Almost a year after it expired, developers and construction workers have finally come to an agreement to extend the 421-a tax exemption program, often seen as a bedrock measure to encourage developers to include affordable units in their projects.
The disagreement had to do with wages, but now the Real Estate Board of New York (REBNY) and Building and Construction Trades Council of Greater New York (BCTC) have reached a consensus. The agreement calls for an average hourly wage of $60 (which includes benefits) for construction workers in Manhattan and $45 for workers in Queens and Brooklyn.
This specifically pertains to buildings with 300 or more apartments, and in Manhattan the projects would have to be south of 96th Street. In Brooklyn and Queens, they cover parts of Community Boards 1 and 2 in those boroughs, that are within a mile from the nearest waterfront bulkhead.
Developments that offer more than 50 percent of their units as affordable can opt out of this requirement, and those projects that got underway during the previous iteration of 421-a will be able to opt into this one when it becomes official.
“The deal reached today between these parties provides more affordability for tenants and fairer wages for workers than under the original proposal. 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.
Since August this year, Cuomo had been in talks with both sides trying to hammer out a deal, and just last week we got news that an agreement was in the offing.
There are several other alterations to the 421-a program as well. Previously developers offering more than 20 percent of a building’s apartments as affordable units received a 20-year tax exemption. Now that term has been extended to 35 years. In addition, newly created affordable units will remain affordable for 40 years.
Developers will need to hire independent monitors to audit payrolls and ensure that workers have been paid the proper wages. The monitor will have to certify this to the city’s Department of Housing Preservation and Development (HPD) within 120 days of the final Certificate of Occupancy being issued.
“We applaud Governor Andrew 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,” Gary LaBarbera, the president of BCTC said in a statement.
Several affordable housing groups have also come forward with their support of this agreement including the New York State Association for Affordable Housing and the Community Preservation Corporation.
“While far from perfect, the 45 year old program has been critical to making rental development financially feasible, creating mixed-income communities, and spurring low- to moderate-income housing production in the outer boroughs,” Rafael E. Cestero, the president of CPC, said in a statement.
The state legislature still has to finalize this agreement, and it’s not yet clear when exactly that might happen. A representative for Governor Cuomo said that it would now be up to the state legislature to ensure that this moves forward. Regardless it is in an important step forward for a program, the expiration of which had seen new residential development applications plummet in 2016.