Photo: Jeffrey Zeldman/Flickr
On January 15th, the deadline to reach an agreement between real estate developers and construction labor unions on the 421-a Tax Abatement program officially expired, meaning the program is done — at least for now.
421-a is a partial tax exemption for developers who build residential properties with 20 percent affordable units or who participate in the 421-a Affordable Housing Production Program. The property owner pays a partial tax on the property’s assessed value before any development for a period. The full tax, based on the property’s new assessed value, is spread over an additional period.
The standstill raises questions about the future of affordable housing in New York City.
The Real Estate Board of New York and the Building and Construction Trades Council of Greater New York (BCTCGNY) were to reach a “memorandum of understanding” on worker’s wages by January 15th, but were unable to do so, likely due to a sticking point on prevailing wages, industry-standard salaries and benefits set by the state and the city comptroller that are usually higher than median wages
According to a recent Independent Budget Office (IBO) report, REBNY is resistant to labor’s push for prevailing wages for all new construction jobs that receive 421-a. The IBO indicated that higher pay for construction workers would raise affordable housing costs by 13 percent and add $2.8 billion to the mayor’s housing plan.
A report from the NYU Furman Center said 98 percent of rental units in Manhattan benefitted from 421-a exemptions between 2011 and 2014.
Without 421-a, the Furman Center predicts a drastic disruption in the supply of rental housing by market-rate builders, though new condo construction would likely be insulated. They also foresee diminishing land prices, increasing rents overall and a reduction in affordable housing.
Both REBNY and BCTCGNY have indicated in statements that they are open to further negotiations.
REBNY President John Banks said that the renter population in NYC will continue to grow and policy needs to accommodate it with housing options. “Without a program like 421-a, one can’t build multi-family rental housing with a significant below-market, or affordable, component on a scale necessary to address the City’s needs,” he said in a statement.
BCTCGNY President Gary LaBarbera noted the “good faith effort by all parties,” but stressed the need for the deal to create more middle class jobs. “We remain ready to engage with all stakeholders in the weeks and months ahead to achieve our goals,” he said in a statement tweeted from the BCTCGNY Twitter account.