Steven Wishnia’s Gothamist article “How Your Tax Dollars are Wasted to Build Luxury Apartments” is intriguing and informative. Many of the issues raised in the article come up at community meetings and are referenced in our other class readings.
Familiar issues are raised again at the outset of the article. Of nearly 4400 apartments built under the 421-a program, about 260 were officially designated “affordable.” That’s about six percent. Of those, 31 were actually affordable to a family making $41k per year (the average for NYC renters in 2014). The numbers may be different, but the principle is the same: not enough affordable housing is available, and what little is isn’t actually affordable. The article is almost overflowing with accounts of 421-a subsidizing luxury buildings with one story noting that with the subsidies one building received, its eight affordable units (compared to 306 luxury) cost the public fund $642k each.
The article also tackles the loopholes in subsidy laws. Essentially, one unit can be used to apply for a basically unlimited number of programs. So each affordable unit is counted toward numerous government subsidies and programs at the same time. The same apartment used to apply for 421-a as well as any number of other loans, bonds, and tax credits. This sort of “double dipping,” as the article calls it, should be prohibited as one of the article’s proposed reforms of 421-a. If a developer receives subsidies form two programs, it stands to reason that they should be setting aside twice as many affordable units.
The first reform would be to make affordable units mandatory for any construction project receiving the tax break (currently, this is only mandatory within certain zones). One group suggests that, for lower Manhattan, half of any new units should be dedicated for the $25k-$50k income level.
The next reform is essentially an overhaul of AMI. The problem with affordabe housing is that it isn’t. These units need to be designated for a much lower income level than they are now. AMI takes into account areas outside of the city, artificially inflating the perceived average income of the area. The result is that affordable housing may be affordable and priced below average income based on AMI, but this is not refelctive of the state of affairs in New York City.
The last reform should seem obvious: affordable housing should be affordable permanently. There is a trend of affordable units converting to market rate after their subsidy expires, leaving low income residents in danger of eviction. If developers want to reap the benefits of these subsidies, the benefits that they provide to tenants shouldn’t be only temporary.
In 1998, Congress passed a law that effectively prohibited the construction of new public housing. The effect was that avenues besides private development have been closed.
In 2013-2014, just over 1/12 of apartments that received 421-a were “affordable,” while over 100k truly affordable ($5-900 per month) have been lost since 2011. Soon, both rent regulation laws and 421-a will be on the floor in the state legislature. The article puts forth a likely situation: 421-a will be used as a bargaining chip to protect and strengthen rent regulation, and vice-versa. While opponents call 421-a deeply flawed and say that it puts money in the wrong places, they concede that if its renewal leads to better rent-control laws, it would be a victory.
Although I haven’t been able to look into it, it is entirely likely that East River Plaza will receive 421-a subsidies in addition to many others. In effect, while trying to ensure that some amount of “affordable” housing is created in New York, 421-a in fact serves first and foremost the profit margin of big developers.
