New York City Wasted $2.8 Billion Intended for Affordable Housing, Report Says

NEW YORK, NY — New York City wasted as much as $2.8 billion over 11 years in a tax break intended to create more affordable housing in the city, according to a report published on Monday.

Instead of providing incentives for builders to construct more units for low-income residents, a tax break for certain building development gave tax relief to condo owners, according to the new research. Condo owners were getting more in tax breaks than they were spending, causing a "waste" of $2.5 to $2.8 billion from 2005 to 2015, according to the report's findings.

The report was published on Monday by the the Independent Budget Office, the city's fiscal watchdog that provides information and reports on the city's budget and tax revenue.

The reported examined what's known as the 421-a, a tax break that provides partial tax exemption for developers who construct multi-unit buildings with a portion of the units reserve for low-income tenants. It looked specifically at how the 421-program applies to condos. The program has an unclear future since it stopped accepting new applications in January 2016. In December, Mayor Bill de Blasio said it was "outrageous" that building owners were taking a tax break while hiking up rents. New York Governor Andrew Cuomo introduced a bill earlier in January in attempt to reform the program.

The 421-a tax program is New York City's biggest single housing subsidy.

The IBO report concluded that throughout the last 11 years, two-thirds of the money awarded to condo owners through the program represents "wasted dollars." The report's author wrote that "buyers are receiving more in benefits than they pay for and the excess does not incentivize development, which is the program’s policy goal." The IBO critiqued the 421-a program for having the opposite effect, writing that the "tax incentive is thus contributing to its own existence: advocates argue the program is necessary to make housing more affordable but the program itself likely contributes to higher land prices, therefore making housing more expensive. "

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