After report that Trump may replace Bharara, REBNY and trade union agree to 421-a revival plan


The lobbying group of New York's influential real estate developers and a trade union announced on Thursday a compromise to revive a corruption-linked property tax abatement program.

The fate of the State law awarding the property tax abatement, which had expired in January 2016, had been placed into the private hands of the lobbying group, the Real Estate Board of New York, or REBNY, and the trade union, the Building and Construction Trades Council of Greater New York, an umbrella group for construction workers’ unions, by Gov. Andrew Cuomo (D-New York).

Under the compromise, real estate developers would receive an abatement on 100% of property taxes for 35 years in exchange for setting aside 20 per cent. of rental apartments for affordable housing. The tax abatement program, referred to as 421-a for the section of State law where it can be found, has been shown to be exploited by real estate developers and landlords. The journalists Cezary Podkul and Marcelo Rochabrun have filed a series of reports for Pro Publica, demonstrating that landlords overcharged tenants for apartments that real estate developers promised to make affordable for having received the tax abatement.

Because the compromise plan involves substantive changes to the property tax break, the compromise is subject to passage by the State legislature and Gov. Cuomo before it becomes law. Gov. Cuomo had a role in reviving the controversial tax abatement program, according to a real estate-friendly news report published by The New York Times.

The lobbying group and the trade union received authority to negotiate the fate of the State law after State legislators initiated a game of political hot potato, tossing the future of the property tax break into private hands after U.S. Attorney Preet Bharara had ordered the arrests of former Assembly Speaker Sheldon Silver (D-Lower East Side) and former State Majority Leader Dean Skelos (R-Rockville Centre) on several counts of Federal corruption charges. During the trial of former Assembly Speaker Silver, for example, it was revealed that real estate developers, either directly or through their lobbyists or other agents, packaged campaign contributions to State legislators to influence passage of real estate legislation on terms favorable to real estate developers.

News about the compromise legislation was announced in a report published by The Commercial Observer and followed a speculative news report published by The New York Post that President-elect Donald Trump was going to violate the campaign promise he made to keep U.S. Attorney Bharara at his post under his new administration.

Because the compromise on the 421-a tax abatement program was timed to be announced after the transition team advising President-elect Trump began to telegraph the move against U.S. Attorney Bharara, the possibility that U.S. Attorney Bharara would no longer be in a position to investigate political or campaign corruption tied to real estate industry may have been material to the decision by REBNY and the Building and Construction Trades Council of Greater New York to revive the tax abatement program.

In New York City alone, the 421-a tax abatement program costs the City of New York over $1 billion in lost property taxes that are used to subsidize the profitability of real estate speculation by developers. The real estate speculation made possible by the 421-a tax abatement program has been blamed by housing activists to spur gentrification, leading to the nearly-endless upward spiral to the costs of renting apartments in New York City. Whereas 20 per cent. of rental apartments created by the 421-a tax abatement are reportedly reserved, for a term, for affordable housing, the income and credit qualifications for renters keeps the affordable housing out of reach of New Yorkers most devastated by the residential real estate market. Furthermore, the remaining 80 per cent. of apartments created by the 421-a tax abatement program are rented by landlords at luxury prices, leading to changes in neighborhoods that causes secondary displacement of long-term tenants, who earn less than the newer, more affluent tenants.

If President-elect Trump does replace leadership of the U.S. Attorney's Office for New York's southern district, it is not known if the career Federal prosecutors will scale back back their anti-corruption investigations and prosecutions, particularly those tied to the real estate industry.

A spokesperson for the U.S. Attorney's Office refused to comment in response to advance questions submitted by Progress Queens, which included how the U.S. Attorney's Office could assure the public that, under a possible new U.S. Attorney under the Trump administration, the real estate industry wouldn't revert back to campaign corruption that was exposed by the trials of former Assembly Speaker Silver and former Majority Leader Skelos.

As repeatedly noted by Progress Queens, except for the investigatory and prosecutorial work of the Federal prosecutors' office under U.S. Attorney Bharara, no other prosecutor, State or Municipal, have dared to investigate large-scale political or campaign corruption, particularly that involving real estate developers.

In the past, the career Federal prosecutors in Manhattan under the direction of U.S. Attorney Bharara have reportedly investigated key political aides and campaign contributors to each of Gov. Cuomo and Mayor Bill de Blasio (D-New York City) to determine whether real estate developers received preferential treatment from Government officials.

Although many of the establishment nonprofit advocacy organisations advocated against passage of the 421-a tax abatement program near the close of the 2015 legislative session in Albany, many key tenant and housing advocacy nonprofit groups eventually capitulated to political pressure from Gov. Cuomo and Mayor de Blasio by supporting compromise legislation that would still award the valuable tax abatements to wealthy real estate developers.

By having expressed support for passage of 421-a compromise legislation, Gov. Cuomo and Mayor de Balsio have signaled a neoliberal political intention to direct State and Municipal land use and tax policies to benefit wealthy real estate investors at the same time when the State's leading Democratic Party officials leave those at the other extreme of the economic spectrum, such as those living in horrid conditions in public housing, without Government resources to bring their living condition standards into compliance with Federal laws.