The Daily Dirt: Real estate and unions to debate tax break “485x”

You know what? How about you do it!

That is more or less the message of the governor’s executive budget when it comes to reinventing the property tax break 421a.

It’s a thorny subject, to say the least. Gov. Kathy Hochul first tried to replace 421a with 485W, but failed. She also tried to extend a key deadline for the expired tax break. Again, no go.

During a press conference Tuesday, Hochul said her executive budget will have a “placeholder” proposal for the tax break’s renewal, but that she hopes the real estate industry and labor unions can come to terms on a plan. She also indicated that a replacement program will be enacted by the legislature.

During her State of the State speech last week and her budget address Tuesday, she hinted that she would ask the legislature to grant the city authority to enact its own tax break. That is not the case, it turns out, although her proposal would leave affordability requirements to the city’s Department of Housing Preservation and Development.

The governor appears to be opting for a route trod by her predecessor, Gov. Andrew Cuomo: She is leaving it up to the real estate industry and labor unions to come up with a program they both can live with. In fact, she is doing almost exactly what Cuomo and the legislature did.

The year was 2015. Cuomo and the state legislature made renewal of 421a contingent on the Real Estate Board of New York and the Building and Construction Trades Council of New York reaching a deal on wage standards for the program.

After months of negotiations — and heated public exchanges — the groups announced a deal that fell short of the prevailing wage requirements sought by the construction unions, but that implemented average wage rules for projects of a certain size located in below 96th Street in Manhattan, or along the waterfronts in Brooklyn and Queens.

Some construction unions have criticized these standards because they are tricky to track and do not apply on a trade-by-trade basis.

One of Hochul’s budget bills refers to the new tax break as Affordable Neighborhoods for New Yorkers — the same name as her last proposal — but assigns it the moniker 485x. The measure calls for “the largest trade association of residential real estate developers” and “the largest trade labor association representing building and construction workers, with membership in New York City” to ink a memorandum of understanding on the new program, including wage standards for projects with 15 units or more, by Jan. 1, 2025.

The dynamics have changed since nine(!) years ago. The BCTC has an agreement with REBNY to work together on policy issues on which their interests align. But the New York City District Council of Carpenters has taken up the mantle of publicly criticizing REBNY on 421a.

The union has knocked REBNY for rejecting its proposal last year to establish wage requirements that were below prevailing wage rates but would have applied citywide. Kevin Elkins, political director for the carpenters, indicated Tuesday that the union’s view of REBNY has not changed: The carpenters believe it is not negotiating in good faith.

REBNY President Jim Whelan said the organization is committed to working with a broad range of stakeholders.

“That includes continuing to work with the Building and Construction Trades Council, and its constituent unions, on a plan that pays good construction wages and benefits as part of any new program that spurs the creation of multi-family, mixed income rental housing,” he said in a statement.

The union and lawmakers have also been pushing for tenant protections as part of any housing deal. The governor has not budged on that issue.

What we’re thinking about: Will these groups be able to reach an agreement? Send a note to kathryn@therealdeal.com.

A thing we’ve learned: The hagfish launches mucus that expands to 10,000 times its original size in seawater and can suffocate predators, according to the New York Times. The next time someone sneezes on you on the subway, remember, it could be worse.

Elsewhere in New York…

— Mayor Eric Adams on Tuesday released a $109 billion budget with fewer than anticipated agency cuts, Gothamist reports. The administration is projecting $3 billion more in property tax revenue in fiscal 2024 than previously estimated.

— Former Gov. Andrew Cuomo received $565,000 from the state last week, Politico New York reports. New York law requires that the state reimburse elected officials for legal fees in criminal cases that do not result in convictions. Meanwhile, Cuomo is considering running for mayor.

— Rat sightings are down 6 percent citywide, TimeOut New York reports. New rules requiring all commercial trash to be placed in a closed container kick in March 1.

Closing Time

Residential: The priciest residential closing Tuesday was $3 million for a condo at 205 East 85th Street in Yorkville.

Commercial: The most expensive commercial closing of the day was $151 million for a commercial condo and garage in Bridge Tower Place at 401 East 60th Street in Lenox Hill.

New to the Market: The priciest residence to hit the market Tuesday was a townhouse at 19 Montgomery Place in Park Slope asking $15 million. Sotheby’s International has the listing.

Breaking Ground: The largest new building filing of the day was for a 35,000-square-foot, seven-story, 39-unit mixed use building at 132-15 Pople Avenue, Queens. Ameriland Brook LLC filed the permit application. — Jay Young