Governor Kathy Hochul’s insistence on finding a replacement for a long-standing affordable housing tax break is commendable. This tax break is essential for offsetting the exorbitant property taxes in the city and driving development.
However, her approach to achieving this goal is flawed.
Since the Legislature has refused to replace the expired 421-a tax break, the governor has announced an executive order as a workaround. This raises constitutional concerns. The order aims to target housing in the Gowanus rezoning neighborhood in Brooklyn, where the state would temporarily control development sites and lease them back to developers. However, developers would be required to make payments-in-lieu-of-taxes (PILOTs) that are lower than their property tax payments.
While this solution is creative, it is not the ideal approach for New York.
After all, why does the governor believe she can defy the Legislature’s decision to not provide a tax break?
President Joe Biden has taken a similar approach, defying Congress on various issues such as student loans and immigration.
In Biden’s case, his goals range from questionable (making truck drivers and waitresses bear the burden of doctors’ and lawyers’ student loans) to outright disastrous (allowing millions of illegal immigrants to overwhelm cities).
Hochul’s goal of securing a new 421-a tax break for New York is commendable. However, bypassing lawmakers to achieve this goal is not justified and raises constitutional concerns.
Furthermore, Hochul’s plan also mandates that developers hire minority- and women-owned businesses to be eligible for the tax break. While promoting diversity is important, this requirement may discourage developers from hiring the best firms at the most competitive prices.
It is crucial to recognize that the 421-a tax break is indispensable for builders who struggle to turn a profit due to the sky-high property taxes in the city. It has been instrumental in adding 75% of the affordable units in the city over the past 20 years.
Without a replacement, more than 3,500 apartments in the Gowanus rezoning area alone are at risk of not being constructed.
The failure to replace the 421-a tax break will result in a decline in rental housing construction, particularly affordable housing, and a decrease in property tax revenue for the Adams administration.
However, a strong and democratic leader finds ways to convince opponents rather than issuing orders. Hochul still has room for improvement in this regard.
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