Last spring, as the clock ticked down on New York City's controversial rent regulation laws, thousands of NYC tenants and advocates marched over the Brooklyn Bridge to voice their opposition for 421-a: a '70s-era tax abatement that gives developers multi-year freezes on their real estate taxes, in exchange for building new "affordable" apartments.
Those same tenants let out an audible groan in June, when the rent laws were renewed almost verbatim. Landlords retained their legal right to deregulate apartments, albeit at a slightly higher rent threshold, and 421-a was extended for four years with a few minor adjustments—developers would have to set aside 25-30% of their units as affordable, for example, rather than 20%.
But the abatement was renewed on a condition—real estate executives and union officials would have to come to an agreement by January 15th as to whether construction workers on 421-a build projects would be guaranteed a union-level wage.
If an agreement isn't reached by tomorrow, the abatement will expire.
From the unions' perspective, the Mayor's ambitious goal of building or preserving 200,000 units of affordable housing in 10 years could be, at best, a boon for workers. However, a report issued by union-backed Real Affordability for All in November documented labor abuses ranging from stolen wages to unsafe working conditions on affordable construction sites throughout the city.
The real estate industry, on the other hand, faces significant production cost increases if wages are raised. A report released this week by the city's Independent Budget Office found that union-level wages on affordable housing projects would increase the construction costs associated with the Mayor's affordable housing plan by $2.8 billion.
Today the NY Times reports that Real Estate Board President John Banks, negotiating on behalf of the real estate industry, told Board members on January 7th that a deal was unlikely.
Gary La Barbera, president of the Building and Construction Trades Council and negotiating on behalf of the unions, declined comment for this story.
Advocates have long argued that 421-a lines the pockets of developers while failing to ensure adequate affordable housing for New Yorkers. According to its guidelines, developers must include a small portion of affordable apartments in each new project. "Affordability" is determined by the median income across the metropolitan area, and is therefore inaccessible for many low-income New Yorkers.
For example, when the Mayor's office proudly announced the creation and preservation of 20,325 affordable housing units in July, about 15% of those units were preserved for New Yorkers who make $38,500/year or less. For context, 36.3% of New York households make less than $35,000 a year [PDF].
Of the 40,204 affordable housing units preserved or created as of this January, about 15% are deemed affordable for New Yorkers who make $38,850 or less.
Tenants take the Brooklyn Bridge to protest 421-a in May (Emma Whitford/Gothamist).
Mayoral spokesman Wiley Norvell has called recent adjustments to 421-a a "game-changer," though. The abatement has contributed to the creation of 5,000 affordable units to date.
At an unrelated press conference on Monday, Mayor de Blasio fielded questions about the possible expiration of the abatement. His office has spoken out against the prevailing union wage in the past, arguing that it could jeopardize as many as 17,000 affordable apartments.
"There is still time for a positive result," the Mayor said, adding, "This is not the first time that 421-a has been on the brink."
Indeed, the city has recently expressed confidence that the loss of 421-a would not inhibit its ability to achieve affordable housing goals. According to Department of Housing Preservation and Development Commissioner Vicki Been, the abatement has "been threatened with expiration basically every four years, so it kind of works out over time."
Some developers told Politico that they would be more inclined to construct condos if 421-a were to expire, because such units would be more profitable than rentals in the absence of the tax abatement.
The expiration of 421-a could "cost the government more money to provide the affordable units they're promising," Jerilyn Perrine of the Citizens Housing and Planning Council told the Times.
This anxiety is lost on many advocates.
Kerri White, a spokeswoman for UHAB, said that many tenants are fed up with late-in-the-game squabbling over a tax abatement that is barely enforced as it is. She cited a recent investigation into Two Trees Management's property at 125 Court Street, where tenants were overcharged an estimated total of $368,000, despite 421-a tax abatements. And in July, the NY Attorney General announced that nearly 200 city landlords were illegally charging tenants market-rate rents on units for which they received significant tax breaks.
"The tenant community was pretty against 421-a getting renewed at all, and it's probably gotten worse considering the news of late," White said. "This is a broken program and it's gone past the point of reform. It's always frustrating to see all of this political energy going towards making these subsidies work."
"Both sides [real estate and unions] have a lot invested in making sure 421-a moves forward," said Katie Goldstein from Alliance for Tenant Power. "To us, it's a giveaway to luxury developers. We're interested in a program that helps tenants."
"We remain committed to working with stakeholders for a program that will allow much more affordable, or below-market, rental housing to be built, ensure construction workers are treated fairly and create job opportunities for residents of New York City," said Banks in a statement to the NY Times.