421a in Prospect Heights / Park Slope

Where exactly do they draw the boundary of Prospect Heights? After all, there are blocks which are officially designated 'blighted'.

If a developer doesn't take advantage of the program because they don't want to get involved with affordable housing they will simply sell the apartments without the tax abatement for the same price they are selling them today.

This makes no sense: buyers compare total cost of ownership when buying, including taxes, and thus developers will not be able to sell the apartments for as much without the abatement, compared to a similar property that has an abatement.

Letter my community group wrote to our local elects, and Yassky's crew (Quin CC'd ). Serious issue with serious repercussions...If you want to discuss more (in serious dialog, PM me).

Here's the letter:

Dear Council Member Gonzalez,

We are writing you on behalf of the Concerned Citizens of Greenwood Heights and as a concerned residents of your district. We are sure that you and your fellow New York City Council members are aware of the upcoming expiration of the 421-a Property Tax Exemption Program on December 29, 2006.

In the past two months, this program has been reviewed by Mayor Bloomberg’s office, the City Council, Community Boards and many civic and community based organizations. While I feel the Mayor’s office and City Council has completed a competent analysis of the problems and potential benefits of this program, we are very concerned at the Mayor’s recommendation of limited reform to the current outdated law. Today’s New York Times Metro Section reported on a new proposal put forth to the Council by Speaker Christine Quinn as a compromise to the Mayor’s modification proposal (“Quinn Offers Compromise on Developers’ Tax Break” http://www.nytimes.com/2006/12/06/nyregion/06housing.html).

We are writing you to please ask that you NOT support either the Mayor’s limited proposal of reform nor this latest effort at a “compromise” by Speaker Quinn. Both of these reform proposals do not adequately benefit the people who live in all five boroughs of the City of New York. Both proposals are Manhattan-centric and would require only a 20% affordable housing component (on or off-site) from developers who wish to participate in this program. In my opinion this underscores the notion that the outdated 421-a program, originally used to encourage development of affordable rental units in underutilized or blighted neighborhoods in the City, is a tax break for rich developers and promotes the creation of luxury housing, not affordable and sustainable housing stock (whether it be rental or sellable).

We ask you to ENDORSE the plan outlined by Council members David Yassky, Annabel Palma and Letitia James (originally initiated by New York State Assembly members Vito Lopez and Hakeem Jeffries at the state level) to reform the 421-a Property Tax Exemption Program. This plan calls for a mandatory 30% on-site affordable housing component in all five boroughs, not just within the Bloomberg and Quinn-proposed expanded geographic exclusion areas in Manhattan and parts of Brooklyn where the creation of luxury housing, not affordable housing, is at a current all-time high. This proposal is outlined in Yassky, Palma and James’s op-ed piece in the December 5, 2006 issue of the New York Daily News (“End tax break for owners of pricey condos” http://www.nydailynews.com/news/ideas_opinions/story/477069p-401385c.html ).

If 421-a is to be reformed rather than allowed to expire at the end of this year, I feel the best benefit to my community would be the enforcement of the development of any and all affordable housing, and to not give the equivalent of a “welfare check” to rich New York–based developers and their partners.

A proposal to make affordable housing mandatory while not giving developers a tax break to build luxury housing is backed by the Pratt Center for Community Development’s recent report and recommendations for 421-a (“Reforming NYC’s 421-a Property Tax Exemption Program: Subsidize Affordable Homes, Not Luxury Development” http://www.prattcenter.net/pubs/PrattCenter-NY421-aReport.pdf).

New York City desperately needs affordable housing for our ever-diminishing lower- and middle-income residents. Council members Yassky, Palma and James’s current proposal is the best reform of the 421-a Property Tax Exemption Program for our community and for the City of New York.

Please support their proposal and do not support either Mayor Bloomberg’s or Speaker Quinn’s “marginal and pro-developer” attempts to reform the 421-a Property Tax Exemption Program when it comes up for further discussion and a final vote by the City Council.

Thank you for your support of your community’s best interests.

escap and I are playing nice, so there's obviously a calculated lag to the responses

OR, bring it on, beatch!

Dr J, chime in?

Hi guys, here I am, sorry to keep you waiting!

After the dramatic pause, I'm unfortunately bound to disappoint, in that my contribution is little more than an agreement with what Dr. J said in the above post. The whole complicated system of taxing this and forcing that seems inefficient and destined towards creating the exact opposite effect as desired.

Also, I have to admit that I don't exactly understand how this tax works. As I recently said in another thread, I'm opposed to the idea of property tax in general. Income and consumption should be taxed, but not assets, so I'd scrap the tax altogether and essentially give all people this "break", if that's what this tax is. As far as incentivizing affordable development, I can refer to my broken record and just reiterate, as always, that I strongly oppose any form of price control, and strongly favor allowing developers to increase the overall supply of housing stock without undue (as defined by me) regulation, and without worrying about the price of those new units (why shouldn't the new ones be expensive and the old ones cheap?)

