Tax Abatement Debate To Be Revived

Developers and real estate lobbyists who fought hard to prevent changes to a lucrative tax abatement are looking forward to December, which is when the City Council will review the impact of new restrictions to the tax break, known as 421a. Real estate professionals hope to convince them that, with the slowing real estate market, these changes have stymied development.“In a market like this, the legislation fails in every respect,” the vice president for development at Toll Brothers, David Von Spreckelsen, said. “Banks are taking a harder look at the financing of development, land prices are decreasing in the boroughs, and construction costs are increasing. … We are going to see the impact.” Effective July 1, developers of new developments in Manhattan who wish to receive the lucrative tax abatement — in which the property value before construction is used to calculate taxes for between 10 and 25 years — must set aside 20% of their units as affordable housing. The same is true for various neighborhoods in the boroughs, including Park Slope, Prospect Heights, Bushwick, Astoria, and Long Island City.“The legislation does require a review of the exclusion zones through the reassessment process, which will allow us to consider the current economy,” Andrew Doba, a spokesman for City Council Speaker Christine Quinn, said.Last year, as the reforms were being drawn up, the real estate community argued that the economy was peaking and that the impact of the changes would be far greater than anticipated, the president of the Real Estate Board of New York, Steven Spinola, said. “We need to analyze the impact,” Mr. Spinola said. “When we have data on that, there will be a debate. We will have to show that 421a is important.”But some affordable housing proponents dismiss the real estate developers’ claims that the slowing economy is an indication that the 421a abatement should be reinstated.“We don’t need tax breaks for market-rate developments in New York City,” the director of the Pratt Center for Community Development, Brad Lander, said. “I don’t believe developers are choosing to build based solely on 421a, compared with the health of the broader market, cost of construction, and interest rates.”Still, experts said the presence of a 421a abatement can make the financing of a project feasible, especially in some of the neighborhoods in Brooklyn and Queens.“At the margins, the availability of 421a abatement could help reduce the equity requirement from lenders,” a partner in the real estate practice at Gibson, Dunn & Crutcher, Andrew Lance, said.

Tax Abatement Debate To Be Revived

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