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09.05.2007
421-a Deal Struck
With reforms, Bloomberg, Lopez, and Ratner all see victory

For a moment, it seemed like the months of hard work spent transforming the 421-a tax abatement program into an engine for affordable housing would come crashing down. After the program emerged from the State Legislature in late June, Mayor Michael Bloomberg felt his plan had been so changed that he asked the governor to veto it if no compromise could be reached. And as often happens in Albany, a last-minute deal was struck on August 7, “a positive result for affordable housing in New York City,” said the mayor in a statement.

“I’m happy with the final outcome of the bill,” said Assemblyman Vito Lopez, architect of the bill the mayor opposed. “We didn’t get everything we wanted, but we’re happy.” Namely, the city’s demands for middle-income housing have returned, whereas Lopez wanted the program to only benefit low-income families.

Some New Yorkers are still missing what they most wanted, though. Under the June bill, Forest City Ratner’s (FCR) Atlantic Yards development received what critics are calling a “carve out” that could have netted the developer $300 million. Even though he is a supporter of the project, the mayor had threatened to revoke city funds, arguing that Ratner’s windfall would be the city’s loss. Instead, he balked and knocked the subsidies down to $200 million with the guarantee that affordable housing would be built during each phase of the project instead of at the end, when critics claim Ratner could renege on promises due to lack of funds.

For Atlantic Yards opponents, the deal still goes too far. “The provision is giving Bruce Ratner a tax break no one else can get,” said Dan Goldstein of Develop Don’t Destroy Brooklyn. “It’s just a little bit smaller, but he shouldn’t have it at all. The mayor said that, ACORN said that, everybody said that.” Neill Coleman,spokesman for the city’s Department of Housing Preservation and Development, said the city won appropriate concessions from FCR, and the deal made sense. "This restores its position very close to where it was before the City Council passed its bill” in December," Coleman said of Atlantic Yards. “Back then, it was not in the exclusion zone.”

Central to the debate are the boundaries of the zones that are excluded from eligibility. The 421-a program, created in 1970 to spur residential development in a beleaguered city, was so successful in parts of Manhattan where the market was strong, an exclusion zone was established. To gain tax breaks within those areas, developers had to create affordable housing equivalent to 20 percent of the units in the project.

Mayor Bloomberg decided two years ago to expand these zones to encourage affordable housing, which would now have to be built onsite within an exclusion zone that would encompass most of Manhattan, and the Brooklyn/Queens waterfront. The City Council expanded that zone, as did the legislature. Lopez expanded the zone to all of Manhattan, and every borough has one. Developers outside the exclusion zone still receive the tax abatement as-of-right.

The Bloomberg administration hopes to negotiate the exclusion zone when the legislature reconvenes next year—they think the latest additions will see a lack of necessary development—but the city is happy with its larger victory, the inclusion of middle-income projects like Queens West and Willets Point. Now developers must make a percentage of units affordable to 90 percent of the area mean income, though this is actually an average that extends between 120 percent and 60 percent. “It’s one-for-one,” Lopez said. “For every middle-income unit, there will be a working-class one.” Coleman estimates this will help realize 10,000 units the city had planned but feared lost under the new rules. 

Matt Chaban