Sheldon Silver, the New York State Assembly’s speaker for the past 21 years, was indicted last month for taking millions in kickbacks from the real-estate lobby, among other special interests. These allegations, if true, reveal a dark truth for Democratic voters — and not just that they have been supporting a crook: Silver, whose district resides at the southern tip of Manhattan and contains neighborhoods both rich and poor, repaid his constituents for two decades of reelection by corrupting the NYC real-estate market with unnecessary tax subsidies.
According to the federal complaint against Silver, he is accused of taking approximately $4 million in kickbacks, most of it from real-estate interests, in exchange for granting favors via the assembly’s role in two development programs — 421-a and 80/20. 421-a provides substantial tax exemptions for developers that create new residential buildings and reserve 20 percent of the units for affordable housing, or that, in lieu of creating affordable housing on-site, create it elsewhere or buy “certificates” from other developers that do. The 80/20 program similarly offers tax-exempt financing and credits to new residential developments that make available 20 percent of the on-site units at an affordable rent for a negotiated period of time.
These programs began in the 1960s and 1970s and at first may have seemed like a typical progressive plan to help the poor. But recently, they have mainly done the opposite. Today, the programs do encourage some affordable-housing growth in the city’s outer boroughs, but they do so at the cost of spurring the growth of high-income housing in the areas where rents — and the threat of gentrification — are already highest. This pushes the poor and middle class out of their homes, a problem that has been especially pronounced with 421-a.
As the New York City population — and thus the demand for housing — skyrocketed over the past decade or so, developers began using the credits to subsidize their luxury buildings with credits from elsewhere. According to the New York Observer, “outer-borough builders earn four or five certificates for each unit of affordable housing they produce, and then sell the paper for $12,000 to $20,000 each to Manhattan developers to qualify for 10-year tax abatements on market-rate condos and rentals.” Consequently, government-subsidized condominiums popped up in Manhattan and Brooklyn — at a time when rents in New York were rising much faster than rents in the rest of the country.