The Real Deal New York

REBNY, LaBarbera clash over 421a and union wages

Building Trades boss says developers are profiting off the backs of underpaid workers

May 02, 2016 01:49PM
By Katherine Clarke and Kathryn Brenzel

From left: John Banks and Gary LaBarbera

From left: John Banks and Gary LaBarbera (credit: buildupnyc.org)

The boss of the trade group representing New York City’s major unions berated developers Monday for what he said was their unwillingness to make small sacrifices on profits in order to fairly compensate construction workers.

“Nobody is doing their building in this city out of the goodness of their heart,” Gary LaBarbera, president of the Building & Construction Trades Council of Greater New York, said on a panel at the Sheraton Hotel in Midtown hosted by Crain’s New York Business “We don’t count anybody’s money. God bless them, the more money they can make, it’s all well and good. But when it’s on the backs of workers who are underpaid and exploited, that’s unacceptable.”

John Banks, president of the Real Estate Board of New York, which represents many of these developers, was on the panel and clashed repeatedly with LaBarbera. The two continued the debate over 421a, the now-defunct program which granted subsidies to developers who offer affordable units in new buildings. Ron Moelis of L&M Development Partners, Vicki Been, commissioner of the NYC Housing Preservation and Development and Hugh Kelly, of Real Estate Economics, also served as panelists.

An agreement to renew 421a will require REBNY and Building Trades to agree on wage requirements for construction workers at 421a sites. Gov. Andrew Cuomo has said he won’t sign a bill related to the program that “is not accepted as a fair deal by organized labor and by the building trades.”

LaBarbera challenged Moelis and Related Companies CEO Steve Ross, the developer of Hudson Yards, over their statements that mandating prevailing wage at 421a sites would make projects financially unfeasible. During an earlier panel discussion, Ross advocated for open-shop labor as a money saver on projects, costing 30 to 40 percent less than union labor. He said Hudson Yards won’t be able to build rental or affordable housing sans 421a.

“If we don’t get some replacement of 421a, you’re going to see a lot more condos being built,” Ross said. “It will be more like the model you see in Europe, where there’s very little rental housing available.”

Moelis agreed: “You’d almost have to get the land for free to make rental work with 421A and prevailing wage,” he said. “I don’t believe you’d have a market for land for affordable housing.”

But LaBarbera said the difference in costs is significantly lower than the 30 to 40 percent figure Ross cited.

“To hear a developer like Steve Ross say it’s a good thing that they city is open shop and that costs are coming down, that’s like saying it’s a good thing that wages are coming down and workers are being exploited every day,” he said. “In my view, that’s the worst thing for the city of New York.”

Reminding the room that Cuomo has been in his corner, he added: “It’s clear we’re not the only ones that think so.” LaBarbera said he’d put a proposal in front of REBNY that would limit the prevailing wage requirement to certain neighborhoods in Manhattan and on the Brooklyn and Queens waterfronts — “where the values support the wages.”

He also lambasted a recently published and highly cited report by the Independent Budget Office, which said that it would cost the city an additional $4.2 billion in financing to keep up with Mayor Bill de Blasio’s affordable housing goals if prevailing wage requirements were rolled into 421A. That figure was a correction from a previous report, which estimated that union wages on such projects would cost an extra $2.8 billion.

“I can rip that apart right here and right now,” LaBarbera said. “Are you kidding me? That’s not a study.”

Kelly, who prepared an alternate report on behalf of the Building Trades, backed the unions’ stance that wage requirements could be accommodated while still allowing developers to profit.

“That marginal cost is well affordable and is far less than the cost of the subsidy,” he said. “It intrudes on the margin you make — there’s no question about that — but it can be done. I think that adopting a prevailing wage approach into construction is actually a gateway for us to control inflation in land costs.”

Negotiations between REBNY and the Building Trades over 421a have hit a wall. LaBarbera noted that he hasn’t been in contact with REBNY for several weeks.

“We can go round on the numbers all we want — they can do their math and we can do our math — Whether they like it or we like it, 421A right now does not exist,” LaBarbera said. “There is a legislative session ending in six weeks and there’s going to be a deal or there’s not.”

Banks said the proposals the Building Trades had put forth just didn’t cut it.

“We’re here without a deal so that should tell you how I feel about the proposals,” he said. “Gary, for all of his desire to want to take over every subsidy program in New York, fails to recognize that you can’t build affordable housing without a subsidy.”

Banks noted that the two groups had come close to a deal before 421a’s
expiration, one that would have included condos in program. He said that framework fell apart, due to “too much political angst.” When asked if it was the governor who came out against the deal, LaBarbera told a group of reporters that he wouldn’t pin the “angst” on Cuomo, since Mayor Bill de Blasio was also against including condos in the program.

As for all the time the two organizations have already spent around the negotiating table, Banks said it’s been well spent.

“It’s not as if we sat there and just made googly eyes at each other,” he said.

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