Finally, I'd also add that high RE prices may not be such a bad thing. The city is projected to reach 9 million within the next couple of decades, and at some point you might ask whether there's a limit on how many people we can support. Does everyone really need to live here? Expensive housing is the market's natural way of maintaining a sustainable level of population. If we just keep building more and more, and legislating that it remain cheap, we might regret the overflow. To the extent that development can't make prices more affordable, I say let them rise.

doctorj wrote: Yes, yes, yes, to everything else, but

[quote=escap]
I'm opposed to the idea of property tax in general. Income and consumption should be taxed, but not assets, so I'd scrap the tax altogether and essentially give all people this "break",

NO NO NO! Land is not just any asset, it's a finite resource everyone has to use and share. You want to increase income tax instead? That's detrimental to competitiveness and the efficiency of labor. Tax businesses? Even worse. You want to raise consumption tax? Why should the poor and children pay more? What could be more fair, more efficient, more progressive, less of a drag on economic growth, and better able to catch rich people who avoid income tax, than land taxes? And the beauty of doing it exactly according to values and sqft means you're charging people according to their footprint and what they're already willing to pay to have access to services and locations. Check out Georgism, and some of its supporters such as Milton Friedman.Agreed on all points with Doc J. Also, taxing the land discourages owners from leaving it empty and abandoned. It doesn't stop it entirely (I refer you to the empty fronts on Underhill & St. John's) but it is a nice disincentive.

escap wrote: taxing property can result in taxes completely disproportionate to a person's ability to pay them--eg, a person who bought cheaply, has a low income (or a retiree with fixed income), and who has to pay steadily increasing taxes as a result of market appreciation. This does not seem like a fair system to me (I guess you could argue that the person could always sell, but that doesn't seem so fair either).

Yep, damn straight. And partially why 421-a also will screw the buyer down the road. Think of purchasing a condo where the abatement might allow you to pay 60-70% less taxes fro the first 10-15 years, then WHAMO 100% taxes and 100% of what the appraised value of your condo unit is at that time. :evil:

Doubly damaging to both the City (lack of taxes during the abatement) and the condo owner (who, unless they have paid off their condo or sold, will be screwed by the tax hike).

Being a home owner who pays 100% of my taxes (and is scrapping by to pay the mortgage), I have little sympathy for the condo owner...but I am human (sometimes ).

Food for thought.

Duke of Flatbush: The 421a program doesn't allow that to happen. You get something like 12 years of 100% abatement, 2 additional years of 80% abatement, 2 more of 60% abatement, etc.

Absolutely "100%" not true in most cases, especially in the as-of-right applications. I have read the program. it was excellent in the 1970's when it promoted the creation of affordable housing as RENTAL units, not luxury condos. We need to get the affordable housing component back...

filling in under developed and vacant lots. I think this is basically a good thing.

Perhaps, but unfortunately 90% are demo's and in-fill development, not the development of vacant land. Remember 1-2 family homes make up over 25% of what the city considers "underutilized" space...herupmph! :evil:

Without 421a new housing prices are going to go up too. The abatement basically makes exorbitant housing costs just really expensive.

Another proven misnomer. Real estate development is at a all time high. Regardless of the market flattening out, it is one of the most lucrative financial returns in this city. READ the Pratt Center report. 421-a may have been created to help spur the housing market along, but this train wreck of over development does not need a tax abated "push" any longer...at least not without legitimate trade offs and pay back to the communities these developments will inhabit.

OK, I finally had a chance to check out that Georgism website you suggested. Correct me if I'm wrong, but the main gist of that policy suggestion is to tax land, not buildings or capital investment, in an attempt to spur development and the efficient use of land. That seems to be a worthwhile idea, but it only tangentially contradicts my point about property taxes, since the tax would not in fact (as I understand it) be applied to the value of your house, just the land beneath it, which I imagine would be far, far lower in value. It really is simply a pro-development tax measure to prevent land speculators from sitting on worthless empty lots. Fine. However, if that's the goal I'd exempt residents of that land who inhabit fully developed buildings and who are not commercial owners of the land.

doctorj wrote: [quote=escap]but as a quick response the point is that taxing property can result in taxes completely disproportionate to a person's ability to pay them--eg, a person who bought cheaply, has a low income (or a retiree with fixed income), and who has to pay steadily increasing taxes as a result of market appreciation. This does not seem like a fair system to me (I guess you could argue that the person could always sell, but that doesn't seem so fair either).

Such a person has stumbled into a high net worth, so they do in fact have the ability to pay. If the tax is less than inflation and less than the average rate of appreciation on their house, they have two choices that should see them through their lifetime: 1) retire to somewhere cheaper (very common choice) 2) tap the equity. I would rather that the asset-rich income-poor pay their fair share than increase the burden on asset-poor working-poor renters with children by increasing consumption and income tax.

Again, forcing someone to sell their property just to pay a tax that's beyond their income ability seems blatantly unfair. Keep in mind that they would then have to buy into an equally inflated market, or rent, despite having potentially put in years of work to try and build home equity to leave to their children or use as a retirement nest-egg. On top of that, they would likely have to pay capital gains taxes on the sale of their property in addition to all the taxes they'd already paid. As for your second point, by "tap" you mean borrow, meaning that people would have to take out a loan just to pay the government. Surely you can't seriously think that is a good system, can you?

