The Cost of New Property Tax Breaks for Local Government

Key Findings

• The five tax incentives could cost local governments across the state as much as $2.84 billion per year if the state meets its housing goals:
  • 421-p’s collective cost to localities other than New York City: up to $441 million per year
  • AHCC cost to New York City: up to $110 million per year
  • 421-a extension cost to New York City: up to $288 million per year
  • J-51 renewal cost to New York City: up to $301 million per year
  • Accessory Dwelling Units tax incentive collective cost to localities statewide: up to $1.7 billion per year

• Each tax incentive would be accompanied by new regulatory changes that would authorize residential construction not permitted under current law. These regulatory changes are likely sufficient to prompt new housing production regardless of available tax incentives

Tackling New York State’s housing crisis is a central priority of the fiscal year 2024 executive budget. The budget proposes a suite of policy responses designed to create 800,000 new housing units, especially in the New York metropolitan area. Many of these measures, including required changes to local land use policy, are appropriately ambitious, given the urgency of the state’s housing shortfall.

Other parts of the housing package, however, would authorize costly and unnecessary tax breaks. The main regulatory change needed to increase the supply of housing is simply permitting the construction of multi- family housing where it is not currently allowed. Layering new tax incentives on top of regulatory changes may afford a windfall to landlords and developers while doing little to spur housing development.

Instead, these tax incentives would deprive local governments of the revenue necessary to support newly-growing populations. The five proposals for new, renewed, or extended tax incentives could cost local governments across the state as much as $2.84 billion per year if the state meets its housing goals. While these incentives are intended to deliver income-restricted housing, tax benefits have proven an ineffective housing affordability policy. Further, they would place affordable housing financing at the local, rather than state, level, despite the state as a whole standing more to gain from increased housing supply than individual localities.