Browse By

Cuomo and REBNY already disagree about last week’s 421-a agreement

http://www.crainsnewyork.com/article/20161115/REAL_ESTATE/161119905/gov-andrew-cuomo-and-rebny-already-disagreeing-about-421-a-agreement

222

The governor is at odds with the Real Estate Board of New York over which projects qualify for the 35-year tax exemption negotiated in the deal.

Days after Gov. Andrew Cuomo brokered an agreement between the Real Estate Board of New York and the Building and Construction Trades Council of Greater New York to revive a property-tax break called 421-a, there is already disagreement about how the pact will be implemented, setting up a bizarre twist for the state legislature to unravel in the coming weeks.

The 421-a tax break is designed to encourage the development of rental housing in the city and ensure that up to 30% of the apartments in those buildings are enrolled in the city’s affordable-housing program. It works by letting developers pay zero property taxes for several decades.

The last version of the policy was penned in 2015 by the de Blasio administration with input from REBNY, a trade group representing developers. But it died in Albany after the governor required that REBNY and the Trades Council, which represents multiple construction unions, agree on wages to be paid at 421-a sites. Last Thursday, that accord was reached. On Friday, however, it became apparent that two of its signatories were already at odds about what the deal actually means.

Under the new law, which still must be approved by the state legislature, developers would need to cap rent increases on their affordable apartments for 40 years, five years longer than the 2015 agreement, as well as modestly lower rents on the priciest affordable apartments offered in the plan. In addition, builders of projects with 300 or more rental units in Manhattan below 96th Street would also be required to pay construction workers an average wage of $60 per hour, while developers along the Brooklyn and Queens waterfront would need to maintain average hourly pay of $45.

In exchange, the plan offers 35 years of tax exemption for the whole building, a boost from the de Blasio administration’s 2015 proposal, in which only the affordable apartments were eligible for an exemption of that length. The market-rate apartments got 25 tax-free years.

But late last week, REBNY said that the longer exemption would apply to every 421-a project in the city, regardless of whether or not the developer adhered to the wage requirements. The group pointed toward the extended affordability period as a benefit the public would get in exchange. And while the trade council did not comment for this story, a joint press release issued by the organization and REBNY also indicated that the exemption would be available citywide.

A high-ranking official in Cuomo’s office told Crain’s just the opposite on Monday: Under the agreement, the official said, only builders who meet the wage requirement would qualify for the extended benefit. All others would receive their tax break under the 2015 time line.

The distinction is important. While a few large rental buildings recently have been constructed within the proposed wage zone, the majority are built elsewhere in the five boroughs. So while the longer tax break may entice more rental development within the wage areas, if the benefit is applied citywide, most 421-a recipients would end up getting an additional decade of tax exemption without having to meet the wage mandate. That would be a huge win for these developers at the expense of New York City taxpayers, the state official said.

Some form of 421-a has been on the books for decades, but the de Blasio administration has prioritized its renewal as an integral part of its affordable-housing agenda. No new buildings can be enrolled in the 421-a program until a replacement policy is adopted, and that will not happen until the state legislature takes up the issue, likely in January.