But I was thinking more in terms of higher income taxes mean higher gross salaries are required meaning a disincentive to employ more people. Imagine you want to employ a second person for your startup business, but because of high income tax labor is very expensive and you will all of a sudden be sending a larger portion of your revenue to the government. Moving a proportion of the tax base as far as possible from business activity is growth friendly.

Note, I never suggested raising income taxes. More on that later.

I too favor consumption tax as part of the mix. It's business-friendly, and catches some revenue from the rich and from tourists. But the way it's implemented in the US is a laughing stock. It has to be universal, simple to administer, and unavoidable. A whole number like 10% for preference. It cannot be allowed to rise to 25% like in some European countries as that is very heavy on the poor who then need handouts for life's necessities, and other such churning and craziness.

Agreed 100%.

Land is a rather special category of consumable asset. Most people think of it in terms of a place to put a home, a farm, an office, a factory, not as a financial instrument. Everyone has to own, rent, or steal it, and thus prevent access of others to it, in a way they don't with a gold bar. Unlike water or cattle or lumber, it's very closely tied to the local services and privileges you are enjoying by occupying that location. Land is not fungible, it's the largest asset most people own, the turnover and price changes are slow, and ownership is very well tracked. Land doesn't move offshore in a financial crisis, only during a hurricane and only in small amounts. Food, clothing, and shelter are life's basic necessities; you'd like to tax food and clothing, but nothing on shelter? As for oil, I think it should be double-taxed, once for consumption, and once for carbon, but that's a whole different story.

When did I say I'd like to tax food and clothing? I don't pay extra taxes if I have expensive jeans, do I? Again, I have no problem with the tax on the sale of these items. When I buy a house, capital gains tax can be applied to the seller and income tax can be applied to the real estate agent and other parties. If I get rental income, then tax the income. When I sell it, same as before. But for all that you might be right about characteristics that land has that other assets don't, none of those characteristics logically leads to the conclusion: tax it. Tax it b/c it's non-fungible? B/c it can't be moved? B/c it's the largest asset most of us own? I don't see the logical connection there. Again, if you earn money, then you can take a percentage of that and share it with the state (and on that note you could argue that even a consumption tax is flawed, that only the income the merchant earns should be taxed, not the transaction itself, which as you pointed out does perhaps unfairly hit the poor), but you shouldn't have to contribute simply because you are a land owner--it's like a punishment for owning a house. Finally, do you really think it's feasible for the city to determine actual market rates? I don't.

In any case, what you're proposing is really radical, as everywhere I can think of places taxes on land owners. Clearly governments in general feel that having owners contribute to revenue is a sensible part of the tax base, in which consumption and income tax also have a role to play. All I'm arguing for is that property taxes could be simpler, more even, and a little more closely tied to the market value of the land.

Well, you're certainly right about that. But just b/c it's so doesn't make it right. Govts all over the world want to keep dipping their hands into the cookie jar that is our pockets, and the least we can do is come up with a fair, equitable set of rules that they must adhere to.

Now, to address the underlying theme of much of your argument, which is that the elimination of property tax would force increases of other taxes that would lead to inefficiencies, this is an admittedly more difficult hurdle, but there are good ideas out there that could at least help out. One is specifically that the tax deduction on mortgage interest should be eliminated--this is in fact the very type of pro-rich/anti-poor measure that you have been arguing against, and as much as there'd be an outcry, the deduction should be scrapped. More broadly, virtually all of the other complex deductions should be scrapped as well in favor of a simple income tax that doesn't have all the loopholes of the current system. Right now a higher % of middle-income taxpayers are paying the AMT than are upper-income taxpayers, b/c of their ability to wriggle out of their liabilities by using sophisticated tax shelters. A flat tax, or equally simple progressive tax, should be introduced that eliminates this tax avoidance.

More importantly, however, is that the shortfall should be made up for on the spending side. I'm not saying this is easy or that it will happen (it won't), but it should. More unfortunately, the vast bulk of govt waste exists at the federal level, so what first needs to happen is a drastic, massive reduction in federal spending and taxes, to allow for any necessary increases at the state or local levels. I'd be much happier to pay NYC taxes than I am shelling out my hard-earned dollars to finance the kind of special-interest written drivel that gets written in Congress, not to mention catastrophic wars that cost us trillions. For its own part, there is tons that the city could do to cut spending (our city's budget is bigger than most countries), and I have plenty of ideas on that note, but many of them are radical, and a digression into a battle over unions, privatization and rent control will have to wait for another day.

Now, I have to get back to studying for finals. Will check back later to see if you have any will left to keep this one going.

Carnivore wrote: doctorj won't quit that easily.

you bet.

But between escap's finals and the numerical solutions to the non-relativistic wave equation I need to find, tax reform might have to be a slow burner. Besides, even when we've agreed on good policy, politicians aren't listening.

Hey, I thought we only allowed one llama per thread

I got yer back. DoctorJ best back-off-ya!

Draw a silly mustachio on some other mammal!