421a Talks Hit Snag as Budget Deal Remains Elusive

With a little more than a week until the state budget is due, there is some movement on a deal to replace 421a.

Not all of it in the forward direction, though.

Leaders of the Building and Construction Trades Council on Friday rejected a proposal put forward by the Real Estate Board of New York, a development that may not bode well for a legislative agreement on the expired tax break being reached by the April 1 budget deadline.

The terms of the proposal were not made public but the New York City District Council of Carpenters took issue with its call for average wage requirements’ only applying on tax-exempted projects in certain parts of the city.

Joseph Geiger, executive secretary-treasurer for the carpenters, said in a statement that REBNY’s proposal was a “non-starter.”

“Over and over again, we have offered significant concessions including a prevailing wage reduction,” he said. “With the budget deadline rapidly approaching, REBNY must realize they have to compromise as electeds, labor unions, and tenant advocates have done or it’s time to remove them from the table.”

REBNY and the BCTC — an umbrella group for the carpenters, laborers and other construction unions — would not comment about the proposal.

Dave Bolger, business manager of the Mason Tenders’ District Council and executive board member of the BCTC, struck a more positive note about the state of talks.

“Negotiations are ongoing and will continue through the weekend,” he said in a statement. “We may be in an even better place by Monday.”

In a statement, REBNY’s Zach Steinberg pointed to an agreement the organization reached this month with the laborers union. Under a new 421a-type incentive, the initial minimum rate for wages and benefits for construction workers would be $35 per hour.

He said the deal, which is contingent on a broader wage agreement being reached, shows the organization’s “commitment to ensuring that good construction wages and benefits are part of any new program that spurs the creation of mixed-income rental housing.”

The District Council 9 Painters and Allied Trades has also expressed support for that wage floor, which would apply to construction workers on exemption-receiving projects citywide and would reach $45 an hour by 2033.

Filings for new rental projects have come to a virtual standstill since 421a lapsed. Developers and construction unions both stand to gain from its revival. Their challenge is keeping labor costs low enough for projects to pencil out but high enough for union workers to get a fair amount of the jobs.

Gov. Kathy Hochul’s executive budget included a framework for a replacement 421a, which expired in June 2022. Her proposal indicated that wage standards and other elements of the program would need to be hashed out by REBNY and the BCTC. The previous program, known officially as Affordable New York, was renewed under similar terms during the Cuomo administration.

That program set average wage requirements for projects with more than 300 units south of 96th Street in Manhattan and on the pricier portions of the Brooklyn and Queens waterfronts. The carpenters and other unions have argued that these requirements are difficult to enforce because it is not entirely clear if the average wage threshold is met until a project is completed.

The carpenters’ union has repeatedly criticized average wage requirements and has been the most vocal critic of REBNY among the unions during negotiations.

Even if the unions and real estate industry come to terms, it is unclear if the tax incentive would be approved by state legislators, either as part of the state budget or in a separate housing package.

Senate and Assembly leaders have expressed a willingness to discuss a replacement for 421a, but did not lay out proposals in their respective budget resolutions.