Developers have spoken: building rental housing in New York just doesn’t pencil out without tax abatement.
Now, the city comptroller’s office is proposing the rules to implement New York’s most recent tax abatement program, 485x.
The program has gained attention for its requirement that projects of 100 or more units pay a minimum construction wage of $40 per hour. That minimum wage rises higher for even bigger projects. In response, developers have pulled back on large-scale projects.
The comptroller’s proposal departs from the statute in a few ways. And industry groups are already voicing concerns.
One sticking point for both developers and construction industry reps is the timeline to get an exemption on the rules.
The comptroller proposes that developers who have a labor agreement need to notify the office five months before construction for an exemption. This goes beyond the statute, which specified three months of notice needed.
Alvin Schein, a partner and attorney at Adler & Stachenfeld, called the requirement “exceedingly onerous.” The requirement would mean project owners would need to either wait to award labor bids or make them contingent on controller approval, Schein said in a written public comment.
Felice Farber, executive director of the Subcontractors Trade Association, said she believes it shouldn’t be up to the comptroller’s office to approve exemptions; they should be granted automatically.
Another industry pain point is in the proposal’s definition of wages. The comptroller proposes limiting the wage definition to only hourly wages. That excludes payroll taxes and other legally required contributions. The Real Estate Board of New York took issue with this, saying the statute explicitly includes employee benefits and employer taxes.
Additionally, the comptroller’s office attempts to define what the statute calls the “greatest prevailing wage.” The office defines it as the highest rate for a classification in the Comptroller’s schedules, without taking into account experience tiers. “Applying the top highest rate regardless of a worker’s experience will raise costs and diverges from prevailing wage norms that tie rates to experience or apprenticeship progression,” REBNY said in a written comment.
Now, this is just a proposal and will be tinkered with. But the cost of any slip-ups could be high for developers. The law says that the comptroller can end and take back 485x benefits after three violations in five years. Losing the benefit would be the difference between making money and not for many projects.
Building Trades Employers’ Association, which represents union construction employers, said it supported the comptroller’s office’s efforts to “provide meaningful oversight and hold developers accountable.”
What we’re thinking about: The Department of Justice has released a trove of documents related to its investigation of Jeffrey Epstein. We’ve started going through those and have published some stories, including one on Epstein’s connections with Core Club and Jennie Enterprise. But there are thousands of documents. Something catch your eye? Drop me a note at lilah.burke@therealdeal.com.
A thing we’ve learned: The Big Apple is in for a big freeze this weekend, with a low of -1 on Sunday. But this is 14 degrees warmer than the coldest Central Park has observed, which was -15 degrees in 1934.
Elsewhere:
— Brooklyn Democrats are once again backing Gov. Kathy Hochul’s re-election after pulling support. Politico reports that leadership initially yanked its endorsement for Hochul due to her pick of Adrienne Adams as her potential second-in-command. Sources told the outlet that Brooklyn party chair Rodneyse Bichotte Hermelyn has long harbored a personal vendetta against Adams. Bichotte Hermelyn has insisted there is no bad blood.
— Mayor Zohran Mamdani inked an executive order Friday underlining New York’s sanctuary city policies. He directed city agencies to audit their internal policies related to federal immigration enforcement, reiterating that city data cannot be shared except when required by law.
— In the Tristate area, progressive candidate Analilia Mejia maintains a narrow lead over competitor Tom Malinowski in the Democratic primary for New Jersey’s 11th district. Democrat Mikie Sherill vacated the seat when she was inaugurated as governor. The special election is April 16.
Closing time
Residential: The top residential deal recorded Friday was $13.4 million for 50 West 66th Street, 11D. The new construction condo unit on the Upper West Side is 3,900 square feet. Douglas Elliman has the listing through developer Extell Marketing Group.
Commercial: The top commercial deal recorded was $31.8 million for 67 Greene Street. The Soho building is a mixed-use, four-family rental with an office component. It’s over 10,000 square feet.
New to the Market: The highest price for a residential property hitting the market was $19.5 million for 763 Greenwich Street. The West Village townhome is 5,500 square feet. Sotheby’s International Realty’s Chris Poore and Serena Boardman have the listing.
— Joseph Jungermann
