After 10 months of legislative limbo and stalled construction sites, the Building and Construction Trades Council of Greater New York and the Real Estate Board of New York have reached an agreement to resurrect the controversial 421-a tax exemption, which props up rental development throughout much of New York City.
The deal requires that developers pay an average hourly wage of $60, including benefits, to workers on residential projects with at least 300 units located in Manhattan south of 96th Street.
Along the water in Brooklyn and Queens, developers of 300-unit-plus projects will have to pay workers $45 an hour, including benefits. The rule will apply to developments planned within a mile of the waterfront in Brooklyn and Queens community boards 1 and 2. That includes Astoria, Long Island City, Greenpoint, Williamsburg, Brooklyn Heights, DUMBO, and Downtown Brooklyn.
However, developers who agree to rent at least half of the units in their buildings at below-market rates can get 421-a without paying the minimum wage and benefits. Projects that are already under construction and meet the requirements for the latest 421-a deal can opt into the program.
“While I would prefer even more affordability in the 421-a program, this agreement marks a major step forward for New Yorkers,” Governor Andrew Cuomo said in a statement.
Builders will have to hire independent monitors to audit worker payrolls. Once a building receives its final Certificate of Occupancy, monitors have 120 days to notify the Department of Housing Preservation and Development (HPD) that the wage requirements have been met.
The new 421-a agreement will allow developers to pay no property taxes on new buildings for 35 years. In exchange, affordable apartments must remain income restricted for 40 years. The previous version of the policy offered full tax exemptions for up to 21 years, with property taxes slowly returning to normal levels over the length of the abatement. Before the old 421-a law expired in January, developers could score tax breaks on new apartment developments for as long as 25 years.
The old version of the law officially sunset in June 2015, but the state legislature agreed to grant a temporary extension of 421-a through January 2016. Then the governor told the Real Estate Board of New York and the construction unions that they had six months to work out a deal on wage requirements before the law expired. When 421-a died, permit filings and investment sales took a dive in the outer boroughs.
Many builders in the outer boroughs put their projects on hold until the legislative fight over the policy was settled. One high-profile example came from the Astoria waterfront, where Durst Organization halted construction on its gigantic Hallets Point development one day after hosting a ceremonial groundbreaking.
The changes announced yesterday stem from a bill passed by the state legislature in mid-2015, but Cuomo said he would hold off on signing the bill into law until the real estate lobby and the building trades sorted out their differences—a process that ultimately took a year and a half. Yesterday, the governor urged lawmakers to return to Albany for a special session to pass legislation enacting the deal into law. The fate of the agreement now rests with the Assembly and Senate.
“We applaud Governor Cuomo and his administration for bringing all parties together to finalize an agreement on an important public policy that will allow for the development of critical affordable housing, and establishes wage standards for construction workers in New York,” said Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York.
“We are pleased to have reached an agreement that will permit the production of new rental housing in New York City, including a substantial share of affordable units, while also ensuring good wages for construction workers. We would like to thank Governor Cuomo for his leadership on this critical issue,” said REBNY Chair Rob Speyer.
Not surprisingly, the Association for Neighborhood Housing and Development came out against the latest 421-a deal. The group declared the new program “unprecedented and unjustifiable on any fiscal or programmatic grounds—all at the expense of New York City taxpayers.”
Jolie Milstein, president of the New York State Association for Affordable Housing, said the revamped tax break would clear the way for state officials to sign a memorandum of understanding to release $2 billion in statewide affordable housing funding.
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