NYC 'Wasted' $2.5 Billion on Tax Breaks For Developers
The city’s venerable 421-a tax break for housing development, which expired last January and which Governor Cuomo now wants to renew and expand, has long come under fire from housing advocates as an insanely inefficient way to spur new residential construction. Now, thanks to a new report from the city’s Independent Budget Office, we can put a number on exactly how much tax money the city has been throwing down a hole: at least $250 million a year, and possibly much more.
The study’s methodology gets a bit hairy — IBO researchers looked at how much of a premium condo buyers in buildings getting 421-a breaks were willing to pay compared to non-421-a buildings. Their findings: “Owners in Manhattan spend on average 53 cents to 61 cents for each $1 of tax savings. Condo owners in the rest of the city spend on average 42 cents to 50 cents for each $1 of tax savings.”
Since the point of throwing tax breaks at developers is to earn them higher sale prices, providing a financial incentive to erect buildings they otherwise wouldn’t — thus boosting the housing supply and, in theory, lowering housing costs for all New Yorkers — that means that the other 39 to 58 percent of the tax breaks are “wasted,” in the IBO’s words. The total cost: between $2.5 billion and $2.8 billion in city money between 2005 and 2015.
And that could well be the tip of the iceberg. Other 421-a costs that aren’t evaluated by the IBO study include:
Read more: http://www.villagevoice.com/news/report-nyc-wasted-25-billion-on-tax-breaks-for-developers-9623202
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