Beneficiaries of New York City's 421-a Tax Exemption Program

New York City's largest tax expenditure, the 421-a partial tax exemption for multi-unit housing, is set to expire on June 15, 2015, sparking heated debates about whether to renew, modify, or cancel the program. Originally conceived 44 years ago as a way to incentivize development during a period of inner-city disinvestment, the program's effects and relevance are being called into question in what is now one of the hottest residential real estate markets worldwide. Despite a series of reforms which aimed to add a component of affordable housing to the program, critics feel that it is ineffective as an affordable housing program, and unnecessary as a developer incentive. This paper will study the current distribution of subsidy recipients in order to determine who is receiving the benefit at a broader scale, and then further focus on the effect of the tax exemption on recent condominium sales in two neighborhoods with distinctly different characteristics: Manhattan's Upper West Side between 59th and 79th Streets, and Morrisania/Longwood in the Bronx. These studies will take a close look at the level of benefit to developers, as well as non-developers who are able to recognize the value of the subsidy, and whether they could be considered the intended beneficiaries of the program