Introduction
Yesterday, with the full support of Governor Andrew Cuomo, the Building and Construction Trades Council of Greater New York ("BCTC") and the Real Estate Board of New York ("REBNY") released news that they have reached an agreement to extend the 421-a tax exemption program. The agreement is contingent on the State passing a new bill, but Governor Cuomo is urging legislators to call an extraordinary session to pass the legislation as quickly as possible.
This Stroock Special Bulletin provides an overview of the agreement and what to expect next.
Summary of the Agreement
According to the joint press release issued yesterday by BCTC and REBNY, the agreement crafts a solution on the open wage issue for construction workers by establishing wage and benefit standards for certain 421-a projects. Such standards would apply "to buildings with 300 rental units or more in Manhattan south of 96th Street and in Brooklyn and Queens Community Boards 1 and 2 within one mile of the nearest waterfront bulkhead. Buildings with 50 percent or more affordable units are excluded from the wage and benefits obligation."
421-a projects that have started prior to the effective date of the agreement and meet the eligibility criteria will have the ability to opt-in. The agreement establishes average wage standards for construction workers for certain 421-a projects: $60 an hour for construction workers based on all hours worked in Manhattan, and $45 an hour for construction workers based on all hours worked for eligible projects in Brooklyn and Queens. These hourly wage standards include both wages and benefits.
Other Key Elements of the Agreement
- Provisions of the 421-a statute enacted in 2015, which were never implemented by the required Memorandum of Understanding, would be amended and replaced by new legislation. The new law would require that newly created rental units with income limitations be kept in place for 40 years. Such buildings would receive a 100% property tax exemption benefit for 35 years.
- Enforcement and compliance of the wage and benefits obligation for eligible projects would be handled directly by developers, who would hire independent monitors to audit certified payrolls. The independent monitors would certify to the New York City Department of Housing Preservation and Development ("HPD") within 120 days of the receipt of the final Certificate of Occupancy that the required average wages and benefits based on all hours worked have been paid.
- Developers would also be able to enter into a Project Labor Agreement ("PLA") at the developer's discretion. If a developer choses to enter into a PLA, then it may opt out of the 421-a wage agreement requirement in its entirety and still be eligible to fully participate in all other provisions of the 421-a statute.
Looking Ahead
Although movement on restoring the 421-a tax exemption is welcome news to developers and many affordable housing advocates, much remains to be done. First and foremost, the New York legislature must call an extraordinary session to introduce legislation to approve this historic agreement. Second, HPD will surely need to promulgate rules to carry out the new revisions to the 421-a statute. Stroock is monitoring the enactment of this agreement reached among the parties, and will provide additional information to its clients as soon as it is available.
Originally published November 11, 2016
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.