MANHATTAN — Mayor Bill de Blasio wants to create a new 1 percent "mansion tax" on homes above $1.75 million to help the city construct thousands of rental units for low- and middle-income New Yorkers, he announced Thursday.
The tax, along with a revamp of affordable housing requirements for developers looking to qualify for tax abatements, requires approval in Albany. The measures are part of the mayor's $42 billion goal of building or preserving 200,000 units of affordable housing over the next decade.
If de Blasio's proposal is approved, condo developers will no longer qualify for tax breaks under the so-called 421a program, which is set to expire on June 15.
Instead, the tax benefits would only go to rental construction, and provisions that allow buildings to have a separate entrance for affordable housing tenants — the so-called "poor door" — would be eliminated.
The 421a tax benefit was created in the 1970s to encourage residential construction at a time when the city was struggling financially and development was seen as a risky venture.
The current program requires developers in Manhattan and parts of Brooklyn and Queens to set aside 20 percent of newly created housing for "affordable" units while developers elsewhere — or nearly 84 percent of the city — can get the benefit without building any affordable units.
Under the revamped program, developers across the city would be required to set aside 25 to 30 percent of a building's units for "affordable" housing.
"No more tax breaks without building affordable housing in return," de Blasio said. "This can’t be a city of just penthouses and luxury condos."
Developers would be able to chose from three options that would give them a chance to target tenants at a wider range of incomes, officials said, noting that current system has resulted in units sitting empty because income qualifications were so narrow. While the current program serves those making roughly $46,000 a year for a family of three, the new one would target those families earning as little as $31,000 a year and as much as $101,000, which is considered "middle income."
The administration believes the changes would double the number of affordable units built through the program from 12,400 to more than 25,000 over the coming decade.
The current tax abatements expire up to 25 years after the building is constructed. Under the new plan, they would last for 35 years.
De Blasio's "mansion tax" would be added to an existing 1 percent state tax on homes above $1 million. This new tax, however, would direct revenue to the mayor's affordable housing plan.
De Blasio is calling for a 1 percent tax on homes between $1.75 million and $5 million. Homes priced above that will be assessed a 1.5 percent tax on the dollar balance that's higher than $5 million.
The tax is projected to raise roughly $200 million per year, which will help plug a $1.9 billion gap in the mayor's $42 billion affordable housing plan, city officials said.
The administration is banking on the tax to help build some 37,000 affordable units over the next 10 years.
The city's real estate lobby appeared to support the overhauls.
"The plan put forward by Mayor de Blasio will result in the creation of much more affordable and market rate, multi-family rental housing in New York City," Steven Spinola, president of the Real Estate Board of New York, said in a statement.
Affordable housing advocates, however, criticized the reforms for failing to address the problem with the current 421a program, claming that it still will give money to developers in exchange for little affordability.
Moses Gates, of the Association for Neighborhood and Housing Development, wrote on the organization's blog that only the top 20 percent of the city's households would be able to afford the rents targeting "middle income" New Yorkers.
"The mayor's 421a reform proposal moves away from serving those from who need it most," he said. "That's going in the wrong direction."
Here's more on the mayor's 421a proposal. Developers would be allowed to pick from three options, which the city believes will be more appealing depending on the neighborhood':
- In pricey neighborhoods like the Upper West Side, developers might want to set aside the fewest affordable units. They could choose the option of setting aside 25 percent of units, including 5 percent for "middle-income" New Yorkers (a family of three making roughly $101,000 a year); 10 percent for "low-income New Yorkers" (a family of three earning $46,620 a year) and 10 percent for very low-income (a family of three earning $31,080). This option would allow developers to also qualify for other subsidies.
- In lower-income areas where the city is hoping to spur construction, developers could set aside 20 percent of units for middle income residents and 10 percent for "moderate income" (a family of three earing roughly $54,000 a year). The city would allow developers to seek other city subsidies so the entire building could be "affordable," officials noted.
- In areas that are rapidly changing, like Astoria, developers might choose the option to set aside 30 percent of the units for middle income families. While market rents might not differ too much from this — roughly $2,500 for a two bedroom, for example — these units would remain "affordable" for 35 years, while market rents in these areas are likely to go up, officials explained.