The Real Deal New York

Unlikely allies: How real estate got minority advocacy groups to lobby for its cause

The NAACP and other social justice groups have pushed for lowering construction costs and property taxes. Why?
By Will Parker, Konrad Putzier and Rich Bockmann | October 05, 2017 12:10PM

From left: Douglas Durst, the NAACP’s Hazel Dukes, REBNY’s John Banks, and Durst’s Jordan Barowitz (Illustration by Lexi Pilgrim for The Real Deal)

In January, the Real Estate Board of New York’s John Banks called the veteran civil rights leader Hazel Dukes. The matter at hand: Intro 1447, a City Council bill that would mandate additional safety training for all construction workers.

The bill would likely push more developers to switch to pricier union hardhats, raising the cost of doing business, and the fear among industry players was that it would paralyze projects. As REBNY’s leaders pored over the proposed law, they felt that such a requirement could send thousands of nonunion workers who couldn’t afford the mandated training—or whose employers wouldn’t pay for it—into unemployment. Many of those workers would be, in Banks’ telling, black or brown.

He explained this to Dukes, who heads the New York conference of the National Association for the Advancement of Colored People. “Hopefully, when the elected officials hear from many voices, they will pay more attention to it as opposed to just the voice of the real estate industry,” Banks told The Real Deal in August.

On the call, Banks asked Dukes if she was aware of the bill, and if she was, whether she would help REBNY “get the message out to the affected groups.” Dukes and other civil rights leaders that Banks called at the time hadn’t necessarily heard of the proposed legislation, “but they got up to speed pretty quickly,” he recalled later. “Once you go through the details,” he said, you “immediately see the flaws with the legislation.”

In June, Dukes spoke out against the bill at a press conference outside City Hall.  She did not respond to requests for comment.

The City Council ended up approving the bill in September, with Speaker Melissa Mark Viverito proclaiming that it was “not going to sit by as a legislative body and watch workers die.” But a closer look at the backroom talks on quashing the bill reveal how real-estate groups, when faced with existential threats, can join hands with the most unlikely partners.

Banks’ January call to Dukes put into motion just one of two major match-makings between real estate and minority-interest groups this summer. The cooperation on Intro 1447 between the industry and minority advocates began to morph into a formal coalition under Putting New Yorkers to Work, a lobbying group formed in 2011 by REBNY in order to lobby against living-wage laws for construction workers.

Apart from REBNY and NAACP, that coalition includes the advocacy groups One Hundred Black Men and Public Housing Communities, and the developer groups New York State Association for Affordable Housing, New York Construction Alliance and the Associated Builders and Contractors Empire State Chapter.

In the past, minority advocates teaming up with the real estate industry to oppose the self-styled progressives of City Council and their union allies would have been a shocker. In 2017, though, it’s far from unusual. Consider Tax Equity Now, which brings together the Rent Stabilization Association, prominent landlords and social welfare groups such as the NAACP and the Black Institute. That group is suing the city, alleging that its property-tax system discriminates against low-income homeowners and landlords alike.

But through several interviews with real estate political operatives and members of black-interest organizations, TRD found that these alliances have sometimes formed without full consideration of the policy implications. Social-justice groups, in some cases, have linked arms with real estate without a consensus on what different tax and construction labor outcomes would really look like.

“It would be silly for me to argue that the real estate industry isn’t acting out of self interest, but so are the other coalition members,” said David Lombino, the director of external affairs at Two Trees Management, one of the development firms involved in Tax Equity Now. “The point is that a lot of different entities have self-interests that align here.”

“I’m not an economist”

One of Tax Equity Now’s top playmakers is Martha Stark, the Department of Finance commissioner from 2002 to 2009 under Mayor Michael Bloomberg. Stark, who has been studying inequalities in the property tax system for years, is also a board member at the Black Institute, a think tank that seeks to, according to its website, “impact public policy uniquely from a Black perspective.”

In an interview, Stark said the current system disproportionately burdens nonwhite homeowners with higher property taxes, particularly those in the outer boroughs. An analysis included in the group’s lawsuit against the city shows that the average Staten Island homeowner pays an effective tax rate more than twice that of than an owner in Manhattan.

