What will New York’s next real estate developer tax break look like?

Housing is again the talk of the budget, with a potential deal to enact a new tax break for developers in return to building affordable apartments in New York City. Both chambers of the state Legislature have offered tepid support for a replacement of the now-expired 421-a program – but the details remain incredibly scarce. And state leaders are waiting on consensus from power players outside of government: the state’s real estate trade group and organized labor. 

In her executive budget proposal, the starting point for the yearly negotiations, Gov. Kathy offered a barebones pitch for a new affordable housing development tax incentive program. It included few specifics, instead leaving factors like affordability requirements for construction and labor standards for others to determine. She characterized it as a “placeholder” provision. 

In both their one-house budget rebuttals, the state Senate and Assembly removed even that barebones language from bill language. Neither chamber introduced new proposals in the amended budget bills or offered specific counters to the version of the program that expired two years ago. The state Senate and Assembly leaders will now start negotiating in earnest with the governor to pass the budget by its April 1 due date.

In its budget resolution, the state Senate instead provided vague assurances about supporting a replacement to 421-a as long as it’s paired with tenant protections that adhere to the “core principles” of “good cause” eviction. The resolution does not include any details about what the new tax break program would look like, nor the finer points of the proposed tenant protections. “The Senate is open to further discussing the creation of a tax exemption for  new  multi-family construction in New York City that includes deeper affordability requirements, strong transparency  and compliance   provisions,  and  living  wages  for  construction  and building service workers,” the resolution reads. Right now, that means allowing labor and developers to come to an agreement on wage requirements. 

The Assembly was even more vague in its resolution language, released Wednesday morning. It says the chamber is committed to  “statewide (policies) that protect tenants from arbitrary and capricious rent increases and unreasonable evictions of paying tenants, ensure strong labor standards, provide development incentives including for office conversions, increase much needed affordable housing supply and support existing Mitchell-Lama programs.” Although the section does not directly reference a 421-a-type program, Assembly Speaker Carl Heastie told reporters on Wednesday that “developer incentives” referred to that affordable housing tax break. “I think that (the Real Estate Board of New York) and the unions have to come to a wage deal, and I think if they come to a wage deal, then I think the other elements can be discussed,” Heastie said. 

Labor standards for new construction have emerged as a key sticking point in debates over renewing and replacing the 421-a tax incentive program for developers. Hochul this year proposed leaving it up to construction unions and developer groups to come to an agreement on their own, and lawmakers seem to be taking the same position. But that leaves a lot of unknowns in the air as the two non-government parties negotiate in private half a month before the budget is due. “There are different moving parts, and they're all still moving,” Assembly Housing Chair Linda Rosenthal told City & State. “We need those conversations to come to a conclusion, which they are not at… So it’s all still very fluid.” 

Those conversations are shrouded in mystery for the general public. Even Assembly Member Harry Bronson, chair of his chamber’s Labor Committee, could not offer insight about where those negotiations stand as the state nears the April 1 budget deadline. “All I know is they are having conversations,” Bronson said in a text.

Earlier this month, Politico New York reported that the Real Estate Board of New York and the Mason Tenders District Council agreed to a wage floor for construction workers on projects that will receive the hypothetical new tax break. However, that doesn’t represent the larger agreement still getting hashed out between developers and the Building and Construction Trades Council, an umbrella organization covering many different construction and trade unions in the city. And one labor source expressed pessimism about the state of those broader negotiations on Wednesday as the budget deadline nears.