REBNY, Unions Chip Away at 421a Deal

The real estate industry and construction unions are chipping away at an agreement to replace the property tax break 421a.

The Real Estate Board of New York and the Mason Tenders District Council have agreed to a wage floor for construction workers on projects receiving the incentive. Workers would initially receive a minimum of $35 an hour for wages and benefits on projects with 100 or more apartments. That rate will increase gradually, reaching $45 by 2033.

The deal seems modeled after a City Council bill that would set a similar wage floor. That measure, also backed by the laborers’ union, would apply to projects that receive public funding.

A $40 minimum for wages and benefits would be a considerable downgrade for union carpenters, compared to prevailing wage rates. At the city level, the carpenters union has backed a separate bill calling for prevailing wage requirements on projects that receive $1 million or more in public financing.

Mike Hellstrom, who heads laborers’ union’s eastern operations, acknowledged that other trades will seek higher pay than the minimum rate, but the agreement was “a monumental step forward.” The previous version of 421a set average wage rates for projects, but those parameters were criticized for being hard to enforce and only applying to projects of a certain size and in limited areas of the city. The new proposed wage floor would apply citywide.

“This unprecedented citywide approach would provide a family sustaining wage for a broad range of construction workers across the city,” REBNY President Jim Whelan said in a statement. “We’re hopeful state lawmakers can agree on a housing supply plan this session so this groundbreaking step can be implemented.”

The agreement is a small step toward replacing the tax break, which expired in June 2022. REBNY and the Building and Construction Trades Council still have to figure out a broader agreement on wage requirements for a new program. In her executive budget, Gov. Kathy Hochul pitched a placeholder tax exemption to replace 421a, but stipulated that a replacement program was contingent on these groups hashing out wage standards.

Politico New York was the first to report on the wage floor deal. BCTC President Gary LaBarbera told the site that the agreement is “only a part of a much broader set of negotiations.” He was not available to discuss the issue further on Wednesday.

The District Council 9 Painters and Allied Trades also signaled its support of the deal.

The replacement 421a program is also entangled with the fate of a larger housing package that includes an incentive for office-to-residential conversions and lifting the city’s residential floor area ratio cap. The legislature is expected to release their budget resolutions next week, which may offer a clearer picture on where negotiations on these and other policies are headed.

Some lawmakers are pushing for the inclusion of good cause eviction as part of that housing package and for prevailing wage requirements as part of a new 421a. Last month, more than a dozen senators and two dozen Assembly members criticized the idea of leaving the wage requirements up to REBNY and the BCTC. Instead, they would prefer to set prevailing wage standards upfront.

Kevin Elkins, political director for the New York City District Council of Carpenters, compared the agreement with the laborers to a false start in football, when a player moves prematurely. REBNY still needs to find common ground with the rest of the construction trades, he said, and that “there’s a long way to go.”

“We’re a little more concerned about every trade and every worker,” Elkins said. “We’re not going to take the first thing offered to us.”