A rare divide has formed between Democrats and affordable housing advocates over a prevailing wage provision in the extension of the popular 421-a tax credit. Those advocates say that an extension of the 421-a tax credit that includes requiring them to pay prevailing wages to construction workers on non-public projects will drastically reduce the number of affordable housing units being built in the city.
Brooklyn Assemblyman Vito Lopez, chairman of the Housing Committe, and Senator Adriano Espaillat, of northern Manhattan and the Bronx, have proposed a bill to extend the 421-a credit for new development in the city, which expired in December. That bill will also require developers to pay prevailing wages on many new projects with more than 80 units.
“This would have a devastating impact on the industry,” said Alison Badgett, the executive director of the New York State Association for Affordable Housing, a trade association. “There’s widespread recognition that development will stop with prevailing wage, and we cannot build affordable housing without [the 421-a] exemption.”
Prevailing wage would require salaries of $46 an hour for carpenters, as opposed to a median wage otherwise of $27, according to the state Department of Labor.
Those wages would increase the cost of affordable development by 25 to 50 percent, according to a 2008 study by the Center for Government Research. That would offset the benefit from the 421-exemption and make it difficult for them to move ahead with projects, especially given that financing for new residential development is difficult to get right now, say developers. “You cannot add this much cost to a project and not have the result be that there will be fewer projects,” said Brian McMahon, the executive director of the New York State Economic Development Council.
“We put prevailing wage in because the trade unions asked us to put it in,” said Mr. Lopez, a long-time ally of affordable housing advocates. Union leaders point out that the government gave away $930 million in tax breaks under the program this year, and it should provide a broader economic benefit for workers. Mr. Lopez added that wage requirements would affect a narrow range of projects with between 80 and 200 units. (Affordable housing advocates say most of their projects have 100 to 200 units.)
With two weeks left in the legislative session, the bill proposed by Messrs. Lopez and Espaillat is just one of the pieces of legislation on the table to extend 421-a, including one by Republican chair of the Senate Housing Committee Catharine Young, which does not include prevailing wage. The Lopez/Espaillat bill could get swept up in an omnibus bill that would also include rent regulation and a property tax cap, but Mr. Lopez described that as “highly unlikely.”
Meanwhile, behind-the-scenes negotiations are taking place. Steven Spinola, long-time president of the Real Estate Board of New York, has met with Gary LeBarbara, head of the New York State Building and Construction Trades Council, over the course of the last month. “We’re talking to labor leadership about their proposal,” Mr. Spinola told The Observer a few weeks ago. “Clearly it potentially adds costs to projects.”
Democrats also say they’re willing to negotiate, but advocates see little room for compromise. “We would be concerned with any compromise that established thresholds or standards for when prevailing wages could apply,” said Mr. McMahon, of the development council. “The precedent would be incredibly important. For the first time we’d be mandating prevailing wages on non-public work projects.”