The Real Deal New York

City Bar urges Albany to pass 421a sans prevailing wage

With just weeks left in legislative session, no formal replacement has been produced

May 18, 2016 08:30AM
By Rich Bockmann

From left: Carl Heastie, Andrew Cuomo and John Flanagan

From left: Carl Heastie, Andrew Cuomo and John Flanagan

With just a few more weeks to go in the legislative session, the New York Bar City Association is calling on state lawmakers to re-enact the revised 421a deal Albany hammered out last year, but this time without the prevailing wage requirement that ultimately killed the program.

The association sent a letter Tuesday urging Governor Andrew Cuomo, Senate Majority Leader John Flanagan, Assembly Speaker Carl Heastie and Independent Democratic Conference Leader Jeffrey Klein to re-enact the law that expired in January after lawmakers passed a revised version during an extra legislative session last June.

“Much of the hard work forging a consensus was already done in the process of drafting the Revised 421-a Law,” read the letter. “The Legislature and the Executive should capitalize on this consensus by re-enacting the Revised 421-a Law and not condition the tax exemption on REBNY and the Construction Trades reaching an agreement on wages—an issue that is distinct from the financing of affordable housing and should be addressed in a separate bill.”

When the contentious tax-abatement expired last June, lawmakers stayed in Albany for extra sessions to put together a deal that extended and expanded the program for another six months. But the new program was contingent on REBNY and the Trades Council coming together with an agreement on prevailing wages, a condition that ultimately proved to be a death knell.

The association’s letter cited a recent story by The Real Deal reporting that new construction permits dropped 94 percent in January from the previous month to 453 units after developers rushed to take advantage of the expiring incentive.

“Even considering the increase in permit applications in the last quarter of 2015 due to the uncertainty about the renewal of the Revised 421-a Law, this is a significant decrease in construction,” the association wrote.

Meanwhile, Mayor Bill de Blasio last week urged the New York State Association for Affordable Housing to pressure legislators to enact a new 421a law before the session ends June 16.

On the same day, Cuomo reportedly met with REBNY behind doors to talk about the tax break, but the result of the discussions remained unclear. The governor has publicly stated that a deal could not go through without a prevailing wage component.

In February, the Independent Budget Office released a study that found prevailing wages increased construction costs by 23 percent in New York. It estimated the city would need to issue an additional $4.2 billion in subsidies to meet its goal of creating 80,000 new units of affordable housing. Unions argue prevailing-wage contractors perform better work and reduce cost overruns.

The Bar Association said that Albany shouldn’t tie 421a to prevailing wage.

“The Revised 421-a Law was conditioned on the Real Estate Board of New York (“REBNY”) and the Building and Construction Trades Council of Greater New York (“Construction Trades”) reaching an agreement regarding the minimum wages to be paid to construction workers,” the group’s letter read. “Practically speaking, however, this condition precedent created uncertainty in the real estate development community and ultimately led to the Revised 421-a Law not taking effect.”

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