MANHATTAN — As the future of the city's 421-a tax abatement for developers still hangs in the balance, one thing is clear: One57, the ultra luxury tower overlooking Central Park with a duplex penthouse that sold for a record-breaking $100 million, got a huge tax break in exchange for relatively few affordable units, an analysis from the Independent Budget Office found.
One57's tax break — worth $65.6 million over 10 years — could have paid for nearly 370 affordable apartments at a cost of $179,000 per unit — the amount to develop an affordable unit, the IBO said.
Instead, the deal with the fancy condo under the program yielded only 66 apartments, which means that the city basically subsidized the apartments at a rate of $905,000 each, the report explained. One57 was grandfathered in under old rules that made it legal to buy an exemption certificate to finance affordable housing off site in the Bronx.
The glassy high rise on West 57th Street — now known as Billionaire's Row — earned the ire of affordable housing advocates who criticized the 421-a program for subsidizing such a fancy property for the world's wealthiest in exchange for relatively little affordable housing. The 421-a was created during the fiscal crisis of the 1970s — in a very different real estate market than today — to spur developers to construct residential buildings.
The way the tax break was used by buildings like One57 was a main driver behind Mayor Bill de Blasio's proposed 421-a reforms.
“The staggering cost and inefficiency of this program is precisely why the administration sought — and succeeded — in ending 421-a tax breaks for luxury condominiums. The practice was just indefensible," mayoral spokesman Wiley Norvell said.
When Albany legislators hashed out the fate of the city's 421-a, they provided a stopgap measure, extending the present tax abatement program for developers for seven months and then agreeing to pass reforms (which would remain in place through June 15, 2019) provided that representatives from labor unions and real estate interest groups hammered out an agreement over wage protections for construction workers.
That agreement is still in the works, but should it pass muster, the revamped 421-a program would eliminate tax benefits for luxury condos. It would not, however, eliminate the abatement for condos altogether, as de Blasio originally called for.
Instead, condos built in the outer boroughs could still get the benefit provided they have no more than 35 units, their average sales price is roughly $700,000 and new residents remain in their units for at least five years.
The redesigned program is expected to result in the creation of 24,000 units (down from the 25,500 de Blasio hoped to create). It would target tenants with incomes as low as $31,000 a year, unlike the current program, which only reaches tenants with incomes as low as $46,600.
While the current subsidy per affordable unit is roughly $573,000 and buildings that participate in the program are only required to construct affordable units if they're in certain neighborhoods — basically the city's priciest areas in Manhattan, Brooklyn and Queens — the new program would lower the subsidy to $427,000 per unit and require buildings across the entire city to include affordable housing to qualify for the program.
The mayor's call for a "mansion tax" on properties over $1.75 million did not pass in Albany.