the program.

Now, instead of stabilizing rents for the duration of the tax break — which would last 35 years — the limits would disappear as soon as the initial tenant moves out, as long as the rent exceeds $2,700 a month. That’s the current threshold for deregulating apartments in buildings that do not receive taxpayer subsidies. Because luxury developers often price their market-rate apartments near or above that level anyway, advocates say that the provision essentially allows rent stabilization to end with the first tenant — while the tax benefits remain.

Here’s Our Data

Download the data behind our previous 421-a investigation from the ProPublica Data Store.

Even with regulations on the books, many developers haven’t fulfilled their promises. A ProPublica investigation of the 421-a program found widespread failure by the city to enforce rent regulations in buildings receiving the subsidy. The city is now aiming to make amends for that failure by warning thousands of landlords to comply with the law.

Cuomo’s bill underscores a broader shift in New York housing policy, where officials are relying less on rent limits to ensure affordable housing, and more on tax incentives to reserve a small quantity of the city’s new apartment buildings for low-income renters. That’s a disappointment to some observers, who view rent regulation as an important tool in the fight against gentrification.

“It’s the last bulwark of maintaining a large supply of affordable housing,” said John Allen, a former legal counsel for State Senate Democrats, who worked on every major piece of housing legislation from 1971 to 2015. Eliminating tenant protections, he said, “is not good policy, in my opinion.” (Allen donated $200 to ProPublica in 2016.)

The Real Estate Board of New York, which represents property developers, declined to answer questions about the effect of Cuomo’s bill on rent regulation, but offered general praise for the legislation. “The Affordable New York program will produce many more rental housing units, including a substantial number of affordable ones, throughout New York City. It will also generate more good jobs for New Yorkers,” John Banks, the group’s president, said in a statement.

Cuomo spokeswoman Abbey Fashouer also declined to comment on the bill’s deregulation of 421-a apartments with market-rate rents above $2,700. The proposal benefits working-class tenants because it extends the length of time that rents in the affordable units will be kept below market rate, and lowers income eligibility requirements for some of the units, she said in an email.

“Affordable New York ... builds on the state’s longstanding commitment to provide a safe, affordable place to call home for all New Yorkers,” Fashouer said.

Why Developers of Manhattan Luxury Towers Give Millions to Upstate Candidates

A first-of-its-kind analysis shows just how tactical the real-estate industry is about bankrolling state legislators who will protect its $1.4 billion tax break and weaken rent laws. Read the story.

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Regulators have sent letters to property owners asking them to certify compliance with a 2007 law mandating higher pay to workers in taxpayer-subsidized apartment buildings. Read the story.

A 2015 renewal of the 421-a law, crafted largely along the lines of a revamp pushed by Mayor Bill de Blasio, also included the language allowing market-rate apartments to exit rent-stabilization. A spokeswoman for the mayor declined comment on why he agreed to weaken rent regulation for those units. Speaking generally about Cuomo’s bill, she said, “Albany needs to make good on the reforms we secured to the broken old 421-a program: No tax breaks for luxury condos, reduced costs to taxpayers, and no tax breaks without significant affordable housing in return. Adhering to these principles is paramount, and we will engage our state partners as the proposal is considered during the budget process.”

The de Blasio-backed bill ultimately did not take effect because of an impasse over how much construction workers should be paid by developers who build new housing with 421-a subsidies. Cuomo and the legislature left it up to the New York real-estate industry and construction unions to work out a deal on worker pay; when they couldn’t reach agreement, the whole 421-a program went into limbo. In November, the two sides reached a deal, which Cuomo’s proposal would enact into law, resurrecting the program.

It’s unclear how much the revived program would cost. Doug Turetsky, spokesman for the city’s Independent Budget Office, predicted it would be more expensive than prior versions. “It’s likely given the scope of the Governor’s proposal and the length of the abatement period that it will cost the city more in foregone tax revenue than either the lapsed 421-a or the version previously suggested by Mayor de Blasio,” he said in an email.

Tom Waters, a housing policy analyst at the Community Service Society, said he conservatively places the cost to the city at about $2.4 billion a year once the program is fully implemented.

If the city doesn’t like that, it won’t be able to do much to change it. Another provision of Cuomo’s bill takes away the city’s ability to pass any law “to restrict, limit or condition the eligibility for or the scope or amount of 421-a benefits in any manner.”

Fashouer, the Cuomo spokeswoman, chalked that up to ensuring “stability and consistency in how the program operates.”

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