“The point is that a lot of different entities have self-interests that align here.”

“The market values of co-ops and condos in predominantly white neighborhoods receive more favorable tax treatment than similar co-ops and condos in predominantly minority neighborhoods,” the lawsuit states.

Tax Equity Now’s interest in reforming the property tax system does not stop with inequalities along the lines of race and income, however. The group is also pushing for lower property taxes for rental landlords and for owners of commercial property such as office and retail spaces.

Carol Kellerman, president of the Citizens Budget Commission, a municipal finance watchdog, said the group agreed to support Tax Equity Now when Jordan Barowitz, director of external affairs at the Durst Organization, came to her and told her about the lawsuit.

Kellerman said aside from sharing a few documents and materials back and forth, CBC had been hands off when it comes to the lawsuit.

“We agreed with the points that they’re making,” she said. “If a lawsuit catalyzes everybody to get the act together to make changes, we endorse the idea. We’re just observers. We’re not participating in the meetings.”

But that changed in late September, when CBC filed an amicus curiae brief in support of the suit. On the same day, the nonprofit LatinoJustice and the NAACP filed briefs of their own.

Barowitz said the Durst Organization welcomed the chance to bring more partners into the group.

“It’s a collaboration,” he said. “We’re happy to play that role.”

Developers that are part of the alliance include Related Companies, RXR Realty, Two Trees, Silverstein Properties and an LLC linked to GFP Real Estate’s Jeff Gural. “I know a lot of people from my time at [DOF], so there are certainly developers in the mix,” Stark said.

Stark’s ties to the industry have gotten her into hot water in the past. In 2012, three years after she resigned as DOF commissioner, she was fined $22,000 by the city’s Conflicts of Interest Board, after an investigation found she had solicited favorable treatment from Glenwood Management after the DOF had reduced the taxable value of a Glenwood property at 1930 Broadway by $17 million.

“You guys have great buildings,” Stark wrote Glenwood’s Charles Dorego in an email, according to a Department of Investigations report, which found she pushed for an apartment deal for her former domestic partner. The investigation also found that Stark used her government email to conduct business for the Tarragon Corporation, a real estate investment company where Stark was a board member.

Tax Equity Now’s 94-page complaint in State Supreme Court details how low-income and minority renters, via the high property taxes placed on their landlords, are indirectly taking on some of those burdens in the form of higher rents. But when asked if she thought lower property taxes would actually result in landlords rolling back rents, Stark said: “I’m not an economist.”

Bertha Lewis, the founder of the Black Institute, believes there is a real correlation between property taxes and rent.

“If one area of the city is benefitting with lower taxes [more] than an outer-borough landlord and his renters, that affects tenants,” Lewis, whom Stark approached to join Tax Equity Now, said. “I don’t want to have a situation where just the landlord benefits and doesn’t pass on those benefits to the renters.”

But economists said it was highly unlikely that any property-tax savings would translate into lower rents for tenants.

“Why would a building owner want to pass along savings that would otherwise be money that could be kept in his pocket?” said Jason Barr, a housing economist and professor at Rutgers University. With supply scarce and tenants still facing few options on the open market, landlords, especially those of rent-regulated housing, would maintain a “captive audience” and feel little pressure to push rents down, he said. (The only supply glut in the rental market has been on the very high end, where landlords have been offering aggressive incentives to fill up luxury Manhattan apartments.)

“Landlords would not charge less rent than they are currently getting if they have no problem avoiding vacancy,” said Judy Geyer, a professor of urban economics at MIT, who added that demand for housing and scarcity of land are much bigger factors in determining rents.

A marriage of convenience

Tax Equity Now argues that lowering taxes on rental buildings and raising them on luxury condos could spur more development of the former, increasing the rental housing supply and pushing down rents. But it doesn’t seem to have an argument for why lowering taxes on existing rental stock would be better than supercharging new rental construction through tax breaks – something the city and state are already offering under 421a’s new avatar, Affordable New York.

“I don’t want to have a situation where just the landlord benefits and doesn’t pass on those benefits to the renters.”

