By Jolie Milstein
One of New York City’s most effective affordable housing programs is at risk. The 421-a property tax credit sunsets in June and some are urging prevailing wage mandates to be included in any extension of the program. Such a step would undermine efforts to build affordable housing in Queens and across the city for the foreseeable future.
The 421-a program offers property tax abatements of between 10 and 25 years for new rental buildings. The program, created more than 40 years ago, encourages construction of new multi-family housing – some of which may have otherwise never been built given the city’s high tax rate on rental buildings.
The program has been a huge success. It has helped create more than 70,000 affordable housing units in the last three decades and led to the rebuilding and revitalization of neighborhoods throughout the city. And it is the only as-of-right tax abatement available for mixed-income affordable housing.
There is no question that the city needs more affordable housing. More than half of the city’s renter households are rent burdened. Affordable housing lotteries routinely receive tens of thousands of applications for a handful of available units. The city’s homeless shelter population has swelled to 60,000. And rising construction costs and unprecedented land prices are making it even harder to build the housing that New Yorkers need.
Given this crisis, New York needs to use every available tool to create new affordable housing for the city’s residents. The 421-a property tax exemption is one such critical tool.
But requiring the prevailing wage on 421-a construction projects would undermine affordable housing in Queens and across the city. The reason is that a prevailing wage mandate would result in a huge jump in wages at affordable housing projects and leave these projects with huge funding gaps. Even if these projects can move forward, they would need much larger government subsidies — or have to be scaled back in size — to make economic sense.
Moreover, prevailing wages are much higher than what the marketplace demands. While the mean wage for a carpenter in the city is $31 an hour, the state prevailing wage is $45 an hour – nearly one-and-a-half times the going rate. The prevailing wage does however resemble the rate demanded by unions – about $48 an hour for carpenters – a standard decided on behind closed doors with no transparency or public review.
A prevailing wage mandate would also make it more difficult for affordable housing developers to hire local workers and help keep wages in the community — an important issue in Queens, since many affordable projects are built in neighborhoods with high unemployment.
Prevailing wage hurts affordable housing by increasing costs, limiting local hiring and requiring more government resources. Affordable housing cannot afford the prevailing wage.
Jolie Milstein
President and CEO
New York State Association for Affordable Housing
