Progressives are hot to see the 421-a tax abatement, which encourages developers to build more affordable housing by reducing their property-tax liability, die when it expires next month. But if the Legislature doesn’t pass a replacement, it’s a clear loss for New York City.

A new analysis by the Citizens Budget Commission confirms those losses include:

Less rental housing construction.
Significantly less affordable-housing development.
And less property-tax revenue for the city.
Supposedly pro-tenant activists and lawmakers won’t admit that, absent some incentive like 421-a, developers will stop building residential units (except luxury ones) because the default tax rate for new construction is prohibitively high.

They also claim that ending the abatement will free up $1.8 billion in tax revenues. The CBC points out that not only are they wrong, but that much current revenue wouldn’t exist without 421-a.

Existing projects will still benefit from the abatements granted before 421-a lapsed, so the city will “lose” only about $100 million per year through Fiscal Year 2029 if the program’s not renewed; not until FY 2043 will even $1 billion of the now-foregone revenue be returned to the tax rolls.

Meanwhile, CBC reports, most development that occurs thanks to 421-a wouldn’t happen. That means the city loses out on the tax take such projects would generate after the abatements expire — as well as on the new housing (both market-rate and affordable) constructed.

So the budget watchdog urges both renewing or replacing 421-a and a broader package of policies to boost housing production, such as reducing construction and operating costs, increasing as-of-right zoning capacity and reforming the property-tax code.

A sane city tax code wouldn’t make it impossibly expensive to build new non-luxury housing; 421-a is a patch that allows enough construction to prevent Gotham from losing ground. Fixing the entire property-tax code won’t happen this year (or maybe ever); if the Legislature doesn’t replace the abatement now, it’s dooming New York to housing decay.

Adams set aside $1.7 billion to pay for raises over the next three budgets. But a 3% annual raise in line with the residential building workers would cost the city more than $4 billion by June 30, 2026, according to an analysis by the Citizens Budget Commission — or more than twice what is in the budget.



Each additional percentage point increase in a raise adds another $1.4 billion over three years, the CBC says.

In fact, as Adams unveiled a $99.7 billion spending plan that tops former Mayor Bill de Blasio’s last budget by $1 billion, the stock market was plummeting. Two days after he released his budget, the S&P reported its worst month since the pandemic started in March 2020.



"He does identify risks in the economy. We have a rocky recovery; we have global instability; we have inflation. The thing is, I don't think this budget accounts for that at all," Citizens Budget Commission President Andrew Rein said in an interview. "They add all this new spending without the savings."

Whether the plan actually materializes could depend on whether Hochul is re-elected, or if the economy remains in good shape, said Patrick Orecki, director of state studies for the Citizens Budget Commission, a nonpartisan organization based in Albany.



"Capital budgets are generally aspirational," Orecki said. "So if there is a change at the top it could certainly impact how, when or if that money gets spent."



But Orecki said that if Hochul is elected, the money should be there to complete the project.

New York City Mayor Eric Adams unveiled his revised $99.7 billion Fiscal Year 2023 Executive Budget Tuesday and discussed his first 100 days in office.

The budget should include higher reserve levels, Citizens Budget Commission President Andrew Rein said.

“Risks abound, including a rocky recovery, inflation, global instability, and economic changes like remote work that may affect commercial real estate and future income taxes," he said. "With the average economic recovery since the 1970s being approximately six years, the city should grow rainy day reserves to over $8 billion by the end of the financial plan.”

Rein noted the budget made a moderate deposit to the rainy day fund while restoring half the funds cut from the labor reserve during the recession.

Hochul used some one-time funds to set aside reserves equal to 15% of state operating funds for a rainy day. That won’t be enough to cushion the blow from the next emergency or recession, the watchdog Citizens Budget Commission points out, meaning New Yorkers could be in for tax increases or budget cuts if another emergency strikes or the economy goes south.

Andrew Rein, president of the Citizens Budget Commission, expressed some serious reservations in a press release.



“The Executive Budget takes some positive steps but focuses on spending more, nearly to the exclusion of the savings, restructuring, and efficiency needed to shore up the City’s fiscal house,” Rein said.



“Spending more now is seductive, but shortsighted,” he added. “The Council wants to add well over $1 billion in recurring spending. While the Executive Budget supports critical priorities, such as mental health and improving housing and land use processes, the City’s leaders should not pretend the City can have and do it all.”

Those longer-run threats worry some observers, including the business-oriented Citizens Budget Commission (CBC). They fear the Mayor isn’t doing enough to reduce a long-term budget gap, and instead see him funding “programs that would expand the gap by $1 billion annually.” The City Council may well push him to add even more program spending. CBC sternly warns that “the City’s leaders should not pretend the City can have and do it all.”



They’re especially concerned about longer-term revenues. The city actually has an upward bump in revenues from historically high Wall Street profits, the return of tourists, and the high prices (and associated taxes) from real estate. The CBC also fears Adams will spend more than allocated on new union contracts while not extracting productivity gains.

Those longer-run threats worry some observers, including the business-oriented Citizens Budget Commission (CBC). They fear the Mayor isn’t doing enough to reduce a long-term budget gap, and instead see him funding “programs that would expand the gap by $1 billion annually.” The City Council may well push him to add even more program spending. CBC sternly warns that “the City’s leaders should not pretend the City can have and do it all.”



They’re especially concerned about longer-term revenues. The city actually has an upward bump in revenues from historically high Wall Street profits, the return of tourists, and the high prices (and associated taxes) from real estate. The CBC also fears Adams will spend more than allocated on new union contracts while not extracting productivity gains.

The Citizens Budget Commission, a New York-based nonprofit research group, filed an amicus brief backing TENNY's appeal. Ana Champeny, its deputy research director, told Law360 that the Class One cap results in homes with quickly appreciating market values having lower effective tax rates than homes in neighborhoods where values are more stable. She added that a requirement for valuing cooperative and condominiums based on rental income of comparable buildings "leads to disparities between more modestly valued units and luxury units."



Additionally, the property tax system results in the city's rental buildings paying higher effective tax rates than other properties, which she said creates a disincentive for developing affordable rental housing.



"We have filed in support of TENNY because of our long-standing position that the city's property tax system, which is byzantine and unfair, needs comprehensive reform," Champeny said

Others were less than pleased about Adams’ spending. The city’s revenue projections improved, raising the proposed budget from $98.5 billion in February to $99.7 billion on Tuesday. But most of the new money was for new spending, rather than shoring up the city’s reserves, which bothered the watchdogs at the Citizen Budget Commission, a pro-business group that often advocates for fiscal restraint. CBC President Andrew Rein told City & State that the executive budget seemed to be lacking the discussions of efficiency and fiscal discipline that Adams had emphasized when he released his preliminary budget. “There are real challenges up ahead and he did not reduce those challenges and in fact made them worse,” Rein said.