By REBNY President John Banks
REBNY recently analyzed publicly available data from the New York City Department of Housing Preservation and Development (HPD) regarding the Housing New York Plan (2014-2015).
The goal of this analysis was to determine how much of HPD’s designated affordable housing projects used some form of a property tax benefit, what percentage of those projects used the 421-a tax benefit program and how many were union built.
We believe that this data is helpful in illustrating the critical role 421-a plays in the development of affordable rental housing.
Our analysis found that out of the 156 citywide affordable projects financed between 2014 and 2015, 98 percent of these used some form of a property tax benefit, and over 50 percent of those used 421-a. The next most used benefit program was 420-c, which was used on 38% of the projects.
Among the developments that used 421-a: the majority, 78.5 percent, were in Manhattan; 54.8 percent were in Brooklyn; 44.4 percent in Queens; 17.1 percent in the Bronx; and 50 percent in Staten Island.
It is important to note that the affordable housing identified as being created through use of 421-a in this study is being built under the “old” 421-a program, which expired this past December.
Under that program, a developer using 421-a was not required to build affordable units in certain areas of the City, and when affordable housing creation was required, it was customarily 20 percent of the units within the development that were offered at below-market rents.
Under the “new” 421-a program, which is currently “suspended”, a developer using 421-a will offer at least 25-30 percent of a development’s units at below-market rents regardless of what area of the City the development is taking place.
Interestingly, only 9.6 percent of the total projects were union-built. The increasingly low union market share is likely a result of the high costs of union construction labor and that union wages make the use of union construction trades uneconomical within the affordable housing programs.
For example, while the NY-NJ Metro mean annual wage for a construction laborer with benefits is roughly $70,892, the same work being performed for prevailing wage pays $160,222 per year – a difference of 126 percent.
It is little wonder that the city’s Independent Budget Office found that imposing a construction prevailing wage requirement onto the City’s plan for constructing a total of 80,000 new affordable housing units would necessitate roughly $4.2 billion in additional funding.
According to the Building and Construction Trades Council (BCTC) of Greater New York, these figures are “cherry picked and irrelevant.” They conducted their own study, which found that the trades held a 65 percent market share in large residential buildings, typically more than 100 units, built from 2010 to 2014. BCTC claims that number jumps to 79 percent on even larger projects with 300 or more units.
However, an analysis of Housing New York data for 2014-15 showed that the unions built 18 percent of affordable projects with over 100 units and only 37 percent of those with over 300 units.
REBNY’s analysis of this data clearly indicates that the 421-a program was the most critical program to the construction of affordable rental housing, particularly in those areas of the city where it is most difficult to build below-market rental housing.
The data also makes clear that imposing an extraordinary construction labor cost onto a program that produces so much affordable housing will dramatically increase the cost of the program and/or result in much less rental housing.
REBNY’s full analysis can be found on www.rebny.com.
In other REBNY news:
We will be hosting our next Residential Breakfast Club on Tuesday, May 10 from 9:30 a.m. – 11:00 a.m. at the Mendik Education Center (570 Lexington Avenue, Lower Level).
Eric Barron of TripleMint, Ari Harkov of Halstead Property, Paul Zweben of Douglas Elliman, and David Walker of TripleMint will share key insight on how residential brokers can maximize their chances of walking away from a listing appointment with a signed exclusive agreement.
On Thursday, May 12 from 9:30 a.m. to 11:00 a.m., we will be hosting a Residential Top Brokers Seminar titled, “Who Are Today’s Buyers, Where Are They Coming From?” which will feature moderator Vickey Barron of Douglas Elliman and panelists: Ari Harkov of Halstead Property, Maureen Hogan of Douglas Elliman, Danielle Lurie of The Corcoran Group, and Natalie Rabaa of Brown Harris Stevens.
The Bank of America-sponsored event will be held at Buckley’s Restaurant, located at 2926 Avenue South in South Brooklyn. For more information, contact REBNYResidentialEvents@rebny.com.
We will be honoring outstanding leaders in the field of Commercial Property Management at our 13th Annual Commercial Management Leadership Breakfast on Thursday, June 2, 2016 from 7:30 a.m. to 10:00 a.m. at the New York Hilton.
Richard Clark, senior managing partner and chairman of Brookfield Property Group and Brookfield Property Partners, will give the keynote address at this highly anticipated breakfast, where we will be presenting awards to Henry M. Celestino, executive vice president at L&L Holding Company, who will receive the Edward A. Riguardi Commercial Management Executive of the Year Award, among other award recipients. To register, visit www.rebny.com or contact Cindy Ramotar at CRamotar@rebny.com.