For Immediate Release: Friday, March 9, 2018
Contact: Libby Rohlfing, 212-863-8076
City Suspends 421-a Benefits to More Than 1,700 Non-Compliant Owners
Non-compliant properties have combined total of 11,022 apartments; represents $66 million in tax revenue for 2018
Suspensions are latest phase of a multi-stage, multi-agency enforcement effort
New York, NY – New York City Housing Preservation and Development (HPD) Commissioner Maria Torres-Springer and Department of Finance (DOF) Commissioner Jacques Jiha announce the suspension of 421-a benefits to more than 1,700 property owners who have not complied with the requirements of the program. This is the latest action as part of HPD and DOF’s wider effort to ensure that properties that receive valuable tax benefits comply with the rules.
“Owners receiving valuable tax benefits need to live up to their end of the deal. While the vast majority of building owners follow the law, those who do not will lose their benefits unless they fulfill all of their obligations,” said Housing and Preservation Development Commissioner Maria Torres-Springer. “We will continue to collaborate with our partner City and State agencies to make sure those who try to take advantage of the system will be held accountable.”
“We are working hard to make sure that all properties receiving 421a benefits are in compliance with the requirements for the program,” said Finance Commissioner Jacques Jiha. “These benefits have broad impact. They offer tax relief to property owners of multi-family units as an incentive to create more affordable housing in New York City.”
This first part of the compliance project targeted projects that had received 421-a benefits for at least five years but have not yet filed a required Final Certificate of Eligibility (FCE) with DOF. DOF sent letters notifying owners of 5,268 multi-family tax lots that their 421-a tax benefits will be suspended if they don’t comply with the requirements of the 421-a program. The letters gave owners notice that the tax exemption will be suspended unless they submit their FCE within a 13-month deadline.
"The 421-a program is another mechanism that allows us to encourage housing development and encourage affordability. It is critical the property owners who receive the lucrative tax benefits offered through this program comply completely with the law. Hopefully, many of the remaining 1,700 owners comply before May 1st so some of 11,000-plus units they own remain a source of affordability in the City's housing market," said Council Member Robert E. Cornegy, Jr.
"The message to property owners is simple -- hold up your end of the bargain," said Council Member Stephen Levin. "Far too many property owners readily pursued tax abatements without fully complying with the requirements. I've seen it happen in my own district. Tenants came and went, many forced out due to high rents, of apartments that should have been registered as rent stabilized. By suspending the benefits, HPD and DOF are showing a serious commitment to preserving affordable housing in our City, and are sending a strong signal to negligent landlords."
"I commend the administration for taking the necessary steps to ensure that our tax breaks are provided only to those property owners who are eligible to receive them," said Council Member Daniel Dromm. "As chairperson of the Committee on Finance I appreciate the effort to safeguard our City’s scarce resources. The Council highlighted the need for the administration to improve enforcement of the 421-a eligibility requirements at a November 2016 hearing. We look forward to working with the administration to conduct outreach to affected property owners, as well as to tenants to ensure that they are informed of their rights."
“The 421-a tax exemption has been a boon for developers to collect on, without providing substantial benefits for tenants who are being egregiously taken advantage of. In exchange for this massive giveaway to developers by the Governor, the least we could do was to make sure that what little was promised was actually acted upon. When Council Member Levin and I passed legislation last year empowering HPD to take action against those collecting these benefits without adhering to regulations,” said Council Member Jumaane Williams. “I am heartened that HPD is working to ensure that this tax exemption is not being exploited, and developers will not profit while ignoring tenants. The state was unwilling or unable to create these protections, and I’m proud that the city stood up. I thank Council Member Levin and HPD for their partnership on this issue.”
On January 31, 2018, DOF notified the 1,788 properties that did not meet the deadline that their 421-a tax exemption had been suspended. These buildings range from small, three-family homes to large multifamily properties. City officials also informed City Councilmembers which properties in their districts have been suspended and how they can help bring them back into compliance.
“421-a was created to incentivize developers to provide affordable housing options for the thousands of New Yorkers who need them,” said Public Advocate Letitia James. “While most property owners do abide by the law, it is unacceptable that some illegally take advantage of our laws, and at the expense of our most vulnerable. I want to thank Commissioner Torres-Springer and Commissioner Jiha for ensuring that these property owners are held accountable.”
