WEEK IN REVIEW : After denying FOIL request on 421-a complaints, Schneiderman launches 421-a enforcement

By LOUIS FLORES

State Attorney General Eric Schneiderman (D-New York) announced last week a multi-agency campaign to bring into compliance thousands of affordable housing units created under New York's controversial 421-a tax abatement program.

Approximately 200 landlords received a demand letter signed by the State Attorney General's Office, the city's Department of Housing Preservation and Development, and the Tenant Protection Unit of the state's Division of Housing and Community Renewal, notifying landlords of violations of the 421-a tax abatement program and demanding that landlords bring into compliance over 2,000 apartments that have been receiving tax abatements but had not been registered in accordance with the city's rent regulations, as required by the Real Property Tax Law § 421-a(2)(f).

The 421-a tax abatement program offers real estate developers property tax incentives for temporarily offering affordable housing rental units within a building that receives the property tax breaks.

“Landlords of rental buildings who accept these tax incentives must follow through on their end of the bargain and offer rent-regulated leases to their tenants,” State Attorney General Schneiderman said, according to a statement issued by his office, adding that, “The Real Estate Tax Compliance Program we are announcing today will safeguard tenants’ rights, protect more than two thousand units of New York City’s rent-regulated housing stock, and ensure that our important and limited tax dollars are properly spent.”

State Attorney General Schneiderman's actions were announced nearly two months after his office denied a request filed by Progress Queens under the state's Freedom of Information Law, seeking records of complaints filed with his office in respect of affordable apartment units created under the state's scandal-ridden 421-a tax abatement program.  At the time when the State Attorney General's Office denied the Progress Queens FOIL request, representatives of the state's prosecutors' office improbably claimed that they did not track complaints made to the State Attorney General's Office by type of housing program.

An extension of the 421-a tax abatement program is currently being negotiated by two industry groups, as ordered by the New York State legislature and Governor Andrew Cuomo (D-New York).  The officials acts of both the New York State legislature and Governor Cuomo are heavily influenced by the large campaign contributions made by the real estate industry.  In an arrangement designed to benefit 421-a landlords, neither of the two groups presently negotiating the extension of the 421-a tax abatement program, the influential Real Estate Board of New York nor the Building and Construction Trades Council of Greater New York, oppose the extension of the property tax breaks.

Instead, the Building and Construction Trades Council of Greater New York is seeking wage concessions from the real estate industry, represented by the Real Estate Board of New York, on behalf of construction workers employed on 421-a development projects with more than 15 apartment units.  As reported by Joe Anuta in an article published by Crain's New York Business, the two groups will commence their negotiations as early as September, leading up to the January 15, 2016, deadline.

In the time leading up to the end of this year's state legislative session, the organized nonprofit tenant lobby had initially opposed a renewal of the 421-a tax abatement program, that is, until, Mayor Bill de Blasio (D-New York City) announced that his affordable housing program would rely on a modified 421-a tax abatement program to reach his goal of building or preserving 200,000 affordable housing units over the span of 10 years.  In the time since, the organized nonprofit tenant lobby has stopped opposing the property tax breaks that cost New York City taxpayers approximately $1,1 billion annually in exchange for only creating a minuscule number of affordable housing units that do nothing to end the housing crisis for New Yorkers.  

Indeed, the only benefactors of the 421-a tax abatement program are influential real estate developers, for which the property tax breaks create demand for buyers of tax abatement-qualified apartments, and wealthy property-owners, who can afford to purchase lavish $100 million penthouses, yet pay only five per cent. of the property tax bill that would otherwise be typical for such luxurious real estate holdings, but for the 421-a tax abatement program.

Aside from the corruption-fighting attention of prosecutors, the 421-a tax abatement program has also received bad press.  Some tenants in 421-a affordable apartment units have complained of various forms of housing discrimination ranging from not being able to access all common or amenities areas of a building to being forced to use segregated entrances known as "poor doors." 

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