A conflict on union wages derailed reinstatement of the 421-a tax rebate back in January, stifling new building in New York City. After much negotiation, developers and union leaders finally came to an agreement Thursday so that the revised 421-a can be approved during the next state legislative session.
However, it turns out that the unions and the developers don’t think they agreed to the same thing.
Thursday’s agreement specified that, in order for projects with affordable units to qualify for 421-a, they must pay union wages of $60 per hour in Manhattan south of 96th Street and $45 per hour on the expensive Brooklyn and Queens waterfront. (No union wages were set for the two boroughs’ interiors.)
As Crain’s reported Tuesday, Governor Cuomo’s office claims that developers’ reward for paying these high wages was an extension of the buildings’ tax exemption, from 25 to 35 years.
However, the Real Estate Board of New York, which represents the developers, claims that the 35-year duration applies to every 421-a project citywide, not just those in Manhattan and waterfront Queens and Brooklyn that pay higher wages.
Applying the 35-year tax exemption citywide would have two major negative consequences from a city-planning point of view. First, it would de-incentivize building in the high-wage areas since builders wouldn’t be specially rewarded for doing so, just penalized in terms of higher staffing costs. Second, it would mean years of reduced tax revenue.