search

The Real Deal Logo

Trending

Lawmakers reach sweeping housing deal with “good cause eviction,” new 421aLawmakers reach sweeping housing deal with “good cause eviction,” new 421aRent board’s 4% hike will “plunge” buildings into distress: landlordsRent board’s 4% hike will “plunge” buildings into distress: landlordsHousing deal could rescue Halletts North, other stalled projectsHousing deal could rescue Halletts North, other stalled projectsSL Green, Vornado kick in $100M to extend 280 Park loanSL Green, Vornado kick in $100M to extend 280 Park loan
New York

Just kidding: IBO corrects its 421a report, says prevailing wage requirement would actually cost city $4.2B

The office previously estimated $2.8B

<em>IBO Director Ronnie Lowenstein</em>
IBO Director Ronnie Lowenstein

The Independent Budget Office says it botched a recent report on affordable housing by drastically underestimating the impact of requiring prevailing wages on projects benefiting from the 421a property tax break.

Such a union-friendly requirement would cost the city an additional $4.2 billion in financing to keep up with Mayor Bill de Blasio’s stated goal of constructing 80,000 new affordable housing units, according to the IBO. This figure is a correction from a previous report, which estimated that union wages on such projects would cost an extra $2.8 billion.

The agency issued a correction to its Jan. 11 report on Tuesday, citing incorrect data provided by the Department of Housing Preservation and Development. The HPD mistakenly left out 13 projects from 2010 to 2015 that required prevailing wages, the IBO said. The error led the IBO to report that prevailing wage requirements would increase construction costs by an average of 13 percent, instead of what the office said was the correct figure of 23 percent. This means the estimated cost per unit would increase by nearly $80,000 — instead of the $45,000 the IBO initially reported.

The agency doesn’t factor in how features of prevailing wages — like job site rules, governmental monitoring, project schedules and safety regulations — could impact construction costs.

Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, criticized the Department of Housing Preservation and Development for not publicly releasing source materials used for IBO’s report.

Sign Up for the undefined Newsletter

“That lack of transparency taints the debate on this issue and must be corrected immediately,” he said in a statement.

For REBNY, which is on the other side of the 421a debate, the report’s findings boost the group’s position that prevailing wages will stymy the development of new affordable housing.

“Policymakers have a clear choice. They can choose to pay ironworkers more than $235,000 per year and carpenters more than $195,000 each year to build affordable housing,” said Jame McShane, REBNY spokesperson. “If so, there will be less affordable housing built or taxpayers will be asked to pay an exponentially larger tab.”

The corrected report comes as the future of 421a continues to hang in the balance. Earlier this week,  LaBarbera declared that the program is “dead” and should not be renewed without a prevailing wage requirement, Politico reported.

The program expired in January after developers and labor unions failed to reach an agreement over wages for construction projects over 15-units. It’s up to the legislature now to figure out the future of affordable housing, but it’s been relatively silent in Albany.

Tags
421a