Over-the-top demands from the building-trades unions may torpedo New York City’s best hope to get serious affordable-housing construction moving again.
Quick background: The default tax rate on new residential rental buildings is so high, developers can only turn enough profit putting up towers for the rich; for most of this century, the 421-a tax break gave projects a lower rate provided they came with sufficient units for low- and medium-income tenants.
But progressives refused to renew 421-a two years back, thundering about the millions the city supposedly lost from a “giveaway.”
This was bull, because the city gets nothing on projects that don’t get built — and without 421-a, new affordable construction has ground to a near-halt.
The other force killing 421-a was the construction unions, which want these projects to also pay above-market wages — that is, more above-market than the old law mandated.
Now the Real Estate Board of New York has an offer on the table for an enhanced tax break that would extend the wage mandate to cover far more job sites and allow an overall 19% wage hike, rising more in later years.
But Gary LaBarbera, the combative chief of the Building and Construction Trades Council, thinks he can get a better deal directly from his Democratic pals in the Legislature.
After all, Dem lawmakers rely on the unions to fund their campaigns and to send volunteers for get-out-the-vote efforts: He figures they owe labor big-time.
Problem is, LaBarbera’s demands would push a ton of potential projects back into the “not worth building” zone — meaning not remotely enough new affordable housing, or many construction jobs.
Since 421-a died, the city’s seen just 10,000 new housing units begin construction — far below what Gotham needs. (Gov. Hochul and Mayor Adams want 500,000 new apartments over a decade.)
In its final 20 years, the tax break was behind 75% of the affordable units the city added; projects totaling around 28,000 apartments (stuck in the pipleline when 421-a lapsed) could get started as soon as Albany passes a reasonable replacement law.
Sure, the best answer is to permanently fix the tax code so no abatement is needed; as Howard Husock has noted: “No one should be surprised housing construction fails to keep up with demand; the tax code discourages it.”
But total reform is an even more brutal political haul; truly replacing 421-a is the fastest way to get the housing market moving in the right direction — and probably the only way.
If you think the state or city can get it done, take one look at the New York City Housing Authority and the $40-billion-plus backlog of vital maintenance needs that make it Gotham’s largest slumlord by far.
The Legislature has a choice: It can treat developers as critical partners in meeting the city’s housing needs, or it can pander to LaBarbera and achieve nothing else.
With a vacancy rate of just 1.4% and open-apartment rents soaring, lawmakers and Gov. Hochul ought to make getting new housing for New Yorkers who aren’t rich their top priority; LaBarbera will soon find some other favor the Legislature can do for him.