Albany Grants Two Trees Special 421a Tax Break for Williamsburg River Ring Towers

An eyebrow-raising tax break for a Brooklyn waterfront megaproject signals both the dogged durability of New York’s development incentives and the city’s precarious housing ambitions.

In New York, billions are lost and made quietly. So it was again this week, when lawmakers in Albany slipped an eye-popping carveout into the state’s $268 billion budget: a bespoke extension of an expired development tax break, revivified to save Two Trees Management’s gargantuan River Ring towers on the Williamsburg waterfront. Their developers stand to gain millions in future property-tax discounts, while the city’s coffers will be lighter for years.

The episode reveals both the enduring power of development incentives in a city perennially starved for housing and the political muscle wielded by well-connected real estate grandees. The River Ring deal, quietly finalized by Governor Kathy Hochul and legislative brass, will let Two Trees sidestep a looming 2031 construction deadline for the expired 421a tax abatement—an exemption once derided even by its enablers as a profligate “giveaway.” It is, in almost every particular, a surgical rescue operation.

With more than 1,200 flats—including some 360 units priced for households below the city’s daunting market rates—the Two Trees towers were in jeopardy after delays made the original abatement expiration unworkable. Completion was projected for 2033, after all, and the economics wobbled without subsidy. Now, the revitalized tax break paves the way for a waterfront reimagining: twin high-rises, a YMCA, a new public park, and $31 million in funding for senior housing offsite.

For New Yorkers, this legislative footnote portends both relief and recurring angst. The city’s housing pipeline, battered by ballooning costs and regulatory rigmarole, can ill-afford to lose one of its largest mixed-income bets. Yet the trade-off is stark: a healthy number of affordable apartments, yes, but only at the cost of millions in foregone tax revenue—estimates for similar towers peg the difference at $54 million per building over the life of the abatement. Skeptics, including a phalanx of progressive lawmakers, have long derided the 421a program as a windfall for developers that delivers meagre results for actual tenants.

The political salience, and peril, are plain. In 2022, city and state leaders allowed 421a to “sunset,” heeding critics who decried the annual billion-dollar cost and the program’s patchy record on affordability. A newer, theoretically nimbler successor emerged in 2024, though its real-world impact remains as yet untested. Still, when crucial “in-flight” projects like River Ring teetered on the brink, lawmakers engineered a face-saving loophole—one so tailored, it could only describe Two Trees’ towers.

Far from parochial melodrama, New York’s frictions over development incentives echo a broader American and even global conundrum. Metropolises from San Francisco to Berlin have grappled with the vexed question of how—or whether—to bribe builders into producing affordable homes that markets will not. Some cities prefer direct spending; others, like New York, opt for the subtler alchemy of tax expenditure. Nearly all must contend with middle-class disillusion at mounting rents and the optics of subsidy.

Developers’ dilemmas, public priorities

Data show mixed results. While 421a and cousins patently encourage more construction, the share reserved as “affordable” rarely keeps pace with need. In a city where vacancy rates for modest flats hover near zero and new construction lags far behind stated targets, every affordable unit built under programs like these helps, but the cumulative effect can seem paltry. Meanwhile, the outsized benefit to landowners stirs resentment and populist backlash.

The River Ring episode also underscores the peculiar way in which New York’s growth ambitions are brokered—not just by policy, but by personal connections and discretionary fixes. Two Trees, with a well-stocked Rolodex and a history of shaping the Williamsburg riverfront, shepherded its request through leaders like Assembly Speaker Carl Heastie with remarkable efficiency. Other, less networked builders are unlikely to enjoy such singular interventions. The result is a politicized, at times opaque housing policy that breeds both progress and distrust.

Nationally, housing shortfalls and overheated real estate markets have become the norm in desirable cities, as high barriers to new development converge with sclerotic bureaucracies and local opposition. International peers provide no panaceas. In London and Toronto, developer incentives operate amid bitter debate; in Tokyo, less restrictive land-use regimes lower the need for such largesse. Global experience suggests that subsidy-heavy systems need constant rebalancing to avoid capture by the most enterprising players.

Is this usurious largesse or canny statecraft? The answer, as too often in Gotham, is both. We reckon that, in theory, using tax incentives to coax genuinely permanent, economically integrated housing is defensible. Yet the River Ring maneuver’s precision—crafted for a single powerful firm—hardly bodes well for even-handed policymaking. New York’s politicians seem unable, or unwilling, to remake the underlying rules so that housing flows reliably, and public benefit outweighs private advantage.

The irony is that, without such selective interventions, the city’s supply woes would surely worsen. Construction costs have rocketed, regulation inches up, and nimbyism remains a potent brake. In this punishing climate, even deep-pocketed developers blanch at breaking ground without robust incentives. Failing to provide them means affordable housing stands little chance at all.

In the long sweep, one hopes the city and state will opt for clarity and fairness over improvisation and cronyism. All stakeholders, not least the half-million New Yorkers in unstable homes, deserve a regime that is robust, transparent, and productive—preferably one incentivizing production, not just profit. Until then, we expect further tortured compromises: a permanent cacophony of carrots and sticks, punctuated by timely favors to those with the sharpest elbows.

As for Two Trees and their new riverside dominion, they may soon find their apartments fill up as quickly as their tax bills empty out. Resolving the contradictions of New York’s housing incentives will require more than legislative sleight of hand; it demands a willingness to confront the city’s puny new-build numbers, not just their tax code.

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