Earlier this month, New York City construction unions and the Real Estate Board of New York reached a tentative agreement to renew a tax credit program aimed at incentivizing builders to provide affordable housing in the city. The 421-a program, which expired last year, gives developers tax credits for constructing affordable housing in certain neighborhoods. After the program expired, development throughout the boroughs fell significantly.
A key area of dispute in the negotiations to renew the program was wages. In the deal reached between developers and the unions, minimum hourly wages are specified for the workers in order for developers to receive the 421-a tax credit. That minimum is $60 in Manhattan and $45 in Queens and Brooklyn, inclusive of benefits. Developers of buildings where more than half of the units are considered affordable housing can opt out of paying those minimum wages.
The 421-a program has been around for 45 years. It was implemented to increase the amount of housing in the city, which was losing residents at the time. It has been modified over the years to stimulate affordable housing in particular areas. These locations are all throughout Manhattan as well as parts of Brooklyn, the Bronx, Queens and Staten Island.
There have been criticisms of the program in recent years. For example, politicians have questioned whether tax breaks for developers are the best way to increase affordable housing. However, one affordable housing developer, Community Preservation Corporation, recently issued a statement, saying that it "has been critical to making rental development financially feasible, creating mixed-income communities, and spurring low- to moderate-income housing production in the outer boroughs."
New York Gov. Andrew Cuomo said that the tentative deal, which still needs state legislative approval, "provides more affordability for tenants and fairer wages for workers than under the original proposal. While I would prefer even more affordability in the 421-a program, this agreement marks a major step forward."
As all New York City residential real estate developers know, tax, zoning and other laws are constantly evolving. It's essential to have sound legal, financial and tax advice when considering a new development.
Source: Bensonhurst Bean, "Deal Reached On Massive Tax Abatement To Joy Of Developers Citywide," Sarah Crean, Nov. 15, 2016