“The danger with all tax incentives is their tendency to become free-for-alls for recipients who don’t live up to their end of the bargain. Apartments in buildings receiving 421-a tax abatements are supposed to be rent-stabilized, but all too often owners don’t follow the law,” said Manhattan Borough President Gale A. Brewer. “I’m pleased to see the Department of Housing Preservation and Development reining in scofflaw owners and forcing them to deliver on their promises. Enforcement actions like this one are essential if we’re going to get our housing crisis under control.”
The City will reinstate owners’ benefits – representing $66 million in tax revenue for 2018 – if they come back into compliance by May 1, 2018.
HPD created a streamlined process for owners with an online FAQ and further streamlined the process of certification for owners of small buildings (five or less units). Also, in August 2017, HPD sent notices to owners of properties that would face suspension of 421-a benefits if the property owner failed to provide a Final Certificate of Eligibility (FCE) to DOF by January 5, 2018. The notices provided information on how to obtain an FCE and notified owners that staff of HPD’s Housing Incentives group would be available to provide in-person help at monthly property owner clinics at HPD offices through December 2017.
Housing Incentives staff and representatives from DHCR attended these clinics on August 9, September 13, October 11, November 8 and December 13. At the clinics, Housing Incentives staff met with and provided help to 111 property owners or filing representatives related to over 150 properties subject to 421-a suspension.
During the FCE application review, HPD confirms that rental units are properly registered as rent stabilized with the New York State Housing and Community Renewal (HCR), and that the initial rent charged for each 421-a affordable unit does not exceed 30 percent of the income limits imposed upon the affordable units. While HPD already has contacted the vast majority of these owners to bring them into compliance, these suspensions now put them on notice that they must complete the process and file their FCE or they will no longer receive 421-a benefits. In addition if they fail to comply by May 2018, the City will begin proceedings to have these owners repay the tax benefits the properties already received. Residents in those buildings are still entitled to the protections of rent-stabilization, and are encouraged to contact HCR if they do not have a rent-stabilized lease. View the list of buildings.
New York State enacted Section 421-a of the Real Property Tax Law, known as 421-a, in 1971 to incentivize the construction of housing in New York City. The law provides a partial exemption from New York City property taxes for the owners of newly-constructed, residential multi-family buildings for at least ten years.
For many years, benefits were administered through a two-stage application process because the 421-a statute allowed a developer to apply to HPD for a Preliminary Certificate of Eligibility (PCE) once construction started, and again for an FCE when construction was complete. Even so, many owners, especially in smaller buildings with less than 100 units, failed to complete the FCE process.
To address the problem going forward, the de Blasio Administration, in 2015, proposed and the State Legislature passed 421-a reforms requiring a single application for retroactive construction period benefits along with post-completion benefits, which would ensure that compliance with all requirements of 421-a would be established before any benefits are allowed.
In early 2014, the City joined forces with Governor Cuomo’s Tenant Protection Unit and Attorney General Eric Schneiderman’s Real Estate Finance Bureau to begin investigating compliance of all building owners receiving 421-a benefits. The data-heavy investigation found that for properties excluding three family homes, 77 percent of units receiving 421-a benefits were in full compliance and that 3 percent failed to ever registered their rents with the State. Of the remainder, 13 percent of units have missed the rent registration requirements for one year only, and the other 7 percent have some years of compliance and some years of non-compliance. Buildings receiving 421-a benefits that are not in full compliance are now the focus of a multi-stage enforcement action.
About the New York City Department of Housing Preservation and Development (HPD):
The New York City Department of Housing Preservation and Development (HPD) is the nation’s largest municipal housing preservation and development agency. Its mission is to promote quality housing and diverse, thriving neighborhoods for New Yorkers through loan and development programs for new affordable housing, preservation of the affordability of the existing housing stock, enforcement of housing quality standards, and educational programs for tenants and building owners. HPD is tasked with fulfilling Mayor de Blasio’s Housing New York Plan which was recently expanded and accelerated through Housing New York 2.0 to complete the initial goal of 200,000 homes two years ahead of schedule—by 2022, and achieve an additional 100,000 homes over the following four years, for a total of 300,000 homes by 2026. For full details visit www.nyc.gov/hpd and for regular updates on HPD news and services, connect with us on Facebook, Twitter, and Instagram @NYCHousing.