Lawmakers Ask Hochul to Rethink 421a

State lawmakers are experiencing déjà vu.

As budget deadlines loom, state senators do not want to leave 421a’s fate up to developers and construction unions once again.

In a letter to Gov. Kathy Hochul, 17 senators urged against the process laid out in the governor’s proposed budget for the tax exemption replacement.

Hochul’s executive budget suggests a “placeholder” for the tax break, the latest version dubbed 485x, but requires the Real Estate Board of New York and the Building and Construction Trades Council to reach an agreement on the policy’s construction wage requirements.

Gov. Andrew Cuomo created a similar dynamic in 2015, eventually leading to the passage of Affordable New York, which set average wage requirements for some projects.

But some state senators think that Hochul’s proposed process of determining those wage requirements is short-sighted, and that the program needs to specify those parameters from the beginning. The letter, obtained by The Real Deal, states that lawmakers “cannot afford to get it wrong again.”

“We believe it would be an abdication of our responsibility if we kicked the can down the road instead of satisfactorily resolving all issues in the legislative session,” the letter states.

The letter calls for adding prevailing wage requirements for all projects with 100 or more units, except those that have a project labor agreement, which are already paying union-level wages. It also highlights the need for more protections against wage theft, by ramping up payroll reporting requirements under the new program.

“With this letter, I hope my colleagues and I are being clear about where our starting point is,” Sen. Jessica Ramos, one of the lawmakers who signed onto the letter, said in a statement. “If we have an opportunity to improve on the 421a boondoggle, we should take that seriously by creating family-sustaining jobs while we build our way out of this housing crisis.”

Lawmakers also want the new 421a program to increase affordability requirements for projects, though the letter does not specify rent ranges.

While Hochul recognized the need for updating affordability levels, her budget proposal leaves that issue up to the city’s Department of Housing and Preservation to define them.

When asked about the letter, REBNY indicated that it is in talks with elected officials and unions.

“Legislation that sounds good in a press release but ignores the basic economics of rental housing development won’t do anything to address the City’s housing crisis,” the group’s president, Jim Whelan, said in a statement. The group has argued that prevailing wage requirements would make projects infeasible.

Gary LaBarbera of the BCTC said that his group is committed to collaborating with the real estate industry, but that there must be “common-sense labor standards that provide hardworking people with more accessible pathways to the middle class and opportunities to pursue a dignified career that supports their families.”

The proposals in the letter mirror the priorities laid out by the New York City District Council of Carpenters. The union has repeatedly criticized REBNY, accusing the trade group of failing to negotiate in good faith.

“What they struck then obviously didn’t work,” said Kevin Elkins, political director for the carpenters.

Since the property tax break’s expiration in 2022, permit filings for new multifamily projects have slowed. Developers say the program’s lapse will further exacerbate the city’s housing crisis as new construction peters out, while critics have called the break a giveaway that fails to produce truly affordable housing.

“The definition of insanity is doing the same thing over and over and expecting a different result,” the letter states. “If 421a had worked, we would not find ourselves in this situation.”