Bloomberg Recommendations On Tax Break Program Derided

Real estate developers and affordable-housing advocates are criticizing Mayor Bloomberg's recommendations for revising an important tax program aimed at creating more such housing.

The 421-a tax incentive program was created in 1971 as a way to coax developers to create housing during lean building years. In February, Mr. Bloomberg convened a task force to recommend changes to the program, which was widely seen as out of date. Affordable-housing advocates said at the time that the city was needlessly subsidizing market-rate housing to the tune of $400 million a year, and even real estate interests admitted that some residential projects were receiving some unnecessary incentives.

Yesterday, the mayor endorsed a series of recommendations by a city-led task force that would limit the tax breaks available to developers who do not provide some affordable housing. City Hall will now push for legislation at the City Council, where a lively, contentious debate is likely.

The president of the Real Estate Board of New York, Steven Spinola, said he feared the proposed reforms would jeopardize the housing boom at a time when the real estate market is showing signs of weakening.

"It is popular to think there is limitless profitability to build housing in New York City, but in truth, it's limited," Mr. Spinola said. "If they go ahead with everything they are leaning towards doing, they will reduce the amount of affordable housing built and it will have a negative impact on the construction of market rate housing in parts of Manhattan."

Currently, developers who build housing in the exclusion zone — extending in Manhattan between 14th Street and 96th Street and in parts of Greenpoint/Williamsburg, Brooklyn — must provide affordable housing in exchange for the 421-a tax breaks. The changes proposed yesterday would extend that exclusion zone to parts of Harlem, Lower Manhattan, Brooklyn Heights, DUMBO, and parts of the Brooklyn and Queens waterfronts.

Real estate developers are most concerned about a proposed change that would require market-rate developers in any of the exclusion zones to pay full taxes unless they build affordable housing on site, by abolishing the negotiable certificates program. Currently, developers of condominiums in places like TriBeCa and SoHo can avoid building affordable housing onsite by purchasing certificates from other developers who build the affordable housing outside the exclusion zone.

Affordable-housing advocates said yesterday that the proposed reforms did not go far enough. Some advocates say they want to expand the exclusion zone citywide, and require developers of market rate housing anywhere in the five boroughs to built onsite affordable housing, or pay full taxes.

The head of the task force, the city's housing commissioner, Shaun Donovan, said yesterday that the changes were meant to strike a balance and harness the strength of the real estate market to create affordable housing.

"The program itself will incentivize developers to create affordable housing, and at the same time, revenues to the city will increase, and those increased revenues can be directed to affordable housing," he said.