Back From the Dead?

Governor Cuomo takes first steps to bring back 421-a

Development East News
(Heike Huslage-Koch / Wikimedia Commons)
(Heike Huslage-Koch / Wikimedia Commons)

Governor Andrew Cuomo‘s administration is working to revive 421-a with a novel idea: Wage subsidies for non-union construction workers.

The program that saved land owners millions in taxes and created thousands of apartments for low- and middle-income New York City residents expired in January of this year. Without the program, industry insiders feared that, with high land costs, rental housing construction would grind to a standstill.

Cuomo’s one-page proposal would set wages for projects that use non-union labor and receive government assistance in Queens, Brooklyn, and Manhattan with some caveats, the New York Times reports. There would be a two levels of minimum wage for projects with 300 or more units in desirable areas—in this case, on the Brooklyn/Queens waterfront and in Manhattan. On the outer-borough waterfront, projects would pay $50 per hour, benefits included, with 30 percent ($15) of that hourly wage reimbursed by the state. In Manhattan, any project south of 96th Street looking for an abatement would pay no less than $65 per hour, benefits included. In return, developers would set aside 25 to 30 percent of units for below market rents.

It’s not clear from the memo how the state will subsidize the wages, or what form the new program will take. 421-a lapsed when real estate industry leaders and union officials could not compromise on the balance of union and non-union labor for residential construction projects. In June, the two groups debated wage rates, but again couldn’t agree on a plan. Unions leaders have criticized developers who reaped generous public subsidies but avoided union labor. The program used to offer a 20-year tax abatement for developers who offered one-fifth of units at below-market rates. In 2014, 150,000 apartments qualified for 421-a tax abatements, for a tax jubilee of $1.06 billion.


The memo emphasized that residential projects in these areas would not have to pay prevailing wage, and was sent to leaders in the building trades and construction industry, including Gary LaBarbera, president of the Building and Construction Trades Council, and John H. Banks, president of the real estate industry’s lobby and advocacy group Rebny. Bringing back 421-a would allow the governor’s $2 billion housing plan to move forward.

A spokesperson for the governor made a statement last week on the negotiations: “It is clear through ongoing discussions with Rebny and the labor unions that the city’s original proposal does not provide the economics that would allow for union labor, and that it is unacceptable to the governor and Legislature. We are working on and considering new and various proposals with all stakeholders, but at this point there is no agreement on anything.”

Mindful of that criticism, Mayor de Blasio proposed several reforms in 2015 designed to extract more affordable housing for taxpayer subsidies. That proposal—made in coordination with the real estate board—would have made condominiums ineligible, while requiring developers to devote up to 30 percent of the units in a project for poor and working-class tenants, in return for a longer tax abatement. But that proposal was rebuffed by the governor.

A spokeswoman for the governor made a statement last week on the negotiations: “It is clear through ongoing discussions with Rebny and the labor unions that the city’s original proposal does not provide the economics that would allow for union labor, and that it is unacceptable to the governor and Legislature. We are working on and considering new and various proposals with all stakeholders, but at this point there is no agreement on anything.”

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