With registered democrats outnumbering republicans by nearly seven to one in New York City, the winner of tomorrow’s democratic primary will most likely become the next mayor. All of the candidates have discussed a litany of ideas on how best to increase the supply of new affordable housing units while also preserving existing units that are at risk of becoming market rate. This is a critical issue for this year’s Mayoral election, after all, less than thirty percent of homes in the metropolitan area are considered affordable and as New York City’s population continues to rise, the shortage of affordable housing will only get worse.

The proposed solutions involve everything from zoning changes and development rights transfers to new pension fund investment strategies and encouraging new construction on underutilized city property. The only thing the candidates seem to agree on is that there needs to be more affordable housing. One of the most powerful and controversial affordable housing subsidy is the 421a tax abatement. In an effort to extend affordability requirements beyond the program’s current limits, some development advocates have proposed a property tax cap based on a percentage of gross rental income in exchange for an additional 30 years of affordability. Given that the current program already costs the city nearly $1.5B annually, this proposal has been hotly debated. Most notably, democratic frontrunners Christine Quinn and Bill De Blasio, have feuded over this issue. Ms. Quinn, an early supporter of the property tax cap, came under heavy criticism from Mr. De Blasio, citing Ms. Quinn’s cozy relationship with the real estate industry. Unfortunately neither candidate has provided the public with sufficient detail on their 421a and other affordable housing proposals. Calibrating tax incentives to achieve maximum public benefit is highly complex and must be analyzed in the context of all the financing mechanisms that make affordable housing possible.

Such context can be found in the New York State Association for Affordable Housing’s recent publication, “New York City Mayoral Policy Agenda.” In regards to the 421a tax abatement, the report offers an insightful proposal that highlights the relationship between tax benefits and other forms of public subsidy.

“421a tax benefits should be awarded to projects where 15% of the units are affordable, while prohibiting the use of public subsidy, such as tax exempt bonds, tax credits, or loans on projects where less than 25-30% of the units are affordable. While the affordable requirement for the 421a tax benefits would drop from 20% to 15%, this policy would enable a more efficient use of New York City’s affordable housing resources. Volume cap that would otherwise be used to subsidize 20% affordable projects could be allocated to projects with a much larger percentage of affordable units, often in neighborhoods where the per-unit cost is far less…”

The NYSAFAH recommended change to the 421a program would improve resource allocation and help provide funding for more units in the near-term, addressing the immediate need for additional housing supply. Given the state of the housing crisis, such a modification is decidedly more efficient that the 421a property tax cap. While the cap will likely help preserve the affordability of some existing units, most 421a properties with affordable units are located in expensive neighborhoods and as rents rise, subsidizing such units may become increasingly expensive and inefficient.

Polls currently point to Bill De Blasio as the likely democratic nominee. Mr. Blasio has one of the most ambitious  plans for the creation and preservation of affordable housing, the feasibility of which is highly questionably without further details. Regardless of tomorrow’s winner, candidates should rely on industry experts and associations like NYSAFAH to help their talking points become truly constructive housing policy.