The Real Deal New York

Is 421a too big of a giveaway to developers?

Analysis shows developers will pocket most of the abatement
March 09, 2017 10:45AM

From left: Andrew Cuomo, Gary LaBarbera and REBNY’s John Banks

Even with wage requirements for construction workers, the proposed replacement to 421a could be too much of a giveaway to developers, according to a new analysis.

The extra 10 tax-free years offered to developers of certain rental projects could be enough to pay for 36 percent of the projected labor costs, Crain’s reported. Experts estimate that the proposed wage requirements — an average wage of at least $60 per hour for projects with 300-plus units south of 96th Street in Manhattan and $45 per hour on the Brooklyn-Queens waterfront — would raise costs by 5 percent in Brooklyn and only slightly more in Manhattan.

By these estimates, the developers would be able to pocket a majority of the extended tax break, according to Crain’s.

The governor’s office noted that the wage requirements come at the beginning of the project, whereas the abatement benefits are a good two decades out. The Real Estate Board of New York argues that developers are taking a risk in paying these costs upfront in order to reap the benefits of a 35-year abatement.

A recent report by the Independent Budget Office estimated that the governor’s proposed program, dubbed Affordable New York, will cost the city $8.4 billion in lost property tax revenue over the next 10 years. [Crain’s] — Kathryn Brenzel