LEGISLATIVE AFFAIRS: 421-a Gets New Life
Philip Weiden | August 24, 2016
421-a is a concession for multi-family residential buildings in New York City that allows developers to obtain a tax abatement in order to create affordable housing. The abatement freezes taxes for many years in exchange for additional inventory at below market rate rentals.
Critics contend the program does not really provide an adequate number of affordable apartments that lower income tenants can access on the market. A big problem that developers say they face is that the construction workers used are unionized and want a prevailing wage, which is significantly higher than the minimum wage, making the projects costly to build.
Both sides could not get together on a deal early this year and new permits for construction plummeted after the tax break expired. New York City has an affordability crisis in which rent increases far outpace wage increases. Gov. Andrew Cuomo’s wishes run counter to New York City Mayor Bill de Blasio’s who wants to build 80,000 new units of housing by the end of the decade. The mayor claims that paying high wages on construction will force 17,000 apartments to become unaffordable because developers will then refuse to build new units for fear of not making a profit.
Under the governor’s new plan, projects that are under 300 apartments would not be required to pay prevailing construction wages, but projects over 300 units in Manhattan, south of 96th Street, would have a minimum wage of $65 an hour plus benefits and $50 an hour plus benefits on the Brooklyn and Queens waterfronts. In Brooklyn or Queens 30% of the rate would be reimbursed by the state and in exchange, the developer would be required to build at least 25%-30% below market rate units of housing.
So far no agreement has yet been reached on this proposal. The Real Estate Board of New York has not weighed in with its position on the new proposal. Neither HGAR nor NYSAR have taken a position on the issue at this time.
The foregoing is important to know for anyone conducting business in the five boroughs. If you have any questions on the new proposal please contact me at 914-681-0833.