421-a: A Waste of Money?
New York’s biggest tax break — the 421-a program for real estate — wasted more than $1 billion over 10 years, according to a recent report released from the nonpartisan Independent Budget Office. Supporters say the tax break encourages new development.
The report says the property tax break is inefficient. Homebuyers typically pay more for condominiums with the tax break, but not as much as they eventually save in taxes. Owners in Manhattan spend an average 53 cents to 61 cents for each $1 of tax savings. “The city ‘wasted’ a total of roughly $2.5 billion to $2.8 billion in tax expenditures in 2005 through 2015,” according to the report.
To get the tax break, which has expired and is up for renewal, developers agreed to provide affordable housing in their developments. The report does not assess the value of this affordable housing, compared to the cost of the tax break.
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