Impasse on 421-a Negotiations A Failure of Cuomo's Leadership

The potential expiration of the 421-a development tax break would not necessarily be the death knell for affordable housing that some advocates are claiming. But with negotiations between the Real Estate Board of New York and the Building and Construction Trades Councilreportedly at a stalemate, Gov. Andrew Cuomo should not get a pass if the Friday deadline for 421-a talks comes and goes without an agreement.

It was an enormous miscalculation for Cuomo to take a step back and leave 421-a negotiations to two sides that have very little incentive to reach an agreement. The trades were never going to agree to a 421-a program that wouldn’t pay a prevailing wage, while developers were fair to argue that paying union wages would balloon construction costs for the 200,000 affordable housing units that Mayor Bill de Blasio wants to build in New York City.

It’s fair to wonder, given the prolonged ugly feud between Cuomo and de Blasio, if this wasn’t a cynical ploy all along to undercut the mayor’s housing plan. The governor’s vindictiveness when it comes to the mayor knows no bounds, though ignoring the city’s housing crisis certainly doesn’t dovetail with the governor’s newfound progressivism.

And while the expiration of 421-a would make building affordable rental units more difficult, especially in markets where land costs are high, there are other avenues that developers can draw on to subsidize development. The city still has the 420-c program – a complete or partial tax exemption for up to 60 years for low-income housing developed by nonprofit organizations in partnership with for-profit developers – at its disposal. The Article XI tax incentive is another tool the city can use to encourage affordable housing construction.

The 421-a expiration would also open the door for rethinking the program entirely. One proposal that should garner consideration is a planfloated by David Jones of the Community Service Society. In lieu of 421-a, Jones floated creating a tax credit that developers could apply for, much like the Low Income Housing Tax Credit. The city would decide how much credit to offer each year, establish standards for determining the best use of the credits and award them to the development projects according to those standards.

The result would be a more efficient program that would not result in the loss of important city tax dollars – 421 costs the city more than $1 billion in revenue every year – and potentially increase affordability of housing projects, assuming the city’s standards for such a tax credit hews to de Blasio’s philosophy of requiring affordable units to be built in buildings receiving the tax break.

There are two days left for REBNY and the building trades to come to an agreement, but if the impasse continues, the governor should assume greater accountability and put other options on the table to replace it.