For the second time in three months, Gov. Andrew M. Cuomo has forged a deal with developers and union construction officials to revive a program designed to create apartments for poor and working-class New Yorkers.
But will it get done?
The program, known as 421-a, expired in January. It grants cuts in property taxes to developers who set aside subsidized apartments for low-, moderate- and middle-income families or individuals in their otherwise luxury projects. It is a city program governed by state legislation.
As the number of homeless people in city shelters has climbed above 60,000, the creation of additional affordable housing has become a key goal for Mr. Cuomo and his political rival Mayor Bill de Blasio, both Democrats, although they have not often agreed on how to achieve it.
The Cuomo administration has hoped that by reviving the 421-a program it would unlock $2 billion for the governor’s own housing program, which has been stalled for months without approval by leaders of the State Legislature.
Under the new deal, builders would get the special tax benefits for a longer period — a 100 percent tax abatement for 35 years. A plan embraced by the mayor had called for a 25-year abatement followed by a phased-in return to full taxes over an additional 10 years. Details of the new deal were hashed out by state officials; members of the Real Estate Board of New York, the industry’s powerful lobbying arm; and union officials. They were announced on Thursday by the board, known as Rebny, and the governor.
In the proposed version of the program, subsidized apartments would have to remain affordable for 40 years.
The deal sets a pay schedule for developers who get the tax breaks in prime areas. In Manhattan below 96th Street, they would have to pay an average $60 an hour in wages and benefits for workers on buildings of 300 or more units.
On the fast-growing waterfront in Brooklyn and Queens, the average would have to be $45 an hour on buildings of 300 or more units. The Brooklyn and Queens projects would have to be within a mile of the East River waterfront. The program would not require the use of union contractors, but at those wage levels the construction unions could compete for the work.
“We are pleased to have reached an agreement that will permit production of new rental housing in New York City,” said Rob Speyer, a developer and chairman of Rebny. “We would like to thank Governor Cuomo for his leadership on this critical issue.”
Gary LaBarbera, the president of the Building and Construction Trades Council of Greater New York, a union umbrella organization, issued a statement saying he “applauded” the governor for bringing the parties together “on an important public policy.”
Because developers would get a 100 percent tax abatement for a longer period, a benefit worth tens of millions of dollars per building, the new proposal would make 421-a, which currently grants more than $1 billion a year in tax abatements, more expensive.
The framework could still fall apart, as did a deal worked out by the Cuomo administration in August, because it requires legislative approval.
Adding to the uncertainty, some of the city’s more prominent developers have not embraced the deal. “This agreement is news to me,” said Douglas Durst, the head of the Durst Organization, “and I’m on the executive board of Rebny. I’ve still got a lot of questions.”
Some housing activists, in discussing the proposed deal, used the word “unconscionable,” because the plan could lower the city’s annual tax revenues by as much as $1 billion more than the prior proposal. “It’s historically unprecedented and unjustifiable on any fiscal or economic grounds,” said Benjamin Dolchin, executive director of the Association for Neighborhood and Housing Development, a nonprofit. “Albany wants to pay Rebny to make a deal with the unions.”
The 421-a program was designed to encourage developers to build rental housing, as well as subsidized units, in a city where the costs of land, construction and materials are high. Before it expired, developers received a 20-year tax abatement for setting aside 20 percent of the apartments in a project for poor and moderate-income families. In 2014, about 150,000 apartments qualified for 421-a benefits, resulting in $1.06 billion in forgiven taxes.
Even before he took office, Mr. de Blasio vowed to build or preserve 200,000 units of affordable housing over 10 years. He said he wanted to get a better deal for taxpayers by obtaining more subsidized apartments in return for the property tax breaks and reducing the subsidy per unit. The de Blasio administration spent nearly a year negotiating with Rebny on a reform plan for 421-a. Their proposal required developers to subsidize 25 or 30 percent of the units in a new rental building and eliminated the benefit for condominiums.
But in spring 2015, Mr. Cuomo stunned Rebny and the mayor when he upended the proposal, insisting that he would not renew the 421-a program unless it required developers to pay union-level wages in order to qualify for the tax benefits. The construction unions, a key ally of the governor, argued that any projects getting taxpayer benefits should pay adequate wages. Developers countered that union-level wages would reduce the number of subsidized units, require greater subsidies or even stop construction altogether. The governor left it up to the developers and the unions to come to terms on wages, but no compromise materialized, and the program expired.
The Cuomo administration then became increasingly intent on reaching a deal. Bill Mulrow, the governor’s secretary, met secretly with a very small group of union officials and, in turn, with members of the real estate board, according to several Rebny and union members who had been briefed on the talks and would speak only anonymously, so as not to jeopardize the deal.
In response to criticism that the 421-a proposals did not focus enough on the poor people who need housing the most, state officials made another adjustment. The maximum income level for the portion of affordable units earmarked for middle-income families would be reduced to $104,000 a year, from $112,000.