Over $1.1 billion is lost each year in the 421a mania of tax-freebies to developers (and their financiers).
When Taxpayers Have to Guarantee Tycoons' Profits
New York City's notorious housing costs are no accident or historical anachronism. They are the specific product of historical factors and corporate-pushed mechanisms whereby taxpayer funds and "the state" are wrangled to ensure profits for a consistently underperforming (and necessarily under-serving) for-profit sector.
Some economists call this model of taxpayers-guaranteeing-private-profit "neo-liberalism" (with neo-conservatism as a related, occasionally synonymous and ever-reproducing correspondent). New York renters just call that sort of corrupt profit-getting the stuff of every day reality.
That reality is composed of folks like Marvin Markus, who served on the Rent Guidelines Board for 13 years and even served as its chairman, ... and now serves as a managing director at financial giant Goldman Sachs.
Or, it means Wall Street's favorite Governor, Andrew Cuomo picking a manager from financial mega-giant Blackrock (comprised of the worst players of the Financial Crisis, the firm serves to repurchase devalued properties through a proxy, and has becomine the nation's biggest landlord) as his Secretary, the top aide to the governor. It's hard for tenant's to see getting a fair shake from a governor who picks his lead advisor from the nation's biggest housing profiteers.
On the larger level, it means a series of corrupt mechanisms: like big-pocketed venture capitalists spending over $1 million, sometimes through the LLC loophole, convincing upstate politicians (who determine New York City's housing laws, but do not live in New York City) to keep New York City laws exactly as maximally-favorable to quick-bucks and taxpayer-guaranteed profits.
Alongside vacancy decontrol and the majestically corrupt "LLC" loophole, 421-a tax-giveaways are part of the inter-corrupting, and self-reproducing, networks of mechanisms through which near-criminal housing profits are leeched out of the New York City population by Wall Street and syndicated wealth.
In the aftermath of the Silver and Skellos indictments, and with the current rent laws due to expire on June 14, New Yorkers (from tenants to small business owners) are demanding an end to the giveaway. Over $1.1 billion is lost each year in the 421a mania of tax-freebies to developers and their financiers.
The 421a tax-giveawy is a remnant of Lindsay era programs to bolster housing construction in New York City.
The sanity and morality of such a program during New York City's current housing boom, is at best questionable, at worst, criminal.
These days, 421-a giveaways are seen as an odious and obvious burden-shifting of tax-costs from big-developers (and their financiers) to working class New Yorkers (whether tenants, small businesses or small scale landlords).
Much like Big Finance flushed capital into the suburbs for taxpayer-guaranteed profits during yesteryear's suburbinization bubble (that left many urban regions severely underserved), Big Finance is now inverting the flow --- flushing its money into urban centers for taxpayer-guaranteed profits during an urbanization bubble (leaving many suburban regions severely underserved).
But what do New Yorkers get in exchange for sponsoring the free rides and easy profits of the city's wealthiest corporations, trust funds and families through 421-a tax breaks?
Are 421-a deals worth it for non-millionaire New Yorkers?
What do the rest of us get in exchange for $1.1 billion a year subtraction away from the public coffers?
To hear the mythology, the 421-a "tax-breaks" (burden-shifting) were created to encourage developers to build New York City's housing (given certain, rather corporate-convenient, conditions).
In exchange for $1.1 billion dollars a year in tax breaks, developers "promise" to build a certain amount of affordable units.
Does it pay for New Yorkers to be sponsoring the easy profits of big developers and their wall street cronies?
The results, year in and year out, have been horrible for working-class New Yorkers.
One could easily look at the overall housing-cost to income ratio on face value and understand the immiserating realities these obscene housing profits externalize into the lives of ordinary new yorkers (e.g. Brooklyn rents have reached a record high,.. in a time when long-term incomes for most of the borough's middle and working classes has plummeted).
One could also look directly at the program's promises as compared to the realities of what it delivers.
All in all, New Yorkers spend $1 million in tax breaks to developers for each and every "affordable" unit created through the 421-a program, according to a recent report by the Community Service Society. At that price tag, why shouldn't the city just develop and grow its own housing projects (a non-rhetorical question who's immediate empirical answers lie in history and profit, not in any logic or human decency)?
Are these apartments even affordable for most regular New Yorkers?
"Affordable" according to the corporate-rigged standards now means affordable for a family of four earning over $100,000 a year. This means paying up to $2800 a month for rent for an "affordable" apartment, in a time when two-thirds of New York City's job growth has occurred specifically in low-wage industries.
In Ridgewood, Queens (currently being targeted by Big Finance-backed developers through a board-or-hoard-then-up-price strategy), household median incomes have dropped from approximately $56,000 a year to $53,000 a year in just a few years. Meanwhile, rents have skyrocketed in the community, enraging, impoverishing and eventually displacing local tenants, owners and businesses. Residents are fighting mad, and they're getting organized (in Ridgewood and throughout the city).
One look at the local economics explains everything about the cruelty and stupidity of the "affordability" scale Wall Street (along with its allies in city and state government) would push on working class New Yorkers.
A family of four living on the median Ridgewood income would have to spend over 62% of that pre-tax income on an "affordable" apartment.
Is that really affordable? What's left to live on?
Can New Yorkers really afford to spend another billion dollars a year guaranteeing easy, tax-light profits for Wall Street?
Doesn't Wall Street already have enough of our money?
Who, precisely, is being helped and hurt by assigning such absurdly high prices as "affordable?"
Albany Should Scrap Giveaway to Developers | Community Service Society of New York
NYC buildings show Albany corruption, real estate connection -- NY Daily News
REBNY members gave a tenth of all N.Y. campaign money -- Capital NY
(feature photo via 401k2012/flickr/cc)