Memo (Elegant design)



Problem Memorandum: Section 421-Ato:City Planning Commission from:Rosy Perez, MPA Candidatesubject:Section 421-Adate:September 8, 2016RE:Technical Memorandom: Section 421-A Tax AbatementWith modificationIntroductionOn March 22, 2016 the Mandatory Inclusionary Housing (MIH) text amendment with modifications was approved by the New York City Council. MIH is Mayor de Blasio’s mandatory housing program that will take zoning actions in order to create new housing development permanently affordable. This policy will discourage many developers because their market-rate units will have to be subsidize for the affordable units that are below market rate. To encourage developers to continue to develop, Section 421-A Tax Abatement should be reenacted with modification.Executive SummarySection 421-Abament is a Tax Exemption Program created in the 1970s in order to encourage multi-family residential development. In this period, several developers had taken their business elsewhere due to the fact that living in the suburbs was a trend. This was created to encourage development. Although, it’s original purpose wasn’t to provide tax exemptions solely for buildings that provided affordable housing but throughout decades this tax abatement was modified to the city’s needs. Section 421-A Tax Abatement expired on June 2015. This memorandum is a proposal to approve with modification Section 421-A Tax Abatement to encourage developers who will provide affordable housing in the New York City in order to provide affordable homes, create mixed income communities and to maximize financial investments for the public benefit.ProblemThere has been a scarcity in the number of affordable housing throughout New York City and it is affecting everyone, targeting specifically, the poor population. The limited amount of affordability units has created an increasing amount of overcrowded homes and homelessness. This pushes families to live in an unhealthy environment, creating health and safety violations. There are non-profit organizations like NYCHA, which are involved in providing public housing. They have encountered several issues such as this, “there is at present a waiting list of more than 250,000 for apartments in the city’s NYCHA public housing developments. The system is currently running a $98 million budget deficit, projected to reach $400 million by the year 2025, and there are no plans for new construction.” New York City Mitchell-Lama housing has become an issue because once their contracted time is met they can sell their apartments at market value, which will diminish the purpose of affordable housing. For the most part we cannot solely rely on nonprofits or government programs to provide public housing. RecommendationsMany people question the need for Section 421-A Tax Abatement especially since affordable units are mandated by law on new development. MIH is a great initiative in order to increase amount of affordable units. It may discourage developers, since their market value units will be subsidizing low income affordable units. Unfortunately, affordable units may not increase as fast as if 421-A would be implemented.Although 421-A was created to encourage development, it is unnecessary to implore solely for development. New York City already has a strong foundation in development what it needs the most at this time is affordable housing. Continuing to provide this tax exemption to residential developers who are not providing affordable housing is an excess use of tax dollars. ‘Housing is considered affordable when a household spends no more than 30% of its income on rent.’ This is highly important to make sure that developers who claim to provide affordable housing will not go above 30% of the family’s AMI. It is also important for the unit size to match the amount of people that will be residing in that unit. The majority of affordable units are one to two bed room units, which rule out the notion of large families qualifying for affordable housing. Families for the most part are shrinking but there are still large families that need to be accommodated for. For every three affordable one-bedroom unit, at least one affordable three-bedroom apartment should be built. An issue that must be addressed with some developers that have affordable housing units is the ‘poor door’ policy. Poor door policy was recently created by landlords and developers to segregate those who live in market value homes from those who live in affordable housing home. This creates a barrier between socio economic classes. “This should be eliminated. “Developers who do not want to treat all tenants in their development equally with dignity and respect should simply opt-out and be required to pay their taxes.”Creating mixed income communities throughout New York City well improve the welfare and security of low income residents. This will create the ability for an affordable housing resident to have access to amenities like gardens, security, gyms etc.. that in most cases they would not have been able to afford. This is also beneficial for public schools. It will create diversity within the schools. It will close academic performance gaps between economic classes. There will always be those developers who will try to work around the system and will apply for the 421A Tax Abatement in order to have a tax reduction on their property. To secure this from occurring 30%-40% (depending on the number of units, altogether) of the units should be affordable. ................
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