The city’s building-trades unions and real-estate developers late yesterday afternoon announced a deal that could revive the 421-a tax subsidy for apartment construction.
Governor Andrew Cuomo had asked the Building and Construction Trades Council of Greater New York and the Real Estate Board of New York in 2015 to set wage and affordability standards for buildings that receive the property-tax exemption, which expired in January when they couldn’t. Reviving 421-a would need to be approved by the state legislature, either in a special lame-duck session or in January.
The agreement “provides more affordability for tenants and fairer wages for workers than under the original proposal,” Cuomo said in a statement. He added that it “allows lower-income individuals to qualify as it lowers the percentage of area median income needed to apply.”
The governor’s office did not provide details last night about how much the “affordable” apartments would actually rent for. A REBNY spokesperson said the levels would be similar to those in Mayor Bill de Blasio’s Mandatory Inclusionary Housing program. The agreement would require apartments with income limits to be kept that way for 40 years, five years longer than in the expired program, but it wouldn’t make them permanently affordable.
In buildings with 300 or more units in Manhattan below 96th Street, workers would be paid an average of $60 an hour in combined wages and benefits, unless the building contains at least half “affordable units.” In similar buildings within a mile of the Brooklyn-Queens waterfront from Brooklyn Heights to Astoria, they would get $45, including benefits. Other buildings wouldn’t have wage requirements.
State Senator Liz Krueger (D-Manhattan), a 421-a critic who hadn’t yet seen the details of the agreement, questioned it sharply on general principles. “Will these units actually be affordable to poor New Yorkers, or set at rent levels too high for the people who really need them?” she asked. “I seriously question the number of affordable units that will be built, and at what cost.”
She also lambasted the use of tax money to “subsidize building in the most expensive real estate in the city” and the governor’s outsourcing decisions about public funds to private parties “who will gain from it.”
Cuomo’s statement said he “would prefer even more affordability.”
The mayor’s office hadn’t seen the terms. “Our priority is ensuring that the ultimate legislation passed demands real affordable housing for our people and protects taxpayers from giveaways,” deputy press secretary Melissa Grace said in an email.
The Independent Budget Office released a report in September showing that leftover 421-a tax breaks will cost the city $1.4 billion in lost revenue this year.
The deal resulted from Cuomo’s attempt to resolve the three-way impasse that prevented the Legislature from renewing the 421-a program when it expired in June 2015. Tenant groups denounced the subsidy as a tax giveaway that produced almost no affordable housing. Developers said they needed it to keep building. The unions wanted to keep the flow of jobs coming and hold their market share against nonunion contractors. Cuomo said he wanted developers getting the tax benefits to pay union-scale wages.
The new agreement “will preserve traditional worker standards and benefits and create opportunities for new categories of workers which will ensure our long-term competitiveness in the industry,” Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, said in a statement. The council’s executive board “overwhelmingly” approved it.
How many buildings will the wage standards cover? Low-wage nonunion contractors dominate construction of residential buildings less than 10 stories tall in the city, and have been making inroads into larger buildings, such as the One57 condos on the 57th Street “billionaires’ row,” which received 421-a subsidies under a bill sneaked through by now-convicted Assembly Speaker Sheldon Silver.
The 300-apartment minimum would seem to leave a lot of room for nonunion work to expand. A “lot of what’s in the pipeline” will be buildings big enough to qualify, a spokesperson for the building-trades unions responded.
A 2014 study by the Real Affordability for All housing-group coalition found that of 61 buildings receiving 421-a subsidies in and around downtown Brooklyn, only seven had more than 300 units. But those seven, in the Flatbush Avenue corridor near the Manhattan Bridge, contained more than 60% of the 4,395 units in those buildings. Only eight of the others contained between 50 and 300 apartments.
Less than 1% of those tax-subsidized 4,395 units were affordable to people with incomes below $41,000 for a family of four. Only 257 qualified as affordable for people with incomes below roughly $85,000.