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Know Your Rights
Source: Crain's New York Business
Subject: Workplace Justice
Type: Media Coverage

Immigrant-owned small businesses want a controversial tax break to go away

A group of 50 small, immigrant-owned businesses, organized by Make the Road NY, is urging Gov. Andrew Cuomo to let the controversial tax break 421-a expire.

Advocates trying to kill a lucrative property-tax break for residential developers are organizing small, immigrant-owned businesses in the hopes of bolstering their long-shot lobbying effort.

A letter signed by more than 50 bodega, restaurant, clothing store and jewelry shops owners to Gov. Andrew Cuomo Tuesday argues that the 421-a abatement program inflates real estate prices and creates market pressure that pushes rents up and residents and small businesses out.

“If 421-a continues, New York City will keep losing affordable housing, and more neighborhoods will serve the wealthy elite at the expense of working-class and middle-class residents,” the letter states.

But 421-a enjoys strong support from Mayor Bill de Blasio, who has proposed changes to the abatement, and from the real estate industry, which is a heavy contributor to the campaigns of state senators and the governor, who control the fate of the program. The Assembly may be pressured to continue 421-a in exchange for the Senate agreeing to extend rent-stabilization laws, which expire at the same time.

The signers of the letter, all operators of small businesses in Brooklyn and Queens, were organized by Make the Road New York, an immigrant-rights nonprofit that is closely aligned with the Working Families Party. Wilfredo Dante Ynoquio, a member of Make the Road and an accountant with a tax-services business in Bushwick, Brooklyn, said he and his clients have been displaced from the neighborhood by rising rents.

“I used to live close by the area” where his business is located on Wycoff Avenue, Mr. Ynoquio said through a translator Monday. “Because I couldn’t make ends meet paying my rent, I had to move far away.”

Mr. Ynoquio and others contend that 421-a has contributed to a loss of affordable housing. The tax break, which lowers property taxes on new apartments for up to 25 years, expires June 15. Mr. de Blasio has called for the state to require new residential developments citywide to set aside 25% to 30% of the units for affordable housing in order to receive the 421-a subsidy. Currently, only 20% of units need to be affordable, and only in expensive neighborhoods, to qualify. Outside of those neighborhoods, in places like Bushwick, any new apartment building can get the tax break.

Although existing buildings are not eligible for 421-a and the tax break lowers building expenses, critics claim that it drives rents up by gentrifying neighborhoods.

“The 421-a program is the factor that’s most important [in] what’s spurring new construction and new people to come in and buy buildings and push current tenants out,” Mr. Ynoquio said.

Developers, led by the Real Estate Board of New York, tell an entirely different story, arguing that thousands of affordable apartments would never be built if not for the tax break offered. In fact, they claim virtually no rental buildings would be constructed without the tax break because projected profits would be too low for lenders to justify making loans for such projects. Were 421-a to expire, the dropoff in construction would exacerbate a shortage of rental housing, leading rents to go up, not down, developers say. They deny that 421-a is merely a transfer of wealth to land owners who jack up the prices of their property in response to the greater profits that the tax break confers to builders.

Gov. Andrew Cuomo has prognosticated that the abatement program will be extended with no changes in light of the corruption scandals and leadership changes that have gripped Albany in recent weeks. But advocates argue the time is ripe for change, and REBNY has endorsed the de Blasio reform.

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