Tax breaks for real estate in the proposed $227 billion could lead to major costs for local governments in New York, a report released Friday by the Fiscal Policy Institute found.

The report questioned the effect of five tax incentives in the spending proposal, including an extension of what's known as 421-a, and an accessory dwelling unit tax incentive. Combined, as much as $2.84 billion could be at stake.

"While these incentives are intended to deliver income-restricted housing, tax benefits have proven an ineffective housing affordability policy," the report found. "Further, they would place affordable housing financing at the local, rather than state, level, despite the state as a whole standing more to gain from increased housing supply than individual localities."

The report comes as Gov. Kathy Hochul is backing a push to expand housing over the next decade by 800,000 units in the state in order to drive up inventory and reduce costs.

But the Fiscal Policy Institute's report found the tax breaks could prove counterproductive to those efforts, and hurt school districts and local government workers in the process. At the same time, the report questioned the need for the tax breaks, especially in a high-demand market like the New York City metropolitan area.

The report recommends instead of tax breaks, the state should address regulations to address local land use that could spur more housing.

Given the metropolitan area’s high housing costs, regulatory changes that permit new housing will have a far greater effect than tax breaks," the report found. "Rather than creating housing that would not be built but for these tax benefits, the proposals have the potential to provide developers and incumbent property owners with a windfall while straining the finances of local governments."