Last month, the Real Estate Board of New York (REBNY) and the Building and Construction Trades Council of Greater New York (union) negotiated wages for construction workers on 421a sites. Unable to come to an agreement, the 421a tax abatement program expired in December 2015.
The 421a abatement program helped to create affordable housing in New York City. The program offered tax abatements to residential developers who built affordable housing units, and owners of condos and coops. The program was available for new construction on vacant, underutilized, or land with “nonconforming” zoning. With such a high rental demand, prices for apartments and condos can be astronomical. 421a enabled builders to allocate affordable units, and without the tax abatement, costs would outweigh profit in some areas.
The 421a abatement program first began in the 1970s, and has been amended several times since then. In June 2015, the New York Legislature approved the 421a program extension, which was set to expire in January 2016. New York’s Governor Andrew Cuomo added a provision which required the REBNY and the union groups to come to an agreement on the terms of union worker’s employment at 421a sites. As of this writing, no agreement has be reached.
The expiration of 421a has already affected the New York’s affordable housing market. According to the statistics provided by The Real Deal, approved residential building projects fell by more than 94 percent in January 2016. There were only 87 non-hotel residential projects approved, as compared to approximately 500 per month during the financial crisis in 2009, a previous low.
The 421a tax abatement program still has hope: if parties come to an agreement, it will be up and running again. If you are looking to develop real estate property, whether affordable housing or not, it is important to contact an experienced real estate attorney who can guide you through the process, and protect your legal rights. Call Georgaklis & Mallas PLLC at (718) 238-2400 or (212) 779-2400.