Sheldon Silver was a New York State Assemblyman for nearly 40 years, but the tax incentive program that contributed to his downfall predates him. A tool meant to jump start construction in NYC that has been renewed and tweaked often since 1971, 421-a is still with us today.
Silver could spend the rest of his life in prison after his conviction on federal corruption charges this week. State Sen. Dean Skelos is on trial in the same Manhattan court house. The allegations against these two politicians are about more than how they padded their own wallets — the charges underscore how the outsize influence of moneyed interests has shaped the city, too. One way that this has happened is with 421-a.
Birth of a tax exemption
421-a is a product of a different era, when developers needed significant incentives to begin construction projects. Under 421-a, developers build new residential housing and the city reduces the property taxes on the development. As the housing market strengthened, the City Council added requirements for developers, like building affordable housing.
But many tenant advocates call the exemption a simple freebie for profitable development companies that would operate in the city anyway. Affordable housing is still desperately needed but construction is booming in a way that wasn't true in the '70s. And often, it seems like the affordable housing the city does get is hardly worth the effort.
The gem of Billionaire's Row, "One57," provides a good example: a New York City Independent Budget Office report found it created 66 affordable apartments through 421-a. The amount given to the developer via subsidy could have paid for 367.
Paul Newell, a district leader in Silver's old district who mounted a primary against the former speaker in 2008, calls 421-a "an incredibly inefficient way to build affordable housing," a method that is "open to abuse."
What happens behind closed doors
Developers have been keen to renew 421-a — and were eager to make that preference known to those making the decisions. In exchange for his support, the prosecution argued, Silver encouraged developers Glenwood Management and the Witkoff Group to do business with a law firm that sent kickbacks his way.
Silver's attorneys argued that there was nothing illegal about those with business before the state incubating "good will" with a key decider. They weren't actually paying him for anything in particular, after all. The jury saw it differently.
In the Skelos trial, the government alleges that the senator pushed for personal favors in exchange for renewal of 421-a.
New York after Silver
Tax incentives can, of course, be sound policy, and as Newell says, "we need to build things." But a good representative should ensure that things are built well for the people represented, not just the real estate industry. Kickbacks don't instill confidence that the right choice is being made.
"We're not just hurting because of crimes that Silver or Skelos might have committed," former gubernatorial candidate Zephyr Teachout says. "We're hurting because of systemic corruption."
It's the outsize power of the three men in the room, and subsequently the moneyed interests that have their ear, says Teachout, that leads to the ease with which luxury towers proliferate in Silver's backyard. To combat that, "we need a fundamental revolution in how we fund campaigns," she says.
"When we have elected officials who aren't dependent on moneyed interest," Newell claims, "we'll have lower rent, lower taxes, better schools," among other benefits.
Newell is considering a run for Silver's seat next year.
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