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Real Estate Board of New York Testimony on Intro Nos. 1339 and 1366
November 22, 2016
MEMORANDUM OF ANALYSIS
SUBJECT: A Local Law to amend the administrative code of the city of New York, in relation to auditing buildings for compliance with the affordability requirements of the 421-a tax exemption program
SPONSORS: Stephen Levin and Jumaane Williams
SUBJECT: A Local Law to amend the administrative code of the city of New York, in relation to auditing buildings for compliance with the rent registration requirements of the 421-a tax exemption program
SPONSORS: Jumaane Williams and Stephen Levin
DATE: November 22, 2016
REBNY represents over 17,000 owners, developers, managers and brokers of real property in New York City and our membership supports the overall goals of these bills to ensure lawful compliance with the 421-a tax benefit program. Our members recognize that the 421-a program is essential in helping spur construction of affordable, rental housing throughout New York City and that all beneficiaries of the 421-a program, from developers to tenants, must comply with all its applicable rules and regulations, or be held accountable for any malfeasance.
The bills seek to ensure that the 421-a program’s affordability and rent registration requirements are met through an audit of no less than 20 percent of all buildings receiving the 421-a tax benefit. However, if the bills’ intention is to eventually review all 11,507 buildings receiving the benefit, the bills are silent as to how often the audit shall occur.1 Nonetheless, an audit of 2,300 buildings - 20 percent of the current participants – is a considerable amount of work. There needs to be a careful consideration of whether the Department of Housing and Preservation Development (“HPD”) is adequately resourced to carry out such an ambitious effort. Otherwise, this unfunded mandate might distract HPD from performing other vital services.
For those not in compliance with either the affordability or rent registration requirements or both, the bill demands that a report of such non-compliance be filed with the City Council Speaker and the Department of Finance (“DOF”) for revocation of the 421-a tax benefits. Both bills require the DOF to report a “plan and a timeline for revocation of benefits.” The bills seem to imply that upon determination of non-compliance, an immediate path toward revocation of benefits will be established.
REBNY believes that there should be some opportunity for the participant to provide comments on the determination of non-compliance and for HPD to determine whether the alleged non-compliance is curable, as provided for in Chapter 39 of Title 28 of the Rules of the City of New York (“Rules”). The Rules require that HPD deliver an initial notice to the participant; outlines how comments and evidence will be received; and allows for hearings where the issue of non-compliance can be fully explored.
In some cases, non-compliance could be the result of an error by the agency doing the review as well as errors in the records of regulatory agencies such HPD and the NYS Department of Housing and Community Revitalization who keeps records about rent registration. Likewise, non-compliance can be the result of simple administrative oversight by the building management company. In all cases, participants should be properly notified of the results of the audit and should be given a reasonable amount of time to cure if non-compliance is discovered. Revocation of benefits is an excessive penalty for these types of non-compliance and should be reserved for those instances where an owner has engaged in willful and illegal activity.
REBNY looks forward to working with the Council to insure that participants in the 421-a tax benefit program lawfully abide by all its attendant requirements and regulations.