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For eight unbearable months, New York City’s real estate developers have been forced to build new residential units with the knowledge that they will have to pay the full amount of taxes on them. But this week, Governor Andrew Cuomo unveiled a plan to resurrect a tax subsidy that would once again give billions of dollars to developers in exchange for building token amounts of affordable housing.
Mayor Bill de Blasio had floated a similar plan to save the program, known as 421-a, before it expired in January. But Cuomo’s office assured the New York Times today that the governor’s idea is way better.
“It is clear through ongoing discussions with Rebny [Real Estate Board of New York] and the labor unions that the city’s original proposal does not provide the economics that would allow for union labor, and that it is unacceptable to the governor and Legislature,” Dani Lever, a spokesperson for the governor, told the paper.
Created in 1971 to promote development at a time when the city desperately needed it, 421-a morphed into a free-for-all that allowed builders to collect $1.1 billion in tax subsidies in 2014, 60 percent of which went to buildings in Manhattan.
Mayor de Blasio’s version of 421-a excluded co-ops and condos (abused by luxury developers and decidedly not “affordable”), increased the number of “affordable” apartments developers had to set aside to up to 30 percent of units (while also increasing their subsidies), and encouraged existing 421-a buildings to increase their number of affordable apartments.
The Independent Budget Office found [PDF] that while de Blasio’s plan would cost more overall, taxpayers would be spending less money on each affordable apartment over a span of ten years — $577,300 apiece under the old plan, $383,800 under the mayor’s proposal. De Blasio’s plan would also create 15,819 affordable units over ten years, versus 6,622 under the original 421-a.
The number is far from approaching what the city needs, and the plan did not promise to pay union or “prevailing” wages to workers. But de Blasio must scrape together every single affordable unit he can get in order to keep his $41 billion affordable housing promises, and the REBNY supported his proposed reforms, but 421-a expired anyway.
Enter Governor Cuomo, who has his own $2 billion affordable housing plan, and an eagerness to undermine the mayor every single chance he gets. According to the Times, Cuomo’s proposal would roughly keep the same levels of affordability as de Blasio’s, but would set a “two-tiered minimum wage for projects of 300 apartments or more in Manhattan and on the waterfront in Brooklyn and Queens.”
In Manhattan, south of 96th Street, any project seeking 421-a property tax abatements would have to pay an average wage of “no less than” $65 an hour, including benefits.
Developers of projects on the East River in prime areas of Queens and Brooklyn would have to pay $50 an hour in wages and benefits — but 30 percent, or $15 an hour, would be reimbursed by New York State, the memo said.
“We feel this is a viable resolution of the issue,” Mr. LaBarbera, the union leader, said. “It’s now up to Rebny to agree, or not. The ball’s clearly in their court.”
At a press conference today, Mayor de Blasio said the governor’s proposal wasn’t “baked” yet.
Lever, the spokesperson for the governor, declined to respond to the mayor’s comments. “Affordable housing is a key priority for the state and we continue to work to reach an agreement on a successor program to 421-a,” Lever said in a statement.
Emily Goldstein, a senior campaign organizer for the Association for Neighborhood & Housing Development, suggested that the governor had better options if his concern was actually affordable housing.
“If you really want to protect affordable housing in New York City, you close the loopholes in the rent laws, and you take tax revenues that you can get under 421-a — because it is actually incredibly profitable to build housing in New York City — and then you use those taxes and build more affordable housing.”
She pointed out that despite the development community’s dire warnings on what life without 421-a would look like, “the sky hasn’t fallen, development is still happening.”
“This program is still an enormous waste of money for very, very little in return. And putting an extra layer of subsidy on top of it, doesn’t really make it less true. It actually makes it more expensive.”