Real Estate Developers Already Worrying About 421-a Expiring Next Year
Mitchell Korbey, the chair of Herrick's Land Use & Zoning practice, was quoted in the Commercial Observer discussing the scheduled expiration of the 421-a tax exemptions in June 2022. While no one yet knows the direction the state legislature with move towards, the real estate industry is keenly aware of the impending deadline.
Mitch said that the June expiration is "a major source of anxiety. A lot of people look at the expiration of the program as no longer making rental housing viable in the city." Adding that without the tax exemption, "what people will do is switch to ownership and do condos, or other uses that are available [under the zoning]. Or, you may pause and wait for a different climate when the program might be renewed some day."
The article states that "[Mitch] pointed out that the de Blasio administration’s Mandatory Inclusionary Housing program — which requires developers to set aside 25 to 30 percent of their units as affordable if they build on rezoned land — hinges on the existence of 421-a".
Mitch continued saying, "Lots of folks look at the de Blasio administration somewhat negatively, but a major accomplishment of his first term was the implementation of MIH. It’s produced thousands of units of potential housing. And what about the survival of that in light of the expiration of 421-a?"
When the conversation turned to what will happen if the tax break expires without a replacement, Mitch argued that the city’s housing development pipeline will likely slow as a response. "There will certainly be a slowdown, if not a halt, in new rental housing." Mitch then noted that the expiration always "creates a lot of tumult in the market and in communities. The same thing happened last time when the program was threatened with not being renewed. You had a lot of speculation and hyper-concern in terms of what the implications are."
Mitch concluded discussing how the uptick in applications for development also causes "a significant backlog" at the Department of Buildings and "elsewhere with folks who will be very, very anxious to vest [under the current program]. And I think it does place a burden on agencies that are significantly burdened," he said.
Real the full article in Commercial Observer here. Access may require a subscription.