421A, a tax abatement law, expired in January of this year but Govenor Cumo has come up with a new plan. 421A is a program started in the 1971, when NYC officials became concerned that people were moving to the suburbs and residential construction in the city was declining. The program is a 10 year tax exemption for developers building multi residential buildings, with lower income units, on vacant land. Sounds great right?
Last June it was renewed but under certain conditions. Developers and union leaders needed to come to an agreement on whether workers on 421A projects would be guaranteed a union wage. Guaranteeing a union wage would mean a significant increase in construction costs. The Independent Budget Office analyzed projects and stated costs would go up by an average of 13%. When both parties failed to come to an agreement, the program died.
The New York Times reported that a new one page memo was sent to the Real Estate Board of New York, detailing a new proposal. Under this new proposal, developers would not have to pay union waves on their projects. There would be 2 separate minimum wages for new development projects. Projects with 300 units would pay $65 per hour plus benefits for Manhattan projects below 96th Street, and $50 per hour plus benefits for projects on the Brooklyn or Queens waterfront. In exchange, 421A recipients would be required to build 25-30% of apartments below market rate.
It’s not clear who would fund this new proposal and Cumo’s office did not confirm the proposal merely that they were working on a successor program to 421A. There are those who are against 421A and feel that the focus should be on strengthening rent laws. Either way this program needs a change, but where do you stand in this?