Report Analyzes the Proposed 421-a Tax Exemption’s Wage Requirement and Potential Impact on Housing
February 8th 2017
New York, NY: A report released today by the NYU Furman Center analyzes the potential impact of the most recent reform proposal for the 421-a program on housing development in New York City, which is currently under consideration by the New York State Legislature.
The report, The Latest Reform Proposal for the 421-a Program, uses financial analysis to examine the program changes from both the taxpayer and developer perspectives to help shed light on the new legislation’s impact on housing development in different parts of the city.
The report finds that the proposed wage requirement could cost city taxpayers between $2.6 and $5.7 million per 300-unit building, depending on the location of the building. In addition, the report finds that the cost for taxpayers of the proposed wage requirement is higher under the proposed middle-income affordable housing option (“Option C”) than under the lower-income affordable housing option (“Option A”). The report studies potential impacts of the revised program in four different parts of New York City—Core Manhattan, Downtown Brooklyn, Astoria, and Bedford-Stuyvesant.
Though the analysis does not estimate whether, or to what degree, labor costs might rise with the proposed wage requirement, it finds that developers under the 2017 proposed program might be able to absorb a 10-18% increase in hard construction costs without affecting the long-term rate of return. Labor costs could go up even more as they make up only one piece of hard costs.
“Our analysis helps put in context the proposed revisions to the 421-a program, which both increase the costs to city taxpayers and allow for significant increases in construction hard costs without diminishing long-term returns to development,” said Mark Willis, Senior Policy Fellow at the NYU Furman Center and co-author of the report. “We hope this financial modeling helps lawmakers and the public make an informed assessment of how the proposed changes may affect both city taxpayers and housing development in different parts of New York City.”
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For more information, contact: Shannon Moriarty, [email protected], 212-998-6492
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About the NYU Furman Center
The NYU Furman Center advances research and debate on housing, neighborhoods, and urban policy. Established in 1995, it is a joint center of the New York University School of Law and the Wagner Graduate School of Public Service. More information can be found at furmancenter.org and @FurmanCenterNYU.