“Everyone needs to be careful what they wish for because there’s no guarantee the alternative will be better,” said one development executive actively involved in Tax Equity Now who spoke on condition of anonymity. He admitted the current consensus among the group’s unlikely bedfellows may break down once it comes to proposing alternative property-tax systems, and that a new system may well end up being a boon for the real estate industry but do little for minorities.

“My guess is that a lot of these organizations haven’t given a whole lot of thought to what happens the day after the lawsuit is successful,” he said.

Officially, REBNY is not involved in Tax Equity Now. “We don’t like to sue because litigation doesn’t guarantee you an outcome, and so you need to be very, very careful,” Banks said. He did acknowledge that the lawsuit is “absolutely a thing that we talk about frequently.”

REBNY’s involvement in Putting New Yorkers to Work, a coalition that fought Intro 1447, was much more direct and aggressive. In August, Banks, who has proposed drug and alcohol testing for construction workers in lieu of the 40-hour offsite training, said he communicated daily with the group’s members. State lobbying disclosures show it spent more than $100,000 between January and July of this year. (In 2015, the group spent more than $2 million, when it was funding ads to oppose prevailing-wage requirements for workers at developments built with the 421a tax abatement.) In late August, the group bought a radio ad in which Jacques DeGraff, a black reverend and social justice advocate, slams the bill.

“This bill would take jobs away from minority contractors and construction workers – and give them to construction unions,” DeGraff says in the ad. “The unions said this was about safety – but it’s a Trojan Horse.” DeGraff did not return a request for comment.

REBNY has declared its concern for minority causes before. In 2015, it published a report  arguing for a reform of the city’s Landmarks Law that found “the population in landmarked districts is significantly less diverse in terms of racial and ethnic makeup, and the average household income is twice that of than the rest of Manhattan, Brooklyn, or New York City as a whole.” Watering down the city’s landmark laws are a big priority for developers, as they can curtail new development.

Jumaane Williams, the City Council member who was co-sponsor of Intro 1447, expressed frustration with real estate’s alliance with black interest groups in an early September interview.

“I don’t know that what REBNY is concerned about is always what the NAACP is concerned about,” Williams said. “Where it’s disingenuous is that REBNY knows that we’re working on these issues and they’ve been part of the discussions, but they’re still pushing forward as if we’re not.”

REBNY and Williams did eventually hammer out some compromises on the bill, lowering the number of training hours required to 40 from 59.

Ken Thomas, the executive director of the New York Construction Alliance, said there “wasn’t any coaxing from the industry” to get minority rights groups into the coalition. One of the group’s priorities, he said, is lobbying lawmakers.

On Aug. 30, U.S. Congressman Gregory Meeks (D-NY) came out against the bill, saying it “could take jobs away from minority construction workers and contractors.” On Sept. 5, Brooklyn Borough President Eric Adams argued in the Gotham Gazette that the bill would “likely sideline many local workers of color and prevent growing minority- and women-owned business enterprises (M/WBEs) from succeeding in the construction industry.”

When asked if the coalition had studied how many union jobs for minorities might be created if the bill passes, and whether these new jobs could offset some of the lost open-shop jobs, Thomas said it hadn’t.

The issue, he said, is “certainly worthwhile to explore further.”

Gary LaBarbera, head of the Building and Construction Trades Council of Greater New York, said the open-shop firms’ stance on minority rights was “no more than a business arrangement between them and the coalition.

“They will basically say whatever they need to say to advance their business relationships with the real estate industry,” he added. Late last month, LaBarbera released a study on participants in the Associated Builders and Contractors (ABC)’ apprenticeship programs for nonunion workers. It found that only 26 percent were racial minorities, whereas the Building Trades touts its minority membership at 68 percent. (ABC contests the data’s accuracy.)

Afua Atta-Mensah, executive director of the advocacy group Community Voices Heard and a proponent of Intro 1447, argued the goal shouldn’t just be to get minority workers jobs, but to get them safe, high-paying ones. Those tend to be with unions, she said.

“Historically,” she said, “the claim that the Real Estate Board of New York is on the side of minority communities is dubious at best.”

Kathryn Brenzel contributed reporting.