According to a recently issued NYU Furman Center study, the de Blasio administration's proposed reforms to 421-a would not interrupt the housing market, but could have wide-ranging effects on housing production in New York City. Under the changes proposed by the administration, building rental projects in some neighborhoods of the city would become even more lucrative than under the old program.

While the old program let developers in many parts of the city get the tax break without building any low-income housing, the new 421-a program would require at least a quarter of every project to be set aside for that purpose, though large condo projects would no longer be eligible. The study found that changes to the tax break more than offset the cost of building low-income housing—even for projects that weren't required to build low-income housing before.

In the study, the Furman Center analyzed profit motivations for two types of developers, those focused on short-term and long-term returns. For markets where rent is moderate, such as Astoria in Queens, it found that new rental projects would become more profitable for developers focused on both the short and long terms, even though developers would be required to build low-income apartments in exchange for the benefit. And in markets such as downtown Brooklyn, where rent is higher, the proposed changes would tip the scales in favor of developers focused on long-term rental projects, rather than those building condos.

Meanwhile, in extremely strong rental markets such as Manhattan below 96th Street, there would be a similar boost for rental developers, but because building condos is so profitable in that area, it’s unclear whether changes to 421-a would be lucrative enough for rental developers to construct new units.

Without 421-a, the study found that building new market-rate development would not be economically feasible in places such as Astoria or Bedford-Stuyvesant, even if land were free, while the effect would be less pronounced, but still hampering, in neighborhoods like downtown Brooklyn. In pricey areas of Manhattan, where condo developers already forgo the exemption, the study found that there would be almost no effect at all.