The fate of a property tax incentive hinges on the real estate industry and construction unions agreeing on wage requirements. But they have yet to see eye-to-eye.
The Real Estate Board of New York has proposed increasing average wages and benefits paid to construction workers on projects receiving a new version of the 421a property tax program. Leaders of the Building and Construction Trades Council rejected the offer late last week, but REBNY appears to be doubling down on its stance.
In a statement, REBNY’s Zach Steinberg said the proposal aims to provide “a generous wages and benefits package for working families” while also incentivizing the construction of as much permanently affordable housing as possible.
“We’ve worked hard, in good faith, to strike that balance in our proposal,” Steinberg said in a statement. “We’re hopeful all stakeholders will continue working constructively toward addressing the housing crisis in a meaningful way this legislative session.”
REBNY presented its proposal as its final offer, but the group is hopeful that negotiations will continue. It is unclear how a deal on the tax break, let alone a broader housing package, will come together ahead of the April 1 budget deadline.
BCTC President Gary LaBarbera acknowledged in a statement that negotiations between the two groups “were at an impasse.”
“On Friday morning, we reviewed a best and final offer from REBNY, which our executive board rejected,” he said. “As always, we are willing to continue conversations with the executive chamber and the legislature, as well as REBNY.”
REBNY pitched increasing average construction wages and benefits for projects south of 96th Street in Manhattan to $72.45 per hour. That is up from the previous 421a’s $63 per hour. The new wage standard would kick in for projects with more than 150 apartments, compared to the previous program’s 300 unit threshold. The average wage and benefits would reach $76.88 by 2028.
The expired 421a incentive stipulated average wage standards for that area of Manhattan and the waterfronts of Brooklyn and Queens. REBNY’s new proposal adds four zip codes in the outer boroughs, as well as Manhattan between 96th and 125th streets. It would also apply wage requirements outside these neighborhoods, in areas that are rezoned to increase residential density by 40 percent.
The average wages and benefits for projects within all of these areas, collectively referred to as Zone B, would be $56 per hour, eventually reaching $59.43. The expired 421a’s average hourly wage and benefits for this area was $47.25.
REBNY believes that under its proposed changes, wage requirements would apply to over half of 421a projects.
The New York City District Council of Carpenters called this proposal a “non-starter” on Friday, and said it failed to ramp up enforcement of wage standards in a meaningful way. The union has been pushing for wage floors on a trade-by-trade basis, to be applied citywide rather than in specific areas. The BCTC has pitched paying workers $72 per hour for wage and benefits or 70 percent of a trade’s prevailing wage rate, whichever is lower.
Construction unions have criticized the use of average wage standards because they can be difficult to enforce. They argue that the standards lead to developers balancing out higher wages by hiring laborers and other workers at much lower rates.
REBNY’s answer to this concern was a deal with the laborers’ union to set a wage and benefit floor for workers citywide at an initial $35 an hour. That minimum rate would apply to projects with 100 or more units. The group also proposed revoking 421a benefits on projects where “significant willful violations of the wage standards are not cured by the developer.”
Gov. Kathy Hochul’s executive budget included a framework for a replacement 421a, but stipulated that REBNY and the BCTC would need to work out wage requirements. Some lawmakers objected to this set up, and called for prevailing wages standards. An impasse between the two groups may mean that lawmakers need to further intervene.