MANHATTAN — The state's 421-a tax break program expired Friday night after real estate developers and construction labor unions could not reach an agreement on how to reform the law before Friday's deadline.
Losing the tax abatement program will result in the loss of 18,000 newly built affordable rental units over the next four years, according to a city analysis. Without the benefit, developers will instead produce market rate condos, according to the Real Estate Board of New York, the developer group that had been negotiating a deal.
“Unfortunately, despite a good faith effort by all parties, REBNY and the Building Trades were unable to come to a final agreement on the renewal of a 421-a program that would provide good wages to construction workers across the city,” Gary LaBarbera, president of the Building and Construction Trades Council said in a statement.
“Without a program like 421-a, one can’t build multi-family rental housing with a significant below-market, or affordable, component on a scale necessary to address the City’s needs,” John H. Banks, III, REBNY’s president said in a statement.
When the program expired in June, Gov. Andrew Cuomo said renewing the abatement — first implemented in the 1970s to spur housing development during a fiscal crisis — must include some form of a prevailing wage requirement for construction workers for buildings with 15 or more units participating in the program.
He gave the Real Estate Board of New York and the Building and Construction Trades Council seven months to hash out an agreement.
The prevailing wage would have depended on the type of worker, size of the project and location within the city.
The labor unions said that prevailing wages were a matter of fair pay for better work. They believe that if developers are receiving public funds, they have a responsibility to pay good wages with benefits and ensure safe work sites.
REBNY said introducing a prevailing wage rate for construction workers would result in a large increase in government spending to cover wages and benefits, which, in turn, would reduce the number of affordable housing that could be built.
The Independent Budget Office said earlier this week that the cost to execute Mayor Bill de Blasio's plan to create 80,000 new units of affordable housing could balloon by $2.8 billion if developers were required to pay a prevailing wage.
Going forward, both groups said they would continue talks.
“We are committed to working with stakeholders to fashion a program that will produce the affordable housing throughout New York City that is so desperately needed, ensures construction workers are treated fairly and creates job opportunities for city residents,” Banks said.
LaBarbera echoed the sentiment.
The legislation that gave the two parties negotiating power, however, did not clearly state that the 421-a program would simply end by the Jan. 15 deadline. Rather it said it would be “suspended” until an agreement was executed.
City and state officials did not immediately respond for comment.
Still, the loss of the exemption might result in lower land prices, according to a report from NYU’s Furman Center for Real Estate and Urban Policy.