City Bar Urges Governor and Legislature to Re-Enact Revised 421-a Law and to Renew the Private Activity Bond Allocation Act of 2014

In a letter to New York Governor Andrew M. Cuomo, Majority Leader John Flanagan, Speaker Carl E. Heastie, and Independent Democratic Conference Leader Jeffrey Klein, the New York City Bar Association strongly urges re-enactment of the Revised 421-a Law and renewal of the Bond Allocation Act.

Specifically, the letter, from the City Bar’s Committees on Housing & Urban Development, Land Use Planning & Zoning, and Real Property Law, encourages the State Legislature and the Executive to:

I. Re-enact the expired real-estate tax exemption in Section 421-a, sub-division 16 of the New York Real Property Tax Law as revised in 2015 (the “Revised 421-a Law”); and

II. Renew, modify, and permanently extend the Private Activity Bond Allocation Act of 2014 (the “Bond Allocation Act”). Specifically, the Bond Allocation Act should: (i) not subject “local” Bonds to review and approval by the Public Authorities Control Board (“PACB”) or Empire State Development (“ESD”); (ii) advance the recapture date by one month; and (iii) mandate uniform reporting requirements.

“The continued development of affordable housing is at a critical juncture,” states the letter. “Without the re-enactment of a tax exemption that is comparable to the Revised 421-a Law, mixed-income rental buildings will not be developed, causing a loss of both affordable and market-rate units. Given the well-documented housing crisis, the City Bar urges the State Legislature and the Executive to act. Much of the hard work forging a consensus was already done in the process of drafting the Revised 421-a Law. The Legislature and the Executive should capitalize on this consensus by re-enacting the Revised 421-a Law and not condition the tax exemption on REBNY and the Construction Trades reaching an agreement on wages—an issue that is distinct from the financing of affordable housing and should be addressed in a separate bill.”

The letter further states, “On a regular basis, members of the Committees are approached by real estate developers who are interested in building affordable, mixed-income rental projects, but who note that such projects, without a 421-a tax exemption, cannot absorb a full property tax burden of up to 30% of gross rents and still obtain sufficient financing. The bottom line is that financial institutions are requiring that projects have returns that can be achieved only with a tax exemption.” The letter adds, “If such a tax exemption is not made available, property owners will simply not develop their lots, as it will not be economically viable to do so.”

The Bond Allocation Act, set to expire on July 1, 2016, is equally critical in ensuring the continuing production of affordable housing, according to the letter, “and the issuance of Bonds through HDC, which has efficiently produced hundreds of thousands of affordable units, should not be bogged down in red tape.” Therefore, the Legislature and the Executive should not mandate PACB or ESD review over local authorities, should move-up the Recapture Date by one-month to facilitate efficient project planning, and promote transparency by requiring the reporting of easily accessible data.

“Reenacting the Revised 421-a Law alone, however, is not sufficient,” the letter explains. “The Bond Allocation Act must also be renewed to ensure that New York City and other municipalities have the necessary tools to effectively address the widely acknowledged housing crisis.”

The letter can be read here: http://bit.ly/1V7Zxtk