The Real Deal New York

Developers eyeing legal challenge to 421a labor deal

Legal experts say the state is handing unprecedented power to the private sector
July 02, 2015 09:01AM

In response to a compromise on 421a that requires the Real Estate Board of New York and labor unions to reach a deal on wages by January 2016, some developers are considering taking legal action against the government.

Real estate insiders are predicting court actions, according to Crain’s. Lawsuits could challenge the fact that an important aspect of the law – the wage requirement for construction workers on buildings over 15 units that are receiving the tax abatement – has been left in the hands of the private sector.

During negotiations over the renewal of 421a, Mayor Bill de Blasio argued that a prevailing wage requirement would slow the construction of affordable housing, while Governor Andrew Cuomo made the prevailing wage requirement a top priority.

“It’s unusual for government to delegate authority to the private sector,” said Randy Mastro, a partner at Gibson Dunn & Crutcher who has sued the state and local governments many times. “I’m not aware of New York state doing that ever before.”

Many developers are hesitant to make plans to build rentals until they can be sure that 421a will exist past January of next year. [Crain’s] — Tess Hofmann