Is Albany ready to take actionable steps towards addressing NYC’s affordable housing crisis?

Building-trades unions have put forth excessive demands that may derail New York City’s best chance for significant affordable-housing construction progress.

Here’s a brief overview: The default tax rate on new residential rental buildings is so high that developers can only profit from constructing luxury towers. The 421-a tax break, which was in effect for most of this century, provided a lower tax rate for projects that included enough units for low- and medium-income tenants.

However, progressives decided not to renew 421-a two years ago, citing concerns about potential loss to the city from this “giveaway.”

This argument is flawed because the city benefits only from projects that actually get built – and without the 421-a tax break, new affordable construction has almost come to a standstill.

Another factor contributing to the downfall of 421-a was the demands from construction unions for projects to pay higher-than-market wages – exceeding what the previous law required.

The Real Estate Board of New York has proposed an enhanced tax break that includes an extension of the wage mandate to more job sites, along with an overall 19% wage increase that could rise further in the future.

However, Gary LaBarbera, the head of the Building and Construction Trades Council, believes he can secure a better deal directly from Democratic lawmakers in the Legislature.

LaBarbera is confident that Democratic lawmakers, who rely on unions for campaign funding and volunteer support, owe a debt to labor and will favor his demands.

Unfortunately, LaBarbera’s demands could hinder numerous potential projects, rendering them financially unfeasible – resulting in a lack of new affordable housing and job opportunities in the construction sector.

Since the expiration of 421-a, only 10,000 new housing units have begun construction in the city – falling short of the housing demand in Gotham. Both Governor Hochul and Mayor Adams aim to achieve 500,000 new apartments over the next decade.

During its last two decades, 421-a accounted for 75% of the affordable housing units added to the city. Around 28,000 apartments (which were stalled when 421-a lapsed) could resume construction once Albany passes a reasonable replacement law.

While a permanent fix to the tax code is the ideal solution to eliminate the need for tax abatement, achieving total reform is a daunting task; therefore, replacing 421-a is the quickest way to stimulate the housing market in the right direction.

If the state or city appears capable of accomplishing this feat, they should consider the dire state of the New York City Housing Authority, which faces a massive backlog of over $40 billion in essential maintenance needs, making it the city’s largest slumlord by a wide margin.

The Legislature has a choice: it can view developers as crucial partners in addressing the city’s housing needs, or it can cater to LaBarbera’s demands and achieve no substantial progress.

With a vacancy rate of only 1.4% and skyrocketing apartment rents, lawmakers and Governor Hochul should prioritize providing new housing options for non-affluent New Yorkers. LaBarbera will eventually seek other favors from the Legislature.