Building Trades

Building Trades, REBNY Reach Deal on Construction Tax Break

November 15, 2016 
By Steven Wishnia

New York City’s building-trades unions announced an agreement with real-estate developers Nov. 10 that could revive the 421-a program, which gives more than $1 billion a year in city property-tax exemptions for new apartment construction.

The deal grew out of an arrangement Governor Andrew Cuomo put together after the state legislature failed to renew the 421-a program in June 2015. He gave the Building and Construction Trades Council of Greater New York and the Real Estate Board of New York in 2015 to set wage standards for buildings that receive the property-tax exemption. The subsidy expired in January when they couldn’t agree, but they continued to negotiate.

Reviving 421-a would need to be approved by the state legislature, whether in a special lame-duck session or in January. Cuomo issued a statement urging the Legislature to “come back to Albany to pass desperately needed affordable housing,” saying that $2 billion in funds for housing could not be released until the deal is approved.

Under the agreement, workers on buildings with 300 or more units in Manhattan below 96th Street 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.

The agreement “will allow for the development of critical affordable housing, and establishes wage standards for construction workers in New York,” Building and Construction Trades Council of Greater New York President Gary LaBarbera said in a statement Nov. 10. It was overwhelmingly approved by the council’s executive board, he added, and will “preserve traditional worker standards and benefits and create opportunities for new categories of workers which will ensure our long-term competiveness in the industry.”

REBNY chair Rob Speyer also praised the deal, saying it 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.”

Cuomo said it would provide “more affordability for tenants” and allow more lower-income people to qualify for housing, but the governor’s office did not release details of how many apartments would be required to be “affordable” under the deal, or what the rent levels for those apartments would be. The affordability requirements would expire after 40 years.

Opponents of the 421-a program have attacked it as a massive tax giveaway. Less than 10% of the housing that receives the tax exemptions qualifies as affordable, even by standards that define apartments renting for up to $2,500 as “affordable.”

State Senator Liz Krueger (D-Manhattan), 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.” While she said she strongly supported paying workers in affordable housing the prevailing wage, she attacked the governor for outsourcing decisions about the use of public funds to private parties “who will gain from it.”

Cuomo’s statement said he “would prefer even more affordability.”

Mayor Bill de Blasio’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.

The deal resulted from Cuomo’s attempt to resolve last year’s impasse over 421-a. Tenant groups and pro-tenant legislators denounced the subsidy for producing almost no genuinely affordable housing. Developers said they needed it to keep building. The building-trades 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. De Blasio wanted it to mandate more affordable housing, but has resisted requiring affordable-housing developers to pay workers prevailing wage.

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. The One57 condo on the 57th Street “billionaires’ row,” which received 421-a subsidies under a bill sneaked through by now-convicted Assembly Speaker Sheldon Silver in 2013, has hired subcontractors from the Auringer family, which various Ironworkers locals say has a long history of wage theft and unsafe conditions.

The 300-apartment minimum would seem to leave a lot of room for nonunion work to expand, as a 21-story building with 186 apartments or a 400-apartment complex in upper Manhattan or the Bronx would not trigger the wage standards. A “lot of what’s in the pipeline” will be buildings that qualify, a spokesperson for the building-trades unions responded.

The deal may help unions gain some work, however. According to a 2014 study by the Real Affordability for All housing-group coalition, only seven of the 61 buildings receiving 421-a subsidies in and around downtown Brooklyn had more than 300 units—and those seven were all “being put up nonunion,” a Laborers Local 79 member said at a protest after the report was issued. The seven, in the Flatbush Avenue corridor near the Manhattan Bridge, contained more than 60% of the 4,395 units in those 61 buildings. Only eight of the others had more than 50 apartments.

Some material in this article originally appeared on VillageVoice.com.

November 14, 2016

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